UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report: October 2, 1998
HOMEGOLD FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
SOUTH CAROLINA 0-8909 57-0513287
(State of other juris- (Commission (IRS Employer
diction of incorporation) File Number) Identification Number)
SUITE 750, 15 SOUTH MAIN STREET, GREENVILLE, SOUTH CAROLINA 29601
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (864) 235-8056
The Exhibit Index appears on page 3 hereof.
ITEM 5. OTHER EVENTS
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HomeGold Financial, Inc. (the "Company") announced on October 2, 1998,
execution of definitive purchase agreement for sale of SBA Division to
TransAmerica Business Credit Corporation. The news release is filed herewith as
Exhibit 99.1 and the definitive purchase agreement as Exhibit 99.2.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HOMEGOLD FINANCIAL, INC.
By: /s/ Kevin J. Mast
-----------------------
Kevin J. Mast
Vice President, Chief Financial
Officer, and Treasurer
<PAGE>
EXHIBIT INDEX
99.1 News Release dated October 2, 1998.
99.2 Asset Purchase Agreement by and among TransAmerica Business
Credit Corporation and certain subsidiaries thereof, The
Sellers Named Herein and HomeGold Financial, Inc. dated as of
October 2, 1998
NEWS RELEASE
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Contacts: Kevin J. Mast Robert S. Davis
Chief Financial Officer Vice President-Administration
(864) 235-8056 (864) 235-8056
HOMEGOLD FINANCIAL, INC. ANNOUNCES EXECUTION OF DEFINITIVE PURCHASE AGREEMENT
FOR SALE OF SBA DIVISION TO TRANSAMERICA BUSINESS CREDIT CORPORATION
GREENVILLE, S.C. (October 2, 1998) - HomeGold Financial, Inc. (formerly known as
Emergent Group, Inc.) (Nasdaq/NM: HGFN) today announced it has executed a
definitive purchase agreement with Transamerica Business Credit Corporation for
the sale of the assets of the Company's SBA commercial lending businesses.
Completion of the transaction is subject to, among other things, the approval of
the U.S. Small Business Administration ("SBA") for the transfer of certain SBA
licenses held by the Company. The Company expects to receive the approvals
necessary and close the sale in the near future.
As previously announced, the assets to be sold include those of the SBA lending
company and the mezzanine lender, but exclude the Company's asset-based lending
group. The asset-based lending group is anticipated to be sold separately to
another buyer, although no definitive sale agreement has been reached yet on the
asset-based lending group.
The sale to Transamerica Business Credit Corporation is anticipated to provide
the Company with net cash proceeds of approximately $51 million after repayment
of related warehouse lines of credit outstanding, before considering a $4
million holdback in proceeds which is payable to the Company over a three year
period. The transaction is also anticipated to result in a gain on sale of
approximately $18.5 million net of anticipated transaction costs. Total assets
being sold to Transamerica Business Credit Corporation relating to the SBA
lending company and the mezzanine lender are approximately $73 million at August
31, 1998, while the asset-based lending group has total assets of approximately
$30 million. The anticipated sale of the asset-based lending group is not
expected to provide the Company with any significant net cash proceeds after
repayment of related warehouse lines of credit.
As the Company's operations improve, the Company plans to continue using the
available cash to pay down on the revolving warehouse lines of credit,
repurchase a portion of its senior unsecured debt and for general corporate
purposes.
The Company is consolidating all of its remaining operations located in
Greenville, South Carolina to its new facility on Pelham Road. This
consolidation is expected to provide further cost reductions in the future. The
Company continues to operate its retail
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operating centers out of three locations (Indianapolis, IN, Phoenix, AZ, and
Houston, TX) in addition to Greenville.
HomeGold Financial, Inc. is a financial services company, which originates,
services and sells non-prime first and second lien residential mortgage loans
and small business loans. HomeGold currently has approximately 835 employees and
operates in 42 states.
Transamerica Business Credit Corporation is based in Rosemont, Illinois and is a
subsidiary of San Francisco based Transamerica Corporation.
EXCEPT FOR HISTORICAL INFORMATION CONTAINED HEREIN, THE MATTERS SET FORTH IN
THIS DOCUMENT ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE CERTAIN RISKS AND
UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN
THE FORWARD-LOOKING STATEMENTS. FOR MORE COMPLETE INFORMATION CONCERNING FACTORS
WHICH COULD AFFECT THE COMPANY'S FINANCIAL RESULTS, REFERENCE IS MADE TO THE
COMPANY'S REGISTRATION STATEMENTS, REPORTS AND OTHER DOCUMENTS FILED WITH THE
U.S. SECURITIES AND EXCHANGE COMMISSION.
ASSET PURCHASE AGREEMENT
BY AND AMONG
TRANSAMERICA BUSINESS CREDIT CORPORATION
AND CERTAIN SUBSIDIARIES THEREOF,
THE SELLERS NAMED HEREIN
AND
HOMEGOLD FINANCIAL, INC.
DATED AS OF OCTOBER 2, 1998
TABLE OF CONTENTS
PAGE
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SCHEDULES
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Schedule 1a - June 30 Balance Sheet
Schedule 1b - The Sellers
Schedule 2.2(a)(iii) - Tangible Personal Property
Schedule 2.2(a)(iv) - Personal Property Leases
Schedule 2.2(a)(v) - Contracts
Schedule 2.2(a)(xii) - Acquired Leases
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Schedule 2.3 - Excluded Leases
Schedule 4.1 - Organization and Existence
Schedule 4.3 - Sellers' Governmental Consents
Schedule 4.4 - Conflicts
Schedule 4.6 - Certain Title Matters
Schedule 4.7A - Contracts and Receivables
Schedule 4.7B - Receivables Report
Schedule 4.8 - Leases
Schedule 4.9 - Intellectual Property
Schedule 4.10 - Litigation
Schedule 4.12 - Tax Matters of EBCH
Schedule 4.13 - Insurance
Schedule 4.14 - Benefit Plans
Schedule 4.15 - Material Contracts
Schedule 4.16A - Current Permits
Schedule 4.16B - Needed Permits
Schedule 4.18 SBA Compliance
Schedule 4.19 - Environmental Matters
Schedule 4.20 - Sellers' Brokers
Schedule 5.3 - Buyers' Governmental Consents
Schedule 6.1 - Certain Changes
EXHIBITS
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Exhibit A Form of Retention Agreement
Exhibit B Form of Systems Transition Agreement
Exhibit C Form of Escrow Agreement
Exhibit D Form of Legal Opinion of Counsel to Sellers
Exhibit E Form of Legal Opinion of Counsel to Buyers
ASSET PURCHASE AGREEMENT
------------------------
This ASSET PURCHASE AGREEMENT, dated as of October 2, 1998, is by and
among TRANSAMERICA BUSINESS CREDIT CORPORATION, a Delaware corporation ("TBCC"),
TRANSAMERICA GROWTH CAPITAL, INC., a Delaware corporation (the "SBIC
Subsidiary"), TRANSAMERICA SMALL BUSINESS SERVICES, INC., a Delaware corporation
(the "SECTION 7(A) SUBSIDIARY," and collectively with TBCC and the SBIC
Subsidiary, the "BUYERS"), each of the SELLERS named on SCHEDULE 1B hereto
(individually a "SELLER", and collectively, the "SELLERS") and HOMEGOLD
FINANCIAL, INC., a South Carolina corporation (the "PARENT").
W I T N E S S E T H:
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WHEREAS, the Sellers are engaged in the businesses of making mezzanine
loans and loans pursuant to Sections 7(a) and 504 of the United States Small
Business Act;
WHEREAS, the Sellers desire to sell and the Buyers desire to purchase
certain of the operating assets of the Sellers relating to such businesses
including the Shares (as defined below), upon the terms and subject to the
conditions hereinafter set forth; and
WHEREAS, the Parent will benefit from the sale of assets by the Sellers
and is willing to guaranty the obligations of the Sellers hereunder and provide
certain representations, warranties, covenants and indemnities set forth herein;
NOW, THEREFORE, in consideration of the premises and of the respective
representations, warranties, covenants, agreements and conditions contained
herein, the parties hereto hereby agree as follows:
As used in this Agreement, the following terms shall have the following
meanings:
"ACCOUNT DEBTOR" means, with respect to a Receivable, the obligor
thereunder.
"AFFILIATE" means, with respect to any Person, any other Person directly
or indirectly controlled by, controlling or under common control with such
Person.
"AGREEMENT" means this Asset Purchase Agreement, including the Schedules
and Exhibits attached hereto, and any restatement hereof and any supplement,
amendment or modification hereto.
"ALLOCATION AGREEMENT" is defined in SECTION 2.6(C).
"ASSUMED LIABILITIES" is defined in SECTION 2.4. References in this
Agreement to a Seller's "Assumed Liabilities" means such portion of the Assumed
Liabilities that are liabilities or obligations of such Seller and which are to
be assumed by the Buyers pursuant to the terms hereof.
A Person shall be deemed "BANKRUPT" if it commences a voluntary case
concerning it under Title 11 of the United States Code as now or hereafter in
effect, or any successor
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thereto (the "BANKRUPTCY CODE"); or an involuntary case is commenced against the
Person under the Bankruptcy Code or any similar foreign law and relief is
ordered against such customer or the petition is controverted but is not
dismissed within 90 days after the commencement of the case; such Person becomes
insolvent or is unable to pay its debts within the meaning of applicable Law or
stops making payments generally or declares a moratorium or suspension of
payments with respect to all or a substantial part of its debts or ceases to
conduct its business or enters into any composition or other arrangement with
its creditors generally (or any class of them); or a custodian (as defined in
the Bankruptcy Code) is appointed for, or takes charge of, all or a substantial
part of the property of the Person; or the Person commences any other proceeding
under any reorganization, arrangement, readjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar Law of any jurisdiction
whether now or hereafter in effect relating to such Person or there is commenced
against the Person any such proceeding which remains undismissed for a period of
90 days or the Person is adjudicated insolvent or bankrupt; or the Person fails
to controvert in a timely manner any petition or action filed against it under
the Bankruptcy Code or any such proceeding or any order of relief or other order
approving any such case or proceeding or the appointment of any custodian or the
like of or for it or any substantial part of its property or suffers any such
appointment to continue undischarged or unstayed for a period of 90 days; or the
Person makes a general assignment for the benefit of creditors; or any action is
taken by such Person for the purpose of effecting any of the foregoing.
"BUSINESSES" means all activities currently conducted by the Sellers or
EBCH relating to (i) the making of mezzanine loans (including the purchase of
warrants and other equity investments in connection therewith); (ii) the making
of investments as a Small Business Investment Company (as defined in the Small
Business Investment Act); (iii) the making of loans pursuant to Sections 7(a)
and 504 of the United States Small Business Act, and (iv) collections and
funding activities (including asset-backed securities transactions) in
connection with any of the foregoing, but excluding the activities relating to
the Retained Assets and Retained Liabilities.
"BUSINESS DAY" means any day other than a Saturday or Sunday or any legal
holiday on which banks in Chicago, Illinois are authorized or required to be
closed.
"BUYERS" is defined in the PREAMBLE, and includes any successor and
permitted assignee of any Buyer pursuant to SECTION 13.6.
<PAGE>
"BUYER PARTY" means the Buyers, any Affiliate, successor or assign of the
Buyers and any officer, director, agent or employee of the Buyers or any
Affiliate, successor or assign of the Buyers.
"BUYERS' ACCOUNTANTS" means the independent accounting firm of Ernst &
Young LLP.
"BUYERS' REPRESENTATIVE" means Christopher Gillock.
"CLOSING" and "CLOSING DATE" are defined in SECTION 2.6(A).
"CLOSING BALANCE SHEET" is defined in SECTION 3.1.
"CLOSING BOOK VALUE" means the amount by which the book value of the
Transferred Assets reflected in the Closing Balance Sheet exceeds the book value
of the Assumed Liabilities reflected in the Closing Balance Sheet, as determined
in accordance with ARTICLE III.
"CLOSING PAYMENT" means the Purchase Price as determined under SECTION
3.2(C) less the Holdback Amount.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPETITIVE ACTIVITY" is defined in SECTION 9.1.
"CONTRACT" means any contract, lease, sales order, purchase order,
security agreement, indenture, mortgage, note, bond, instrument, license
agreement or other agreement or binding undertaking. For purposes of this
Agreement, the term "Contract" shall be deemed not to include any Receivables.
"DRAFT PRIOR MONTH BALANCE SHEET" means the combined statement of certain
assets and liabilities of the Businesses which includes only the Transferred
Assets and the Assumed Liabilities of the Sellers (to the extent such Assumed
Liabilities are required to be set forth thereon), prepared in accordance with
generally accepted accounting principles consistent with the accounting policies
and practices used in the June 30 Balance Sheet, as at (i) the last day of the
month ended immediately prior to the Closing Date if the Closing Date occurs on
or after the 20th day of a month, or (ii) the last day of the month ended prior
to the full calendar month immediately preceding the Closing Date if the Closing
Date occurs before the 20th day of a month.
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"EBCH" is defined in SECTION 2.2(A)(XI).
"EMPLOYEE BENEFIT PLANS" is defined in SECTION 4.14(B).
"EMPLOYEES" is defined in SECTION 10.1.
"EMPLOYEE LIST" is defined in SECTION 10.1.
"ENCUMBRANCES" means all liens, security interests, claims, charges,
pledges, mortgages or other encumbrances of any kind.
"ENVIRONMENTAL LAW" means any Law relating to environmental protection or
the use, generation, manufacture, storage, treatment, management, discharge,
release, disposal, transportation or other handling of any substance, chemical,
waste or other material which is listed, defined or otherwise identified in such
Law as hazardous, toxic or dangerous, including asbestos, PCBs, petroleum,
petroleum products or by-products, crude oil, natural gas, natural gas liquids
or synthetic gas useable for fuel.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that is a member of a "controlled group" of which any Seller is a
member or under "common control" with a Seller (within the meaning of Section
414(b) and (c) of the Code).
"ESCROW AGREEMENT" means the Escrow Agreement, dated as of the Closing
Date, in the form attached hereto as EXHIBIT C, among the Parent, TBCC and
Carolina First Bank, as escrow agent.
"ESTIMATED CLOSING PAYMENT" means the Estimated Purchase Price less
the Holdback Amount.
"ESTIMATED PURCHASE PRICE" means the Prior Month Book Value
plus $20,000,000.
"FINAL CLOSING BALANCE SHEET" is defined in SECTION 3.2(B).
"FINAL CLOSING BOOK VALUE" means the amount by which the book value of the
Transferred Assets reflected in the Final Closing Balance Sheet exceeds the book
value of the
<PAGE>
Assumed Liabilities reflected in the Final Closing Balance Sheet, as determined
in accordance with ARTICLE III.
"GOVERNMENTAL AUTHORITY" means any foreign or domestic federal, state,
provincial, local or other governmental subdivi-sion, department, commission,
board, bureau, court, legislature, agency, instrumentality or other governmental
authority.
"HAZARDOUS MATERIALS" means any substance, material, waste, pollutant or
contaminant listed or defined as hazardous or toxic under any Environmental Law.
"HOLDBACK AMOUNT" means (i) $4,000,000 from the Closing Date to but not
including the date that is six months after the Closing Date, (ii) $3,000,000
from and including the date that is six months after the Closing Date to but not
including the first anniversary of the Closing Date, (iii) $2,500,000 from and
including the first anniversary of the Closing Date to but not including the
date that is eighteen months after the Closing Date, and (iv) $2,000,000 from
and including the date that is eighteen months after the Closing Date (subject
to disbursement as specified in SECTION 12.5 and the Escrow Agreement).
Notwithstanding the foregoing, the Holdback Amount shall not be decreased on the
scheduled date for a reduction pursuant to the foregoing formula if any claims
by Buyer Parties were made (whether pending or satisfied) pursuant to Article
XII in the time period from and after the immediately preceding calculation of
the Holdback Amount and such claims are in an amount in excess of the amount of
the decrease in the Holdback Amount scheduled to occur on such date. The
Holdback Amount shall accrue interest as set forth in the Escrow Agreement.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"INDEMNIFIABLE LOSS" means any and all damages, losses, liabilities,
fines, penalties, amounts paid in settlement (in accordance with the terms
hereof), costs and expenses (including reasonable expenses of investigation and
litigation and reasonable attorneys' and consultants' fees and expenses) in
connection with any demand, claim, action, cause of action, suit, proceeding,
assessment, judgment or award relating thereto and in connection with any
action, suit or proceeding by an Indemnified Person against the Indemnifying
Person to enforce a right to indemnification hereunder.
"INDEMNIFIED PERSON" and "INDEMNIFYING PERSON" are defined in SECTION
12.4.
<PAGE>
"INDEPENDENT ACCOUNTING FIRM" is defined in SECTION 3.2(B).
"INTELLECTUAL PROPERTY" means all trademarks, trademark registrations,
trademark applications, service marks, service mark registrations, service mark
applications, trade names, product names, copyrights, copyright registrations,
copyright applications, patents and patent applications, and all processes,
computer software (including Lewtan and Lotus Notes), formulae, trade secrets,
data, inventions, drawings, designs and know-how other than the Software.
"JUNE 30 BALANCE SHEET" means, collectively, the balance sheet of Emergent
Business Capital, Inc., the balance sheet of Emergent Commercial Mortgage, Inc.
and the combined balance sheet of Emergent Business Capital Equity Group, Inc.
(formerly known as Emergent Equity Advisors, Inc.) and Reedy River Ventures
Limited Partnership as at June 30, 1998, copies of which are attached hereto as
SCHEDULE 1A.
"KEY EMPLOYEE" means each employee identified by the Buyers'
Representative in the letter to the Parent and the Sellers dated September 28,
1998.
"KNOWLEDGE" means, with respect to the Parent and the Sellers, the actual
knowledge after reasonable investigation of any of John M. Sterling, Keith B.
Giddens, Kevin J. Mast, Mark S. Keegan, Susan E. Streich, Capers Easterby or
Scott Lining.
"LAW" means any foreign or domestic federal, state, provincial or local
statute, law, ordinance, rule, published administrative interpretation,
regulation, order, writ, injunction, directive, judgment, decree or other
requirement of any Governmental Authority.
"LEASED PROPERTY" means the Real Property subject to the leases listed on
SCHEDULE 4.8.
"MATERIAL ADVERSE EFFECT" means a material and adverse effect,
individually or in the aggregate, on: (a) the operation of the Businesses of any
Seller or EBCH; (b) the assets, liabilities, prospects, condition (financial or
otherwise) or results of operation of any Seller or EBCH or any of the
Businesses; (c) the ability of any Person to timely perform its obligations
under this Agreement or any of its Related Agreements or the ability of such
Person to consummate any of the transactions contemplated hereby or thereby; (d)
the ownership or value of all or any portion of
<PAGE>
the Transferred Assets or the Shares; (e) the nature or extent of any of the
Assumed Liabilities; or (f) the ability of the Buyers to own the Transferred
Assets or the Shares, assume the Assumed Liabilities or conduct the Businesses
after the Closing.
"MATERIAL CONTRACTS" is defined in SECTION 4.15.
"OTHER CONFIDENTIALITY AGREEMENTS" is defined in SECTION 6.8.
"PARENT" is defined in the PREAMBLE.
"PERMIT" means the licenses and authorizations issued by the SBA and any
permit, license, authorization, registration, qualification, approval or
franchise issued or granted by or effected with any Governmental Authority that
is required under Laws applicable to the conduct of the Businesses or used by
the Sellers in the conduct of the Businesses.
"PERMITTED ENCUMBRANCES" is defined in SECTION 4.6.
"PERSON" means any individual, sole proprietorship, firm, corporation,
partnership, limited liability company, trust, unincorporated association or
other entity.
"PRE-CLOSING TAX PERIOD" is defined in SECTION 13.15.
"PRIOR MONTH BOOK VALUE" means the amount by which the book value of the
Transferred Assets reflected in the Prior Month Closing Balance Sheet exceeds
the book value of the Assumed Liabilities reflected in the Prior Month Closing
Balance Sheet, as determined in accordance with ARTICLE III.
"PRIOR MONTH CLOSING BALANCE SHEET" shall be the balance sheet agreed to
by the Sellers' Representative and the Buyers' Representative pursuant to
SECTION 2.6(B).
"PURCHASE PRICE" means the Final Closing Book Value plus $20,000,000 and
as adjusted pursuant to SECTION 3.1.
"REAL PROPERTY" means real property, including all privileges and
easements appurtenant thereto, and any and all buildings, plants, facilities,
installations, fixtures and other structures and improvements situated thereon
or attached thereto.
"RECEIVABLE" means an account receivable, trade receivable, loan
receivable, note receivable or other
<PAGE>
account or right to payment generated through the extension of credit in the
operation of the Businesses.
"RECEIVABLE COLLATERAL DOCUMENT" means any contract, instrument or other
document pursuant to which any security interest, mortgage or other lien was
granted by an Account Debtor.
"RECEIVABLE CREDIT SUPPORT DOCUMENT" means, with respect to any Receivable
and Receivable Document, any guaranty, letter of credit, security agreement,
mortgage or other form of credit support given by a Person other than the
Account Debtor.
"RECEIVABLE DOCUMENT" means any contract, instrument or other document
evidencing a Receivable owed to a Seller or pursuant to which a Receivable owing
to a Seller was or may be generated.
"RELATED AGREEMENTS" means the following: (a) the Systems Transition
Agreement, (b) the Transfer Instruments, (c) the Escrow Agreement, and (d) any
certificates or other agreements executed in connection with this Agreement or
the transactions contemplated hereby. References in this Agreement to a Person's
Related Agreements shall mean the Related Agreements to which such Person is, or
is purported to be, bound.
"RETAINED ASSETS" is defined in SECTION 2.3.
"RETAINED LIABILITIES" is defined in SECTION 2.5.
"RETENTION AGREEMENTS" means, collectively, the Retention Agreements, in
the form attached hereto as EXHIBIT A, between TBCC and each of the Key
Employees.
"SBA" means the United States Small Business Administration.
"SBIC HOLDBACK" means $100,000.
"SBIC PERMITS" means any permit, license, authorization, registration,
qualification, approval or franchise issued or granted by or effected with the
SBA and relating to being a Small Business Investment Company (as defined in the
Small Business Act).
"SBIC SUBSIDIARY" is defined in the PREAMBLE.
<PAGE>
"SECTION 7(A) PERMITS" means any permit, license, authorization,
registration, qualification, approval or franchise issued or granted by or
effected with the SBA and relating to making loans pursuant to Section 7(a) of
the Small Business Act.
"SECTION 7(A) SUBSIDIARY" is defined in the PREAMBLE.
"SELLER" and "SELLERS" are defined in the PREAMBLE. Each of the Sellers
is listed on SCHEDULE 1B.
"SELLERS' NOTICE" is defined in SECTION 2.6(C).
"SELLER PARTIES" means the Sellers, any Affiliate, successor or assign of
the Sellers and any officer, director, agent or employee of the Sellers or any
Affiliate, successor or assign of the Sellers.
"SELLERS' REPRESENTATIVE" is defined in SECTION 13.1.
"SHARES" is defined in SECTION 4.1.
"SMALL BUSINESS ACT" means the Small Business Act, as amended.
"SOFTWARE" means (i) all general ledger and accounting systems (including
loan accounting systems) provided to the Parent by Information Technology, Inc.
under the terms of various software license agreements; and (ii) all personal
computer and local area network software and systems provided to the Parent
under the terms of various software license agreements with various software
suppliers, other than the Intellectual Property listed on SCHEDULE 4.9.
"SYSTEMS TRANSITION AGREEMENT" means the Systems Transition Agreement,
dated the Closing Date, in the form attached hereto as EXHIBIT B, among the
Buyers and the Parent pursuant to which the Buyers will be provided the right to
access the Software and necessary computer equipment through the Parent and
receive related systems support for the term specified therein.
"TAXES" means all taxes, charges, fees, duties, levies or other
assessments, including income, gross receipts, net proceeds, ad valorem,
turnover, real and personal property (tangible and intangible), sales, use,
franchise, excise, value added, stamp, leasing, lease, user, transfer, fuel,
excess profits, occupational, interest equalization, windfall profits, severance
and employees' income withholding, unemployment and Social Security taxes, which
<PAGE>
are imposed by the federal government, or any state, local or foreign government
or subdivision or agency thereof, including any interest, penalties or additions
to tax related thereto, whether or not disputed.
"TAX RETURN" means any return or other document (including any related or
supporting information) filed or required to be filed with any Governmental
Authority or other authority in connection with the determination, assessment or
collection of any Tax or the administration of any laws, regulations or
administrative requirements relating to any Tax.
"TBCC" is defined in the PREAMBLE.
"TBCC BENEFIT PLANS" is defined in SECTION 10.2.
"TERRITORY" is defined in SECTION 9.1.
"TRANSFER INSTRUMENT" means such good and sufficient bills of sale,
assignments, assignment and assumption agreements, notice filings, tax
declarations and other statements or filings with any Governmental Authority
(including financing statements filed pursuant to the Uniform Commercial Code)
as may be required for the sale of the Transferred Assets and assumption of the
Assumed Liabilities and other instruments of sale, conveyance, transfer,
assignment and assumption and, if applicable, limited powers of attorney as may
be necessary or appropriate for the execution, delivery and recordation or
filing of Transfer Instruments, as prepared by the Buyers in form and substance
reasonably satisfactory to the Sellers and as shall be required to vest in the
Buyers title to the Transferred Assets and as shall be required to evidence the
Buyers' agreements to assume, pay, perform, fulfill and discharge the Assumed
Liabilities.
"TRANSFERRED ASSETS" is defined in SECTION 2.2. References in this
Agreement to a Seller's Transferred Assets means the portion of the Transferred
Assets that are owned by such Seller.
"TRANSFERRED EMPLOYEES " is defined in SECTION 10.1.
Upon the terms, and subject to the conditions, of this Agreement, each of the
Sellers agrees to sell, assign, transfer, convey and deliver to TBCC, and TBCC
agrees to purchase from such Seller, such Seller's Transferred Assets, free and
clear of Encumbrances, other than the Permitted
<PAGE>
Encumbrances, and TBCC agrees to assume the Assumed Liabilities of the Sellers,
at and as of the Closing; provided, however, that (i) Emergent Business Capital,
Inc. shall sell, assign, transfer, convey and deliver to the Section 7(a)
Subsidiary, and the Section 7(a) Subsidiary agrees to purchase from Emergent
Business Capital, Inc., the Section 7(a) Permits and the Shares; and (ii) Reedy
River Ventures Limited Partnership shall sell, assign, transfer, convey and
deliver to the SBIC Subsidiary, and the SBIC Subsidiary agrees to purchase from
Reedy River Ventures Limited Partnership, the SBIC Permits.
(a) Subject to SECTION 2.2(B) and SECTION 2.3, the "TRANSFERRED
ASSETS" consist of each Seller's right, title and interest in and to all assets,
properties and rights required to conduct the Businesses or currently used by
such Seller in conducting the Businesses, including all of the following:
(i) all Receivables, and any Receivable Documents,
Receivable Collateral Documents and Receivable Credit Support Documents
related thereto;
(ii) all Intellectual Property and licenses for
Intellectual Property required to conduct the Businesses or currently used
by such Seller in conducting the Businesses, including those items
described on SCHEDULE 4.9;
(iii) all vehicles, machinery, equipment, furniture, tools,
spare parts, supplies, maintenance equipment and supplies, inventories,
materials and other items of tangible personal property of every kind and
description required to conduct the Businesses or currently used by such
Seller in conducting the Businesses, including those listed on SCHEDULE
2.2(A)(III);
(iv) all leases for equipment, machinery, vehicles and
other personal property of every kind and description required to conduct
the Businesses or currently used by such Seller in conducting the
Businesses, including those listed on SCHEDULE 2.2(A)(IV);
(v) all other Contracts required to conduct the
Businesses or currently used by such Seller in conducting the Businesses
to which such Seller is a party on the date hereof including those listed
on
<PAGE>
SCHEDULE 2.2(A)(V) and such other Contracts as shall be entered into by
such Seller between the date hereof and the Closing Date in accordance
with SECTION 6.1 and listed on a supplemented SCHEDULE 2.2(A)(V) pursuant
to SECTION 13.2;
(vi) all Permits, including the Section 7(a) Permits and
the SBIC Permits;
(vii) all records, files, technical information,
confidential information, price lists, marketing information, sales
records, customer lists and files (including customer credit and
collection information), and other proprietary information required to
conduct the Businesses or currently used by such Seller in conducting the
Businesses;
(viii) all charged-off loans and other assets and related
contract rights;
(ix) any claim, action, proceeding, counterclaim, cross
claim or set-off being brought by any of the Sellers and relating to the
Businesses;
(x) any insurance policies owned by such Seller and
related to the Businesses;
(xi) all of the issued and outstanding capital stock of
Emergent Business Capital Holdings Corporation ("EBCH");
(xii) the leases for Real Property listed on SCHEDULE
2.2(A)(XII);
(xiii) a non-exclusive license to use the tradenames of the
Sellers and an exclusive license to use the trade names of EBCH for 1 year
after the Closing Date;
(xiv) all seals, minute books, stock transfer books, blank
stock certificates and other documents relating to the organization,
maintenance and existence of EBCH;
(xv) all accounts and reserves relating to the
securitizations conducted in the operation of the Businesses; and
(xvi) all other assets required to conduct the Businesses
or currently used by such Seller in conducting the Businesses (including
prepaid expenses and lease, utility and similar deposits, goodwill and all
other intangible assets required to
<PAGE>
conduct the Businesses or currently used by such Seller in conducting the
Businesses).
(b) Anything in this Agreement to the contrary notwithstanding,
this Agreement shall not constitute an agreement to assign any Contract or
Permit of any Seller to the Buyers, or any claim, right or benefit of such
Seller thereunder or resulting therefrom, if an assignment thereof,
without the consent of a third Person, would constitute a breach or
violation thereof. The Sellers shall identify all necessary consents to
the assignment of Contracts and Permits and develop procedures for
attempting to obtain any such consents. If a consent to the assignment of
a Contract or Permit of the type specified in SECTION 8.1(E) is not
obtained prior to the Closing or if an attempted assignment of a Contract
or Permit of the type specified in SECTION 8.1(E) is ineffective for any
other reason, the Buyers may elect not to close this transaction pursuant
to SECTION 8.1(E). If the Buyers elect to proceed with the Closing, at the
request of the Buyers such Seller shall cooperate with the Buyers in
continuing to attempt to obtain such consent or otherwise procure an
effective assignment of such Contract or Permit and, pending the obtaining
of such consent or the procurement of such assignment, shall implement any
reasonable arrangement to provide to the Buyers the benefits under any
such Contracts or Permits. If, with respect to any such Contract or
Permit, the consent to assignment is obtained or an effective assignment
can otherwise be made following the Closing, the relevant Seller shall
promptly assign to the Buyer designated by TBCC all of its right, title
and interest in and to such Contract or Permit pursuant to a Transfer
Instrument substantially similar in form and substance to the Transfer
Instrument used for the assignment of similar Contracts or Permits at the
Closing. If a consent to the assignment of a Contract or Permit is not
obtained prior to the Closing or if an attempted assignment is ineffective
for any other reason and the Buyer designated by TBCC requests that it not
receive the benefits thereof, or if an arrangement to provide such
benefits is not feasible, such Seller, in consultation with the Buyer
designated by TBCC, shall terminate or wind-up such Contract or Permit and
shall be responsible for any liability and expenses in connection with
such termination. The Purchase Price shall be adjusted pursuant to SECTION
3.1 to account for any Contracts or Permits not assigned to the Buyers.
<PAGE>
(a) Notwithstanding SECTION 2.2(A), the right, title and interest
of each Seller in and to the following (the "RETAINED ASSETS"), if any, shall be
retained by such Seller and are not being sold, assigned, transferred, conveyed
or delivered to any of the Buyers hereunder:
(i) any Receivable under which any Seller or any
Affiliate of a Seller is the Account Debtor;
(ii) any claim (including any claim for Tax refunds with
respect to any Tax return of such Seller), counterclaim, setoff or other
rights relating to any Retained Liability;
(iii) subject to SECTION 2.2(B), any Contract that cannot
be effectively assigned to any of the Buyers at the Closing;
(iv) the leases for Real Property listed on SCHEDULE 2.3;
(v) all monies to be received by the Sellers from the
Buyers in connection with and in accordance with the terms of this
Agreement;
(vi) all rights of the Sellers under this Agreement;
(vii) all taxpayer and other identification numbers of the
Sellers;
(viii) all seals, minute books, stock transfer books, blank
stock certificates and other documents relating to the organization,
maintenance and existence of the Sellers as legal entities; and
(ix) subject to SECTION 2.2(A)(XIII), the names
"Emergent Business Capital Asset-Based Lending, Inc.", "Emergent Financial
Corp.", "Emergent Business Capital" and any and all similar names
containing the "Emergent" moniker.
(a) Subject to SECTION 2.5, and without prejudice to the rights
and remedies of the Buyers pursuant to ARTICLE XII, at the Closing, the Buyers
shall assume, pay, perform, fulfill and discharge, the following obligations and
lia-bilities of the Sellers (collectively, the "ASSUMED LIABILITIES") and the
Buyers shall not assume
<PAGE>
any other liabilities or obligations whatsoever of the Sellers:
(i) all obligations and liabilities of the Sellers, which
are required to be performed, and which accrue, after the Closing Date,
arising under any Receivables, Receivable Documents, Receivable Collateral
Documents and Receivable Credit Support Documents and the Contracts
acquired pursuant to SECTION 2.2(A) (but not any liabilities of the
Sellers in respect of a breach of or default under such Receivables,
Receivable Documents, Receivable Collateral Documents, Receivable Credit
Support Documents or Contracts arising prior to the Closing for which
claims are brought prior to the sixth anniversary of the Closing Date);
(ii) all liabilities of the Sellers to the extent set forth
in the Final Closing Balance Sheet;
(iii) the obligations of the Sellers specifically assumed
or otherwise undertaken by TBCC pursuant to ARTICLE X; and
(iv) all liabilities relating to accrued employee bonuses
for Transferred Employees.
(b) If, as contemplated in SECTION 2.2(B), a required consent to
the assignment and assumption of a Contract or Permit referred to therein is not
obtained prior to the Closing, or if an attempted assignment and assumption
thereof is ineffective for any other reason, and if the applicable Seller and
Buyer are undertaking an arrangement to provide the applicable Buyer with the
benefits thereunder, the applicable Buyer shall pay, perform, fulfill and
discharge, or otherwise undertake, such Seller's liabilities and obligations
under such Contract arising after the Closing. If, with respect to any such
Contract or Permit, such consent is obtained or an effective assignment and
assumption can otherwise be made following the Closing, the applicable Buyer
shall promptly assume such Seller's liabilities and obligations under such
Contract pursuant to a Transfer Instrument substantially similar in form and
substance to the Transfer Instrument used for the assumption of similar
Contracts at the Closing.
Except as expressly set forth in SECTION 2.4, all liabilities and obligations
of the Sellers (the "RETAINED LIABILITIES") shall be retained by such Sellers
and shall not be assumed by the Buyers, including:
<PAGE>
(a) any liability or obligation of any of the Sellers for any
Taxes, other than any Taxes which the Buyers or any Affiliate of the Buyers has
expressly agreed to pay pursuant to this Agreement;
(b) any liability or obligation of the Sellers, including for
sums due, under any Contract that cannot be effectively assigned at the Closing;
(c) any liability or obligation arising partially or wholly in
respect of any Retained Assets, including any existing or future liability or
obligation resulting from any legal, administrative or arbitration proceeding,
suit or action of any nature with respect thereto;
(d) any liability or obligation arising from any legal,
administrative or arbitration proceeding, suit or action of any nature against
such Seller arising in connection with the conduct of the Businesses prior to
the Closing;
(e) any liability or obligation retained by the Sellers pursuant
to ARTICLE X (including any liability with respect to any Employee Benefit Plan
or other employee compensation arrangement); and
(f) all liabilities and obligations relating to charitable
contributions and pledges of the Sellers.
(a) The closing (the "CLOSING") of the purchase and sale of the
Transferred Assets hereunder shall take place at the offices of Mayer, Brown &
Platt in Chicago, Illinois, on the last Business Day of the calendar month in
which the conditions set forth in SECTIONS 8.1 and 8.2 are satisfied (provided
that such date shall give the parties sufficient time to proceed to Closing, and
in the event the parties do not have sufficient time to proceed to Closing, the
Closing shall take place on the last Business Day of the next calendar month),
or at such other time or place as the Buyers' Representative and the Sellers'
Representative may agree (the date of the Closing being hereinafter called the
"CLOSING DATE"). At the Closing:
(i) The Buyers shall pay to the Sellers the Estimated
Closing Payment (minus the SBIC Holdback to the extent established
pursuant to SECTION 8.3) by wire transfer of next day funds to such bank
account or accounts as may be designated in a writing delivered to the
Buyers by the Sellers' Representative, such writing
<PAGE>
to be delivered at least two (2) Business Days prior to the Closing.
(ii) Each Seller shall execute and deliver to the Buyers
such Transfer Instruments as reasonably may be required by the Buyers to
be executed and delivered by such Seller and the Buyers shall execute and
deliver to the Sellers such Transfer Instruments as reasonably may be
required by the Sellers to be executed and delivered by the Buyers.
(iii) The other executions, deliveries and actions
contemplated in SECTIONS 8.1 and 8.2 shall be made.
(b) No later than ten (10) days before the Closing Date, the
Sellers' Representative shall provide the Draft Prior Month Balance Sheet to the
Buyers. Within five (5) days of receipt of the Draft Prior Month Balance Sheet,
the Buyers shall agree with the Draft Prior Month Balance Sheet or discuss in
good faith with the Sellers' Representative any areas of disagreement with the
Draft Prior Month Balance Sheet. The Sellers' Representative and the Buyers'
Representative shall thereupon mutually agree upon the Draft Prior Month Balance
Sheet whereupon it shall be deemed to be the "Prior Month Closing Balance Sheet"
for purposes of this Agreement. If the Sellers' Representative and the Buyers'
Representative cannot agree upon the Prior Month Closing Balance Sheet by the
Closing Date, the parties shall cause the Independent Accounting Firm to review
the Draft Prior Month Balance Sheet for the purpose of preparing the Prior Month
Closing Balance Sheet in accordance with the terms of this Agreement and the
Closing Date shall be postponed until such Prior Month Closing Balance Sheet is
prepared. The Independent Accounting Firm shall deliver to the Sellers and the
Buyers within fifteen (15) days of its commencement of such review, a Prior
Month Closing Balance Sheet. Subject to SECTION 3.2, such report shall be final,
conclusive and binding on the parties hereto. The fees and charges of the
Independent Accounting Firm in making such review and preparing such report
shall be borne equally by the Sellers, on the one hand, and the Buyers, on the
other hand.
(c) With respect to the Buyers' acquisition of the Transferred
Assets, the Buyers and the Sellers agree to report the transfers under this
Agreement consistent with Sections 1060 and 338 (h) (10) of the Code, and shall
take no position contrary thereto unless required to do so by applicable Tax
Laws pursuant to a Determination (as defined in Section 1313(a) of the Code).
<PAGE>
The Buyers shall be responsible for the preparation and filing of all
Forms 8594 and 8023 pursuant to the provisions of Sections 1060 and 338 of the
Code in accordance with applicable Tax Laws and the terms of this Agreement. The
Sellers shall execute and deliver to the Buyers such documents or forms as are
reasonably requested and are required by any Tax Laws properly to complete the
Forms 8594 and 8023, at least 20 days prior to the date such Forms 8594 and 8023
are required to be filed.
The Buyers and the Sellers agree that they shall use their best efforts to
enter into an agreement (the "ALLOCATION AGREEMENT") as soon as practicable
after the Closing Date concerning the computation of the amounts allocable to
the Transferred Assets in accordance with Sections 1060 and 338 (h) (10) of the
Code. The Buyers shall deliver to the Sellers a proposed Allocation Agreement no
later than 75 days after the Closing Date. If the Sellers have not objected to
such Allocation Agreement within thirty (30) days of receipt, such agreement
shall be deemed accepted and shall be the Allocation Agreement. If the Sellers
object to the Buyers' proposed Allocation Agreement, the Sellers shall give the
Buyers notice of its objection (the "SELLERS' NOTICE") and the Sellers and the
Buyers shall use all reasonable efforts to resolve their differences. If sixty
days after the delivery of the Sellers' Notice, the Buyers and the Sellers have
not adopted the Allocation Agreement as described above, any disputed aspects of
the Allocation Agreement or such revision proposed in the Sellers' Notice shall
be resolved within thirty days by the Independent Accounting Firm. The costs,
expenses and fees of the Independent Accounting Firm shall be borne equally by
the Buyers and the Sellers. The Buyers and the Sellers agree to act in
accordance with the allocations contained in the Allocation Agreement in any
relevant Tax Returns or similar filings, and before any Governmental Authority
having taxing authority or in any judicial proceeding. The Buyers and the
Sellers shall promptly inform one another of any challenge by any Governmental
Authority having taxing authority to any allocation made pursuant to the
Allocation Agreement.
(d) The consummation of the transactions contemplated hereby to
occur on the Closing Date shall be deemed to have occurred as of 11:59 p.m. on
the Closing Date.
As promptly as practicable after the Closing Date, the Buyers
will cause to be prepared a balance sheet
<PAGE>
of the Transferred Assets and the Assumed Liabilities (to the extent required to
be set forth thereon) as at the time of the Closing (together with the notes, if
any, thereto, the "CLOSING BALANCE SHEET"). No later than thirty (30) days after
the Closing Date, the Buyers will cause the Closing Balance Sheet to be
delivered to the Sellers' Representative, together with a certificate setting
forth the proposed Closing Book Value and the Purchase Price based on the
Closing Balance Sheet and as adjusted to take account of the Contracts and
Permits not assigned to Buyers as of the date of delivery of the Closing Balance
Sheet and stating that the Closing Balance Sheet has been prepared in accordance
with the terms of this Agreement. The Closing Balance Sheet shall be prepared in
accordance with generally accepted accounting principles consistent with the
accounting policies and practices used in the June 30 Balance Sheet.
If the Sellers disagree with the calculation of the Purchase Price or the
Closing Book Value under the proposed Closing Balance Sheet delivered pursuant
to SECTION 3.1, the Seller's Representative may, within thirty (30) days after
receipt of the Closing Balance Sheet, deliver a notice of objection to the
Buyers. Any such notice of objection shall specify those items or amounts or
calculation methods as to which the Sellers disagree, and the Sellers shall be
deemed to have agreed with all other items, amounts and calculation methods
contained in the Closing Balance Sheet and the calculation of the Closing Book
Value and the Purchase Price.
If a notice of objection shall be delivered pursuant to SECTION 3.2(A), the
parties hereto shall, during the ten (10) days following such delivery, attempt
in good faith to reach agreement on the disputed items or amounts in order to
determine, as may be required, the Final Closing Balance Sheet and the amount of
the Final Closing Book Value and the Purchase Price. If, during such period, the
parties are unable to reach such agreement, they shall promptly thereafter cause
Arthur Andersen LLP, or another independent accounting firm of nationally
recognized standing reasonably satisfactory to, and mutually agreed upon by, the
Sellers' Representative and the Buyers' Representative (who shall not have any
material relationship with the Sellers or the Buyers) (the "INDEPENDENT
ACCOUNTING FIRM"), promptly to review this Agreement and the remaining items or
amounts disputed by the parties hereto for the purpose of preparing the Final
Closing Balance Sheet and calculating the Final Closing Book Value and the
Purchase Price, as applicable. In making such calculation or calculations, the
Independent Accounting Firm shall consider only those items, amounts or
<PAGE>
calculation methods in the Closing Balance Sheet or the calculations of the
Closing Book Value and Purchase Price as to which the Sellers have disagreed.
The Independent Accounting Firm shall deliver to the Sellers and the Buyers, as
promptly as practicable (but in any event not later than thirty (30) days
following its commencement of such review), a report containing the final
Closing Balance Sheet (the "FINAL CLOSING BALANCE SHEET") setting forth its
calculation or calculations of the Final Closing Book Value and the Purchase
Price. Such report shall be final, conclusive and binding upon the parties
hereto. The fees and charges of the Independent Accounting Firm in making such
review and preparing such report shall be borne equally by the Sellers, on the
one hand, and the Buyers, on the other hand.
For purposes hereof, the Final Closing Book Value and the Purchase Price, as
applicable, shall in each case be the amount (i) as shown therefor in the
calculation of the Closing Book Value and Purchase Price delivered pursuant to
SECTION 3.1 if no notice of objection with respect thereto is delivered pursuant
to SECTION 3.2(A) or (ii) if such a notice of objection is delivered, (A) as
agreed by the parties pursuant to SECTION 3.2(B) or (B) in the absence of such
agreement, as shown in the report of the Independent Accounting Firm delivered
pursuant to SECTION 3.2(B), provided that the Final Closing Book Value and the
Purchase Price shall not, in any such case, be less than the amount thereof
shown in the calculation thereof delivered pursuant to SECTION 3.1 or more than
the amount thereof shown in the notice of objection delivered pursuant to
SECTION 3.2(A).
The parties hereto agree that they will, and agree to cause their respective
independent accountants to, cooperate and assist, as contemplated in this
ARTICLE III, in the preparation of the Final Closing Balance Sheet and the
calculations of the Final Closing Book Value and the Purchase Price and in the
conduct of the calculations and reviews referenced in this ARTICLE III
(including if applicable, by the Independent Accounting Firm), including making
available all relevant books, records, work papers and personnel.
If the Estimated Closing Payment (minus the SBIC Holdback to the extent
established pursuant to SECTION 8.3) exceeds the Closing Payment, the Sellers
shall pay to the Buyers, in the manner provided in SECTION 3.3(B), the amount of
such excess. If the Closing Payment exceeds the Estimated Closing Payment (minus
the SBIC Holdback to the extent
<PAGE>
established pursuant to SECTION 8.3), the Buyers shall pay to the Sellers, in
the manner provided in SECTION 3.3(B), the amount of such excess. Any such
payment pursuant to this SECTION 3.3(A) shall be made (i) within five (5) days
after the expiration of the period for objection specified in SECTION 3.2(A) or
(ii) if a notice of objection with respect to the Purchase Price is delivered
pursuant to SECTION 3.2(A) then within five (5) days after the earlier of (A)
agreement between the parties pursuant to SECTION 3.2(B) with respect to the
Purchase Price and (B) delivery of the calculation of the Independent Accounting
Firm of the Purchase Price referred to in SECTION 3.2(B).
Any payment pursuant to this SECTION 3.3 shall be made by wire transfer by the
Buyers or the Sellers, as the case may be, of immediately available funds to
such account of the party or parties to receive such payment as may be
designated by the Buyers' Representative or the Sellers' Representative, as
applicable.
Any payments to or by the Sellers pursuant to this SECTION 3.3 shall be
allocated among the Sellers and the Transferred Assets as mutually agreed upon
by the Sellers' Representative and the Buyers' Representative.
To induce the Buyers to enter into this Agreement, the Parent and the
Sellers, jointly and severally, hereby represent and warrant to the Buyers as
set forth in this ARTICLE IV:
The Parent, EBCH and each Seller is a corporation or limited partnership duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation set forth in subsection 4.1A of SCHEDULE 4.1. Each
of the Sellers has full corporate power and authority to own and operate the
Transferred Assets it now owns and operates and to carry on the Businesses as
and where such Transferred Assets are now owned or operated and such Businesses
are now conducted. The Parent and the Sellers have heretofore made available to
the Buyers true, correct and complete copies of their respective articles or
certificates of incorporation and by-laws or equivalent governing instruments
and the articles or certificates of incorporation and by-laws or equivalent
governing instruments of EBCH, each as amended to the date hereof or the Closing
Date. Each of the Sellers and EBCH is duly licensed or qualified to do business
as a foreign corporation or limited partnership, as applicable, and is in
<PAGE>
good standing, in all jurisdictions in which the character of the Transferred
Assets now owned or operated by it or the nature of the Businesses now conducted
by it requires it to be so licensed or qualified. Subsection 4.1B of SCHEDULE
4.1 sets forth each jurisdiction in which each of the Sellers and EBCH is
licensed or qualified to do business as a foreign corporation. EBCH has the
requisite power and authority to own, operate or lease the properties and assets
now owned, operated or leased by it and to carry on its business in all material
respects as currently conducted by it. Subsection 4.1C of SCHEDULE 4.1 sets
forth the number of shares of authorized capital stock of each class of the
capital stock of EBCH and the number of issued and outstanding shares of each
class of its capital stock (the "SHARES"). The Shares constitute all the issued
and outstanding shares of capital stock of EBCH. Emergent Business Capital, Inc.
owns all of the Shares free and clear of all Encumbrances. The Shares have been
duly authorized and validly issued and are fully paid and nonassessable. There
are no options, warrants or rights of conversion or other rights, agreements,
arrangements or commitments relating to the capital stock of EBCH obligating
EBCH to issue or sell any of its shares of capital stock. There are no voting
trusts, stockholder agreements, proxies or other agreements in effect with
respect to the voting or transfer of the Shares.
Each of the Parent and the Sellers has the requisite power and authority to
execute, deliver and perform this Agreement and its Related Agreements and to
consummate the transactions contemplated hereby and thereby. All shareholder and
other corporate or limited partnership acts and proceedings required to be taken
by or on the part of each of the Parent and the Sellers to authorize it to
execute, deliver and perform this Agreement and its Related Agreements and to
consummate the transactions contemplated hereby and thereby have been duly and
validly taken and remain in full force and effect. This Agreement constitutes,
and upon the execution and delivery by the Parent and each of the Sellers and
the other parties thereto of the Related Agreements to which it is a party, such
Related Agreements will constitute, the legal, valid and binding agreements of
the Parent and such Seller, enforceable against the Parent and such Seller in
accordance with their respective terms except as such enforcement may be limited
by bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally or by judicial discretion as to the availability of
equitable remedies or by general equitable principles.
The execution, delivery and performance of this Agreement and the Related
Agreements by the Parent and each of the Sellers do not, and the consummation by
each such Person of
<PAGE>
the transactions contemplated hereby and thereby will not: (a) violate or
conflict with the certificate or articles of incorporation or by-laws or similar
governing instruments of such Person or EBCH; (b) assuming satisfaction of the
matters referred to in the following CLAUSE (C), violate, contravene or conflict
with any order, writ, injunction, directive, judgment, award or decree of any
Governmental Authority to which the Parent, EBCH or any of the Sellers is a
party or to which any of their respective properties or assets is subject or any
statute, law, ordinance, rule or regulation of any Governmental Authority
applicable to any of them or any of their respective properties or assets; or
(c) require any filing or registration by such Person with, or approval,
consent, authorization or other action with respect to it by, any Governmental
Authority other than (i) the notification under the HSR Act referred to in
SECTION 6.3, and (ii) the filings, registrations, authorizations, approvals,
consents and other actions listed in SCHEDULE 4.3.
Except as set forth on SCHEDULE 4.4, the execution, delivery and performance
of this Agreement and the Related Agreements by the Parent and each of the
Sellers, as applicable, do not, and the consummation by each such Person of the
transactions contemplated hereby and thereby will not: (a) violate or conflict
with, result in a breach of, constitute a default under (whether with notice or
the lapse of time or both), or accelerate or permit the acceleration of the
performance required by, any Contract to which such Person or EBCH is a party or
by which such Person or EBCH is bound or by which any of such Person's or EBCH's
property is bound, other than Contracts with payments of less than $1,000 per
month, individually, and no more than $5,000 per month, in the aggregate for all
such Contracts, or (b) result in the creation of any Encumbrance upon the
Transferred Assets of the Sellers or the assets of EBCH (other than Permitted
Encumbrances). Emergent Business Capital, Inc., Emergent Commercial Mortgage,
Inc. and Emergent Business Capital Equity Group, Inc. will be released as
guarantors of the Parent's 10.75% Senior Notes due 2004 automatically upon the
consummation of the transactions contemplated by this Agreement and the
occurrence of the following events: (x) the determination by the Board of
Directors of the Parent that the Parent has received fair market value for the
Transferred Assets and the filing of a copy of such Board resolutions with the
trustee for such 10.75% Senior Notes; (y) 85% of the consideration for the sale
of the Transferred Assets being cash; and (z) delivery of an officer's
certificate and opinion of counsel to the trustee for such 10.75% Senior Notes
stating that all conditions precedent for the release of the guarantors have
been satisfied.
<PAGE>
The Sellers have furnished to the Buyers true and complete copies of the
audited consolidating income statements and balance sheets of the Parent and the
audited income statements and balance sheets of Emergent Business Capital, Inc.
and Reedy River Ventures Limited Partnership as of December 31 in each of the
years 1996 and 1997 and the unaudited income statements and balance sheets of
the Sellers for the six months ended June 30, 1998. All of such financial
statements were prepared in accordance with GAAP which has been consistently
applied throughout the periods involved and from period to period and in
accordance with the books and records of the Sellers (which books and records
were kept in accordance with GAAP) and fairly present the financial position of
the Businesses as of the dates thereof. Since June 30, 1998 there has not been a
Material Adverse Effect with respect to the Businesses.
Sufficiency of Transferred Assets. Each of the Sellers has good title to, a
valid leasehold interest in, or valid license or other right to use all of its
Transferred Assets which title, leasehold interest or license may be legally and
validly sold, assigned or otherwise conveyed as contemplated in this Agreement.
None of the Transferred Assets is subject to any Encumbrance, except any
Encumbrances which shall be removed at or prior to the Closing and except the
following: (a) mechanics', carriers', worker's and other similar liens arising
in the ordinary course of business and consistent with past practice for amounts
the payment of which is not delinquent; (b) exceptions disclosed in SCHEDULE
4.6; (c) liens for current taxes not yet due and payable; (d) purchase money
liens securing liabilities not in excess of $20,000 in the aggregate with
respect to office equipment and liens securing rental payments under capital
lease arrangements previously disclosed to Buyers, in each case entered into in
the ordinary course of business; and (e) other liens securing liabilities not in
excess of $20,000 in the aggregate arising in the ordinary course of business
not incurred in connection with the borrowing of money and which do not impair
the use of the asset (the "PERMITTED ENCUMBRANCES" ). The Transferred Assets,
together with the rights of the Buyers under the Systems Transition Agreement
constitute, and upon consummation of the transactions contemplated hereby will
constitute, all of the rights, assets, properties and interests which are
sufficient for the operation of the Businesses as the Businesses are currently
being operated and conducted.
(a) Except as set forth on SCHEDULE 4.7A, each Receivable,
Receivable Document, Receivable Credit Support
<PAGE>
Document and Receivable Collateral Document was originated in the ordinary
course of business of the Businesses. Each security or other interest created or
intended to be created under any Receivable Document is valid, subsisting,
binding and enforceable and has the priority interest in favor of the grantee
thereof as indicated in the loan file for such Receivable. Each Receivable,
Receivable Document, Receivable Credit Support Document and Receivable
Collateral Document is valid, genuine, binding and enforceable against the
counterparty thereto in accordance with its terms, is fully transferable and
assignable, and is not and shall not be (due to acts or omissions committed or
omitted by or on behalf of any of the Sellers) subject to any defenses, setoffs,
off-sets, adjustments, rescission or counterclaims of any kind or nature. Each
Receivable is absolute and unconditional. Each Receivable, Receivable Document,
Receivable Credit Support Document and Receivable Collateral Document is in
compliance with all applicable laws. No Receivable, Receivable Document,
Receivable Credit Support Document or Receivable Collateral Document is subject
to any law under which the sale, transfer or assignment thereof is unlawful,
void, voidable or otherwise prohibited.
(b) SCHEDULE 4.7B has been previously provided to the Buyers and
accurately and completely sets forth, as of June 30, 1998 and with respect to
each Receivable, the amount owing and the aging of such Receivable and the name
of the party from whom such Receivable is owing, and the coding of the
Receivable (e.g., bankruptcy or litigation). The Sellers have made available,
and at Closing shall deliver, to the Buyers complete and correct copies of all
Receivable Documents, Receivable Credit Support Documents and Receivable
Collateral Documents evidencing or otherwise relating to the Receivables. No
Seller has expressly or by its conduct or inaction waived or prejudiced the
binding effect or priority or enforceability of any Receivable or any Receivable
Documents, Receivable Credit Support Documents or Receivable Collateral
Documents and none of the Receivables has been waived or amended in a manner
adverse to any Seller since January 1, 1998. Security interests to the extent
required under the Sellers' credit policies and procedures have been, and
remain, validly and properly perfected in accordance with the applicable state's
Uniform Commercial Code or, outside the United States, in accordance with
applicable local law. No Receivables are owing by any Governmental Authority.
SCHEDULE 4.8 contains (a) an accurate and complete list of each lease pursuant
to which any of the Sellers or EBCH leases Real Property as lessee, including
such lease's expiration date, and (b) an accurate and complete list of each
lease pursuant to which any of the Sellers or EBCH leases tangible personal
property and which calls for annual
<PAGE>
payments by such Seller or EBCH of $12,000 or more. Each such lease is in full
force and effect and the Leased Real Property is adequate in all material
respects to conduct the Businesses as they are currently being conducted.
SCHEDULE 4.9 contains an accurate and complete list of (a) all Intellectual
Property owned by the Sellers and included in the Transferred Assets, and all
licenses and other Contracts relating thereto, and (b) all Contracts pursuant to
which any Seller or EBCH is licensed or authorized by others to use any other
Intellectual Property. The Sellers have good and marketable title to the
Intellectual Property, free and clear of all Encumbrances other than Permitted
Encumbrances. The Sellers have the valid and enforceable right to use the
Intellectual Property and the Software in the manner the Intellectual Property
and the Software is used by the Sellers, the Sellers are in full compliance with
the Contracts pursuant to which such Seller is authorized to use any
Intellectual Property and the Software and to the Sellers' Knowledge such use by
the Sellers does not infringe on the intellectual property rights of any other
Person.
There is no legal, administrative or arbitration proceeding, suit or action of
any nature pending or, to the Knowledge of the Parent or the Sellers, or to the
knowledge of Ashley Nutley or, with respect to clauses (iii) and (iv), to the
knowledge of any Affiliate of the Parent or the Sellers, threatened, against (i)
any Seller which involves aggregate claims against such Seller exceeding
$10,000, (ii) except as set forth in SCHEDULE 4.10, the Parent which involves
aggregate claims exceeding $50,000 (not including any such claims arising from
individual mortgage foreclosure actions or lender liability claims in connection
therewith), (iii) any Seller or the Parent which could have a Material Adverse
Effect, or (iv) any Seller or the Parent which questions or challenges the
validity of this Agreement or of any of the Related Agreements or any action
taken or to be taken by any Seller or the Parent pursuant to this Agreement or
to any of the Related Agreements or in connection with the transactions
contemplated hereby or thereby. Except in respect of a bankruptcy court order
issued in connection with one of the matters identified with an asterisk on the
attachment to SCHEDULE 4.10, there is no order, agreement, memorandum of
understanding or similar instrument issued by a Governmental Authority with
respect to the Businesses or the Transferred Assets. There are no pending or, to
the Knowledge of the Parent or the Sellers, or to the knowledge of Ashley Nutley
or any Affiliate of the Parent or the Sellers, threatened disputes,
investigations or controversies between the Parent or any Seller and any
Governmental Authority. At the date of this Agreement, none of the Sellers nor
the Parent has received any communication
<PAGE>
from any Governmental Authority that such authority would oppose or refuse to
grant or issue its consent or approval to, if required, or would impose a
materially burdensome condition on, the Sellers with respect to the transactions
contemplated by this Agreement. SCHEDULE 4.10 contains a list of all suits,
actions, or proceedings commenced by any Seller (or the Parent on behalf of any
Seller) as the plaintiff which are outstanding as of the date hereof or as of
the Closing Date.
(a) All Tax Returns with respect to the Sellers that are required
to have been filed through the date hereof have been duly filed, and all Taxes
shown to be due on such Tax Returns or otherwise required to be paid have been
paid in full. No Seller is delinquent in the payment of any Taxes, the failure
of which to pay would result in an Encumbrance on all or a substantial part of
the Transferred Assets or a liability to the Buyers as a matter of law.
(b) There are no tax liens (other than liens for current Taxes
not yet due and payable) upon any of the Transferred Assets. All Taxes that the
Sellers are required by Law to withhold or collect, including sales and use
taxes, and amounts required to be withheld for Taxes of employees and other
withholding taxes, have been duly withheld or collected and, to the extent
required, have been paid over to the proper Governmental Authorities or are held
in separate bank accounts for such purpose.
(c) None of the Sellers is a "foreign person" as defined in
Section 1445(f)(3) of the Code.
(d) None of the Transferred Assets constitutes a joint venture,
partnership or other arrangement or contract which is treated as a partnership
for Federal income tax purposes.
(e) None of the Transferred Assets constitutes tax-exempt bond
financed property or tax-exempt use property within the meaning of Section 168
of the Code, and none of the Transferred Assets is subject to a lease, safe
harbor lease or other arrangement as a result of which any Seller is not treated
as the owner for federal income tax purposes.
(a) EBCH (i) has filed (or has had filed on its behalf) on a timely basis
all Tax Returns required by applicable law to be filed by it on or before the
Closing Date and such Tax Returns are true, correct and complete in all material
respects, and (ii) has paid all Taxes (whether
<PAGE>
or not shown to be due on such Tax Returns) or has made adequate provision for
such Taxes such that the reserves for current Taxes (excluding reserves for
deferred Taxes) in respect of the period ended on and including the Closing Date
or to any years and periods prior thereto will not be less than the reasonably
estimated Tax liabilities accruing or payable by EBCH in respect of any such
period prior to or as of the Closing Date.
(b) There are no ongoing audits or examinations of any of the Tax Returns
of EBCH nor has EBCH been notified, formally or informally, by any Governmental
Authority that any such audit is contemplated or pending and no facts exist
which would constitute grounds for the assessment of any additional Taxes by any
Governmental Authority with respect to the taxable years covered in such returns
and filings. No material issues have been raised in any examination by any
Governmental Authority with respect to the businesses and operations of EBCH
which, by application of similar principles, reasonably could be expected to
result in a proposed adjustment to the liability for Taxes for any other period
not so examined.
(c) There are no claims, investigations, actions or proceedings pending
or, to the Knowledge of the Sellers or the Parent or to the knowledge of Ashley
Nutley, threatened against EBCH by any Governmental Authority for any past due
Taxes with respect to which EBCH would be individually or severally liable;
there has been no waiver of any applicable statue of limitations nor any consent
for the extension of the time for the assessment of any Tax against EBCH.
(d) EBCH is not delinquent in the payment of any amount of Taxes, and
there are no Tax liens upon any assets of EBCH (except for Taxes not yet due and
payable).
(e) EBCH has not filed a consent to the application of Section 341(f)(2)
of the Code (or any predecessor provision) or agreed to have Section 341(f)(2)
of the Code apply to any disposition of a subsection (f) asset (as such term is
defined in Section 341(f)(4) of the Code) owned by EBCH.
(f) EBCH is not a party to any safe harbor lease within the meaning of
section 168(f)(8) of the Code, as in effect prior to amendment by the Tax Equity
and Fiscal Responsibility Act of 1982, nor has EBCH entered into any
compensatory agreements with respect to the performance of services for which
payment thereunder would result in a nondeductible expense to EBCH pursuant to
Section 280G or 162(m) of the Code. None of the assets of EBCH secures any debt
the interest on which is tax exempt under Section 103 of the Code.
<PAGE>
(g) EBCH has not participated in or cooperated with an international
boycott within the meaning of Section 999 of the Code.
(h) EBCH has not agreed, or is required, to make any adjustment under
Section 481(a) of the Code by reason of a change in accounting method or
otherwise.
(i) EBCH has not entered into a transaction which is being accounted for
as an installment obligation under Section 453 of the Code, nor is EBCH a party
to an interest rate swap, currency swap or other similar currency transaction.
(j) No items of income attributable to transactions occurring on or before
the close of the last preceding taxable year of EBCH will be required to be
included in taxable income by EBCH in a subsequent taxable year by reason of
EBCH reporting income on the cash method of accounting, the completed contract
method or the percentage of completion-capitalized cost method.
(k) EBCH is not subject to any liability for Tax of any person, including,
without limitation, liability arising from the application of U.S. Treasury
Regulation Section 1.1502-6 or any analogous provision of state, local or
foreign law.
(l) EBCH is not a party to any tax sharing agreement, tax indemnification
agreement or similar contract or arrangement which is binding and in effect on
the date hereof.
(m) No claim has been made by any authority since January 1, 1995 in a
jurisdiction where EBCH does not file Tax Returns that it is or may be subject
to taxation by that jurisdiction.
(n) EBCH has withheld and paid over all Taxes required to have been
withheld and paid over and complied with all information reporting and backup
withholding requirements, including maintenance of required records with respect
thereto, in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder or other third party.
(o) EBCH has not requested or received a ruling from any taxing authority
or signed a closing or other agreement with any taxing authority which could
affect any taxable period after the Closing Date.
(p) No power of attorney has been granted by or with respect to EBCH with
respect to any matter relating to Taxes which is currently effective.
<PAGE>
(q) SCHEDULE 4.12 contains a list of all states, territories and
jurisdictions to which any Tax is properly payable by EBCH.
(r) EBCH is and has always been a corporation subject to subchapter C of
the Code for Federal income tax and applicable state tax purposes.
(s) EBCH has made available to the Buyers copies of all Tax Returns and
correspondence with any Governmental Authority with respect to Taxes commencing
on or after January 1, 1995, which Tax Returns are complete in all material
respects.
(t) The Sellers have filed a consolidated federal income tax return,
including EBCH, for the taxable year immediately preceding the current taxable
year and the Sellers are eligible to make an election under Section 338(h)(10)
of the Code with respect to EBCH.
SCHEDULE 4.13 contains a summary of all policies of fire, liability, worker's
compensation and other forms of insurance maintained for the benefit of the
Businesses (other than insurance policies relating to the benefit plans listed
on SCHEDULE 4.14 and other than credit life, casualty or similar insurance
policies (including credit unemployment, credit disability, inventory finance
property and casualty and keyman policies) obtained by Persons who are provided
financing by any of the Sellers). Such insurance policies are of the kind,
covering such risks and in such amounts and with such deductibles and exclusions
as are consistent with the industry. Neither the Parent nor any Seller has
received any notice of cancellation or termination with respect to any insurance
policy.
(a) SCHEDULE 4.14 contains an accurate and complete list of all
"employee pension benefit plans," as such term is defined in section 3(2) of
ERISA, "employee welfare benefit plans" as such term is defined in section 3(1)
of ERISA, retirement or deferred compensation plans, incentive compensation
plans, stock plans, unemployment compensation plans, vacation pay, severance
pay, bonus or benefit arrangements, insurance or hospitalization programs or any
other fringe benefit arrangements, and employment or consulting agreements
maintained by or contributed to by the Sellers, EBCH or their ERISA Affiliates
or with respect to which the Sellers, EBCH or their ERISA Affiliates have any
liability or contingent liability.
<PAGE>
(b) A true and correct copy of each of the plans, arrangements,
and agreements listed on SCHEDULE 4.14 (referred to hereinafter as "EMPLOYEE
BENEFIT PLANS"), and all contracts relating thereto, or to the funding thereof,
including, without limitation, all trust agreements, insurance contracts,
administration contracts, investment management agreements, subscription and
participation agreements, and recordkeeping agreements, each as in effect on the
date hereof, has been supplied to the Purchaser. In the case of any Employee
Benefit Plan which is not in written form, the Purchaser has been supplied with
an accurate description of such Employee Benefit Plan as in effect on the date
hereof. A true and correct copy of the most recent annual report, actuarial
report, accountant's opinion of the plan's financial statements, summary plan
description and Internal Revenue Service determination letter with respect to
each Employee Benefit Plan, to the extent applicable, and a current schedule of
assets (and the fair market value thereof assuming liquidation of any asset
which is not readily tradable) held with respect to any funded Employee Benefit
Plan has been supplied to the Buyers, and there have been no material changes in
the financial condition in the respective plans from that stated in the annual
reports and actuarial reports supplied.
(c) None of the Employee Benefit Plans is a multiemployer plan
within the meaning of section 3(37) of ERISA or an Employee Benefit Plan that
has two or more contributing sponsors at least two of whom are not under common
control within the meaning of Section 4063 of ERISA.
(d) No Employee Benefit Plan is subject to Title IV of ERISA.
(e) Each Employee Benefit Plan complies and has been administered
in form and in operation in all respects with all requirements of law applicable
thereto and no event has occurred which will or could cause any such Employee
Benefit Plan to fail to comply with such requirements and no notice has been
issued by any governmental authority questioning or challenging such compliance.
(f) All Employee Benefit Plans which are employee pension benefit
plans comply in form and in operation with all applicable requirements of
sections 401(a) and 501(a) of the Code; the Internal Revenue Service has issued
a favorable determination letter with respect to each such plan and there have
been no amendments to such plans which are not the subject of a favorable
determination letter issued with respect thereto by the Internal Revenue
Service; and no event has occurred which will or could give rise to
disqualification of any such plan under such sections or to a tax under section
511 of the Code.
(g) There have been no acts or omissions by the Sellers, EBCH or
any of their ERISA Affiliates which have given rise to or may give rise to
fines, penalties, taxes or related charges under section 502 of ERISA or
Chapters 43, 47, 68 or 100 of the Code for which EBCH or any Seller may be
liable.
<PAGE>
(h) There are no pending or threatened claims (other than routine
benefit claims), lawsuits or arbitrations which have been asserted or instituted
against any Employee Benefit Plan, any of the fiduciaries thereof or any Seller
with respect to their duties under the Employee Benefit Plans.
(i) All Employee Benefit Plans that are group health plans,
within the meaning of Section 5000(b)(1) of the Code or Section 607(1) of ERISA,
have been operated in substantial compliance with the provisions of Section
4980B and Sections 9801 through 9806 of the Code and Sections 601 through 734 of
ERISA, and no liability under Sections 4980B or Sections 9801 through 9806 of
the Code or Sections 601 through 734 of ERISA has been incurred by any Seller or
any ERISA Affiliate.
(j) There has not occurred a nonexempt "prohibited transaction"
(within the meaning of Section 4975 of the Code or Sections 406 or 407 of ERISA)
with respect to any Seller or any Employee Benefit Plan.
(k) No Seller or EBCH maintains or has entered into any document,
plan or Agreement which contains, directly or indirectly, any change in control
provisions which could cause an increase or acceleration of benefits or benefit
entitlement to employees or former employees of the Businesses or of any of the
Sellers which would create a liability to the Buyer as a result of the
transactions contemplated by this Agreement.
(a) Except for this Agreement, the Related Agreements and the
Retained Assets (other than Contracts that may be subject to an arrangement to
convey the benefit thereof pursuant to SECTION 2.2(B)), and except as set forth
in SCHEDULE 4.15 with respect to CLAUSES (IV), (V) and (IX):
(i) none of the Sellers has any employment Contract with
any officer or employee, or any Contract that contains any severance or
termination pay liabilities or obligations to any officer or employee;
(ii) none of the Sellers has any collective bargaining
or union Contracts;
(iii) none of the Sellers nor any employees of the Sellers
is restricted by Contract from carrying on its business or any part
thereof anywhere in the world or from competing in any line of business
with any Person;
<PAGE>
(iv) none of the Sellers has any debt obligation for
borrowed money or Contracts to acquire any such debt obligation of others;
(v) none of the Sellers has any obligation or liability
pursuant to Contract as guarantor, surety, co-signer, endorser, co-maker,
indemnitor or otherwise;
(vi) none of the Sellers is subject to any obligation or
requirement to provide funds to or make any investment (in the form of a
loan, capital contribution or otherwise) in any Person whether under a
loan agreement, note or otherwise in excess of $50,000 other than
commitments to lend money in the ordinary course of operation of the
Businesses;
(vii) none of the Sellers is a party to any Contract which
provides for payments by such Seller to any of its officers or directors,
to any of its Affiliates (excluding the other Sellers), or to any of the
officers or directors of any of such Affiliates;
(viii) none of the Sellers is a party to any purchase or
sale Contract involving the purchase by such Seller of goods or services
which have a value in excess of $10,000 and which is not presently (and
for the remainder of its term will not be) terminable at such Seller's
election without premium, penalty or forfeiture;
(ix) none of the Sellers has given any irrevocable power of
attorney to any Person for any purpose whatsoever, except the appointment
of agents to accept service of process; and
(x) none of the Sellers is a party to any oral arrangement
with respect to any of the matters described in the foregoing CLAUSES (I)
through (IX).
(b) True and complete copies of all documents (including all
amendments thereto) and descriptions of any oral arrangements identified on
SCHEDULE 4.15 have been made available for inspection by the Buyers.
(c) Each Contract set forth on SCHEDULE 4.15 or otherwise
material to the Businesses (collectively, the "MATERIAL CONTRACTS") is in full
force and effect and is a valid and binding obligation of the respective Seller,
enforceable in accordance with its terms except as such enforceability may be
limited by applicable bankruptcy, reorganization, insolvency, moratorium or
other similar laws from time to time in effect affecting creditors' rights
generally or by principles governing the availability of equitable remedies.
Except as set forth on SCHEDULE 4.15, no Seller, or to the Knowledge of the
Sellers or to the knowledge
<PAGE>
of Ashley Nutley, any other party to any Material Contract, is in violation
thereof or in default thereunder, and no Material Contract is currently under
negotiation or renegotiation.
All Permits possessed by the Sellers or EBCH are listed on SCHEDULE 4.16A and
each of the Sellers and EBCH is in good standing and not subject to any
suspension, adverse modification, revocation or adverse proceeding with respect
to, any such Permit. The Sellers and EBCH are required to obtain but do not have
the Permits listed on SCHEDULE 4.16B. The Permits listed on SCHEDULES 4.16A and
4.16B constitute all the Permits necessary for the Sellers and EBCH to engage in
the Businesses as currently conducted.
The Businesses and the Transferred Assets have been and are being conducted by
the Sellers and EBCH in compliance with bankruptcy, insolvency and debtor relief
laws (including, without limitation, the provisions thereof relating to
reaffirmation agreements), usury laws, the Federal Truth-in-Lending Act, the
Federal Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Fair
Debt Collection Practices Act, the Federal Trade Commission Act, the
Magnuson-Moss Warranty Act, Regulations B, M and Z of the Federal Reserve Board,
state adaptations of the National Consumer Act, of the Uniform Commercial Code
and of the Uniform Consumer Credit Code, and all other banking, usury, consumer
credit laws and equal credit opportunity and disclosure laws and laws governing
the collection of amounts owing under consumer obligations. The Businesses and
the Transferred Assets have been and are being conducted by the Sellers and EBCH
in compliance with all other Laws applicable to the Sellers or EBCH except to
the extent any such noncompliance would not reasonably be expected to have a
Material Adverse Effect. Each Seller has originated and serviced (or has caused
to be serviced) its Receivables, Receivable Collateral Documents, Receivable
Credit Support Documents and Receivable Documents in conformance with such
Seller's applicable origination and servicing policies and procedures. The
Receivables have been, and will on the Closing Date be, recorded on the books of
the Sellers in accordance with the charge-off and charge-down policies currently
followed by the Sellers. Neither the Parent nor the Sellers have received any
notice from any Governmental Authority that, or have any basis to believe that,
the Businesses are being conducted in violation of any applicable Laws.
Except as set forth on SCHEDULE 4.18, the Sellers are in good standing with
the SBA and in compliance with all statutes and regulations governing the
programs of the SBA including: (1) Section 7(a) of the Small Business Act, 15
U.S.C. 637(a), and the regulations promulgated thereunder, 13 C.F.R. ss.120;
(ii) Titles I, II , and III of the Small Business Investment Act of 1958, 15
U.S.C. 661 et seq., and the regulations promulgated thereunder, 13 C.F.R.
ss.107; and (iii) Title V of the Small Business Investment Act of 1958, 15
U.S.C. 695 et seq., and the regulations promulgated thereunder, 13 C.F.R.
ss.120. Except as disclosed on SCHEDULE 4.16B, no Seller has failed to obtain,
and the Sellers presently
<PAGE>
maintain in good standing, all Permits necessary to conduct the Businesses,
including: (i) authorization by the SBA for Emergent Business Capital, Inc. to
operate as a Small Business Lending Company (as defined in the Small Business
Act); (ii) authorization by the SBA in such district(s) where it has been sought
and granted for Emergent Business Capital, Inc. to be a Certified Lender (as
defined in the Small Business Act); (iii) authorization by the SBA in such
district(s) where it has been sought and granted for Emergent Business Capital,
Inc. to be a Preferred Lender (as defined in the Small Business Act); and (iv) a
license granted by the SBA for Reedy River Ventures Limited Partnership to be a
Small Business Investment Company (as defined in the Small Business Investment
Act).
Except as disclosed on SCHEDULE 4.19:
(a) No Seller nor EBCH has used the Leased Property, or any part
thereof, for the generation, treatment, storage, handling or disposal of any
Hazardous Materials in violation of any Environmental Laws.
(b) There is not now pending or, to the Knowledge of any Seller
or to the knowledge of Ashley Nutley, threatened any action, suit, or proceeding
by or before any Governmental Authority (i) alleging violation by any of the
Sellers or EBCH or any liability of any of the Sellers or EBCH under, any
Environmental Law in connection with the conduct of the Businesses, (ii)
alleging failure by any of the Sellers or EBCH to have any Permit required under
any Environmental Law in connection with the conduct of the Businesses, or (iii)
with respect to the release, disposal, transportation or storage of any
Hazardous Material by any of the Sellers or EBCH at, upon or under any Leased
Property.
(c) There are no past or present actions, circumstances,
conditions, or events that could reasonably be expected to result in a notice,
demand, request for information, citation, claim, action, proceeding, summons,
or complaint against any of the Sellers or EBCH with respect to any violation by
any of the Sellers or EBCH of, or liability of any of the Sellers or EBCH under,
any Environmental Law in connection with the conduct of the Businesses.
Except as disclosed on SCHEDULE 4.20, no Seller nor any of their Affiliates
has employed any investment banker, broker or finder in connection with the
transactions contemplated hereby who might be entitled to a fee or any
commission upon consummation of the transactions contemplated hereby. Any fees
or commissions to be paid to any such investment banker, broker or finder shall
be for the account of the Parent on behalf of the Sellers.
No Seller nor the Parent or EBCH has, nor has any director, officer, or
employee of any Seller, EBCH or the Parent, directly or indirectly, used funds
or other assets of any Seller, EBCH or the Parent or made any promise or
undertaking in regard to such funds or assets, for (a) illegal contributions,
gifts,
<PAGE>
entertainment or other expenses relating to political activity; (b)
illegal payments to or for the benefit of governmental officials or employees,
whether domestic or foreign; (c) illegal payments to or for the benefit of any
Person, or any director, officer, employee, agent or representative thereof; or
(d) the establishment or maintenance of a secret or unrecorded fund. There have
been no intentionally false or intentionally fictitious entries made in the
books or records of any Seller, EBCH or the Parent.
Except as set forth in the financial statements referenced in SECTION 4.5, none
of the Sellers nor EBCH has any material liabilities, claims, debts or
obligations, whether accrued, absolute, contingent or otherwise, whether due or
to become due, other than trade payables and accrued expenses which have arisen
after June 30, 1998 in the ordinary course of business.
All hardware, software, equipment or systems utilized by or material to the
operations or financial reporting of the Sellers and EBCH (collectively, the
"systems") are in good working order and condition, function in accordance with
the specifications therefor contained in the agreements pursuant to which the
Sellers or EBCH obtained the systems and no Seller nor EBCH has experienced any
significant defects in design, workmanship or material with respect thereto. The
respective Seller or EBCH, as applicable, has valid and enforceable warranties
from the respective vendors of the systems to the effect that the systems (i)
properly perform date sensitive functions before, during and after the year
2000; (ii) accurately perform leap year calculations; and (iii) will not cause
any other information technology to fail or generate errors related to any such
dates.
EBCH has conducted its operations in compliance with its articles or
certificate of incorporation and by-laws and is not in violation of any Contract
to which it is a party.
The replacement of KPMG Peat Marwick LLP with Elliott Davis as the Sellers'
accounting firm is not the result of any disagreement over the financial affairs
or accounting practices of the Parent or the Sellers and does not reflect any
event or circumstance that would impair the value or usefulness of the
Transferred Assets or that would constitute a Material Adverse Effect.
No representations or warranties made by any Seller in this Agreement contain
or will contain any untrue statement of material fact or omit or will omit to
state any material fact necessary to make the statements herein, in light of the
circumstances under which they were made, not misleading.
<PAGE>
To induce the Sellers to enter into this Agreement, the Buyers hereby
represents and warrants to the Sellers as set forth in this ARTICLE V:
Each Buyer is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation.
Each Buyer has the corporate power and authority to execute, deliver and
perform this Agreement and its Related Agreements and to consummate the
transactions contemplated hereby and thereby. All corporate acts and proceedings
required to be taken by or on the part of each Buyer to authorize it to execute,
deliver and perform this Agreement and its Related Agreements and to consummate
the transactions contemplated hereby and thereby have been duly and validly
taken and remain in full force and effect. This Agreement constitutes, and upon
the execution and delivery by each Buyer and the other parties thereto of such
Buyer's Related Agreements, such Related Agreements will constitute, the legal,
valid and binding agreements of such Buyer, enforceable against such Buyer in
accordance with their respective terms except as such enforcement may be limited
by bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally or by judicial discretion as to the availability of
equitable remedies or by general equitable principles.
The execution, delivery and performance of this Agreement and the Related
Agreements by each Buyer do not, and the consummation by each such Person of the
transactions contemplated hereby and thereby will not: (a) violate or conflict
with the certificate or articles of incorporation or by-laws of such Person; (b)
assuming satisfaction of the matters referred to in the following CLAUSE (C),
(i) violate, contravene or conflict with any order, writ, injunction, directive,
judgment, award or decree of any Governmental Authority to which such Person is
a party or to which any of its properties or assets is subject or any statute,
law, ordinance, rule or regulation of any Governmental Authority applicable to
it or any of its properties or assets; or (ii) violate or conflict with, result
in a breach of, constitute a default under (whether with notice or the lapse of
time or both), or accelerate or permit the acceleration of the performance
required by, any material Contract to which such Person is a party or by which
it is bound or by which any of its property is bound; or (c) require any filing
or registration by such Person with, or approval, consent, authorization or
other action with respect to it by, any Governmental Authority other than (i)
the notification under the HSR Act referred to in SECTION 7.1, and (ii) the
filings, registrations, authorizations, approvals, consents and other actions
listed in SCHEDULE 5.3.
The Buyers have sufficient cash, lines of credit or other sources of available
funds to enable it to make the payments contemplated by this Agreement and the
Related Agreements.
<PAGE>
There is no legal, administrative or arbitration proceeding, suit or action of
any nature pending or, to the knowledge of the Buyers, threatened, against the
Buyers which questions or challenges the validity of this Agreement or any of
the Related Agreements or any action taken or to be taken by the Buyers pursuant
to this Agreement or any of the Related Agreements or in connection with the
transactions contemplated hereby or thereby. There are no pending or, to the
knowledge of the Buyers, threatened disputes or controversies between the Buyers
or any of its Affiliates and any Governmental Authority that would reasonably be
expected to adversely affect or impair the ability of the Buyers to consummate
the transactions contemplated hereby. At the date of this Agreement, to the
knowledge of the Buyers, neither the Buyers nor any of their Affiliates have
received any communication from any Governmental Authority that such authority
would oppose or refuse to grant or issue its consent or approval to, if
required, or would impose a materially burdensome condition on the Buyers with
respect to, the transactions contemplated by this Agreement.
No Buyer nor any of their Affiliates has employed any investment banker,
broker or finder in connection with the transactions contemplated hereby who
would have a valid claim to a fee or any commission upon consummation of the
transactions contemplated hereby.
The Parent and each of the Sellers, jointly and severally, covenants and
agrees with the Buyers as set forth in this ARTICLE VI:
(a) Except as otherwise contemplated hereby, from the date hereof
until the Closing, each of the Sellers will (and will cause EBCH to) conduct its
Business in the usual and ordinary course consistent with past practice and in
compliance with all applicable Laws. In addition, each of the Sellers will (and
will cause EBCH to):
(i) use reasonable best efforts to preserve its
relationships with its suppliers, clients, borrowers and others having
business relations with it;
(ii) use reasonable best efforts to preserve its business
organization intact and retain the services of its present officers,
employees and agents;
(iii) give prompt written notice to the Buyers of any
notice received by it of any default or breach or alleged default or
breach under any Material Contract to which it is a party or by which it
is bound;
<PAGE>
(iv) give prompt written notice to the Buyers of any notice
received by it of the commencement of any proceeding, suit or action of
the type described in CLAUSE (IV) of SECTION 4.10 or the threat to
commence any such proceeding, suit or action;
(v) maintain its books and records in all respects in the
same manner and with the same care that such books and records have been
maintained prior to the execution of this Agreement; and
(vi) maintain in full force and effect through the Closing
Date the insurance policies listed in SCHEDULE 4.13.
(b) Except as otherwise contemplated hereby, from the date hereof
until the Closing, none of the Sellers nor EBCH (nor the Parent with respect to
CLAUSES (IV), (XII) OR (XIII) ) will, without the prior written consent of the
Buyers:
(i) enter into or amend any Material Contract except in the
ordinary course of business consistent with past practice;
(ii) borrow or agree to borrow any funds or incur, assume
or become subject to, whether directly or by way of guaranty or otherwise,
any obligation or liability with respect to borrowed money, except in the
ordinary course of business consistent with past practice;
(iii) loan or advance any amount to such Seller's or EBCH'S
directors or officers, except in connection with existing programs, or
make any loans or advances to any other Person other than in the ordinary
course of the Businesses;
(iv) acquire, except in the ordinary course of collection,
a material amount of assets constituting all or substantially all of the
business or assets of any Person;
(v) amend or modify its charge-off and charge-down policies
or amend or modify its credit policies or procedures in any respect;
(vi) other than pursuant to this Agreement, sell, lease or
otherwise dispose of any of its Transferred Assets except in the ordinary
course of business consistent with past practice;
(vii) permit or allow any of the Transferred Assets to be
subjected to any Encumbrances of any kind, other than the Permitted
Encumbrances;
<PAGE>
(viii) except as described in SCHEDULE 6.1, grant any
general increase in the compensation of the officers and employees of such
Seller or EBCH (including any increase pursuant to any bonus, pension,
profit-sharing or other plan or Contract), except for increases in the
ordinary course of business consistent with past practice or as may be
required by the terms of any such bonus, pension, profit-sharing or other
plan or Contract;
(ix) make any capital expenditure or commitment therefor
in excess of $20,000 individually or in excess of $50,000 in the
aggregate;
(x) permit any insurance policy naming it as a
beneficiary or a loss payable payee to be canceled or terminated or any
of the coverage thereunder to lapse;
(xi) hire any employees other than in connection with
filling a vacancy;
(xii) sell or otherwise transfer to any third party any
list of customers, past customers or prospects relating to the Businesses;
(xiii) enter into or amend or cancel or agree to the
amendment or cancellation of any insurance Contracts relating to the
Businesses;
(xiv) except as described in SCHEDULE 6.1, amend, renew or
renegotiate any lease being assumed by Buyers pursuant to SECTION
2.2(A)(XII);
(xv) merge or consolidate with any other Person; or
(xvi) enter any Contract to do any of the foregoing.
(c) From the date hereof until the Closing, the Parent will not,
without the prior written consent of the Buyers (which consent will not be
unreasonably withheld or delayed) merge with or consolidate with any other
Person unless such Person's securities are rated investment grade or better by
Moody's Investors Service or Standard & Poor's Rating Group and such Person
agrees in writing, in form and substance satisfactory to the Buyers, to be bound
by all obligations of the Parent hereunder.
(d) Anything to the contrary in this Agreement notwithstanding,
the covenants of the Sellers in this SECTION 6.1 shall not be deemed to apply to
the extent otherwise applicable in respect of any Retained
<PAGE>
Assets (other than Contracts that are subject to an arrangement to convey the
benefit thereof pursuant to SECTION 2.2(B)) or Retained Liabilities.
Each of the Sellers and EBCH will afford promptly to the Buyers and its
authorized representatives and agents (including the Buyers' Accountants)
reasonable access from the date hereof until the Closing, during normal business
hours, to the properties, books, records and employees of the Sellers and
furnish to the Buyers such additional financial and operating data and other
information as it may reasonably request. The Sellers will, at and after the
Closing, furnish the Buyers with such additional financial and operating data
and other information about the Businesses as may be requested by the Buyers and
reasonably available and necessary or appropriate for the Buyers to comply with
applicable Law and financial reporting requirements.
The Sellers have filed with the Federal Trade Commission and the Department of
Justice the notification and report form required under the HSR Act for the
transactions contemplated hereby and the Sellers shall cause to be filed as
promptly as practicable any supplemental information that may be reasonably
requested in connection therewith, which notification and report form does
comply and which supplemental information will comply in all material respects
with the requirements of the HSR Act. The filing fees incurred in connection
with compliance with the HSR Act shall be borne equally by the Sellers on one
hand and the Buyers on the other hand. The Sellers will as promptly as
practicable make the filings with, and take all reasonable steps to obtain the
authorizations, approvals, consents and other actions of, governmental agencies
described in SCHEDULE 4.3.
The Sellers shall use all commercially reasonable efforts to cause the
conditions set forth in SECTION 8.1 to be satisfied as soon as practicable after
the date hereof. To the extent that any Transferred Asset requires the consent
of any third Person for its assignment or any Assumed Liability requires the
consent of any third Person for its assumption as contemplated in this
Agreement, or any Related Agreement contemplates that certain consents may have
been obtained, or other actions may have been taken, prior to the execution and
delivery of such Related Agreement, the Sellers, at the request of the Buyers,
shall cooperate with the Buyers in attempting to obtain such consents or to
cause such other actions to be taken prior to the Closing Date.
Unless and until this Agreement has been terminated pursuant to ARTICLE XI or
the Closing has occurred, none of the Sellers nor the Parent will (i) solicit
any offer to acquire the Businesses or any capital stock of any Seller, whether
by merger, purchase, purchase of assets or other similar transaction, or (ii)
disclose (other than to the Buyers, Affiliates of the Buyers and their
respective agents) any information not customarily disclosed in the ordinary
course of business or legally required to be disclosed concerning the Businesses
or the Transferred Assets of any of the Sellers.
<PAGE>
Prior to Closing, the Sellers shall provide the Buyers with a complete and
correct description of all banking, safe deposit box and lock-box arrangements
with respect to the Businesses or Transferred Assets maintained at such time by
any Seller or EBCH or otherwise used in connection with the Businesses, all
powers of attorney in connection with such arrangements, and the names of all
persons authorized to draw thereon or to have access thereto.
Except for those Permits that are not transferrable by law, the Sellers shall,
to the extent possible under applicable Law, cause the issuance or transfer of
the Permits to the relevant Buyer upon the Closing Date in form and substance
the same as the Permits which were held by the Sellers or EBCH; provided, that
no Seller shall be required to transfer any Permit which is not transferable to
the relevant Buyer under applicable Law. The Sellers shall give and make all
required notices and reports to the appropriate Persons with respect to the
Permits that may be necessary for the ownership, operation and use of the
Transferred Assets by the relevant Buyer after the Closing.
Promptly following the date hereof, the Parent shall request each party to a
confidentiality agreement entered into with any of the Sellers or the Parent or
their Affiliates in connection with the exploration of an acquisition of the
Businesses or any material portion thereof or the Sellers (collectively, the
"OTHER CONFIDENTIALITY AGREEMENTS") to (i) return to the Parent all materials
and documents received from the Parent or the Sellers in connection with such
exploration or (ii) destroy such materials and documents and certify such
destruction to the Parent in writing. From and after the Closing, the Parent
shall, upon the request of TBCC, use commercially reasonable efforts to enforce
any covenants relating to confidentiality and non-solicitation contained in any
of the Other Confidentiality Agreements. To the extent permitted under the Other
Confidentiality Agreements, the Parent hereby assigns to the Buyers its rights
relating to confidentiality and non-solicitation contained in the Other
Confidentiality Agreements.
The Parent and TBCC shall jointly make the elections provided for by Section
338(h)(10) of the Code and Treasury Regulation Section 1.338(h)(10)-1 (and any
comparable election under state or local tax law) with respect to the purchase
of the Shares by TBCC (each, an "ELECTION"). Upon finalization of the Allocation
Agreement as set forth in SECTION 2.6(C), the Parent shall deliver Internal
Revenue Service Form 8023 to TBCC with Sections 3a through 8h and 11a through
11g completed and signed by the Parent. Also, the Parent, the Sellers and TBCC
shall cooperate with each other to take all actions necessary and appropriate
(including filing such additional forms, returns, elections, schedules and other
documents) as may be required to effect and preserve a timely Election in
accordance with the provisions of Treasury Regulation Section 1.338(h)(10)-1 (or
any comparable provisions of state or local tax law) or any successor
provisions. The Parent and TBCC shall report the purchase by TBCC
<PAGE>
of the Shares pursuant to this Agreement consistent with the Elections (and any
comparable elections under state or local tax laws) and shall take no position
inconsistent therewith in any Tax Return, any proceeding before any taxing
authority or otherwise. Any liability for Taxes arising from the Elections shall
be borne by the Sellers, including any Taxes imposed on EBCH as a result of such
Election.
The Parent shall prepare or cause to be prepared and filed in a timely manner
all of EBCH's Tax Returns for all taxable periods ending on or before the
Closing Date. The Parent shall prepare or cause to be prepared such Tax Returns
using accounting methods and other practices that are consistent with those used
by EBCH in its prior Tax Returns and items to be taken into account in EBCH's
Tax Returns for the short taxable period ending on the Closing Date shall be
determined under the "closing-the-books" method as described in Treasury
Regulation Section 1.1502-76(b)(2)(i).
The Sellers hereby grant to the Buyers the non-exclusive right to use the
trademarks and tradenames of the Sellers and the exclusive right to use the
trademarks and tradenames of EBCH from the Closing Date until the first
anniversary of the Closing Date. The Buyers agree to use such trademarks and
tradenames only as reasonably necessary to transition the operation of the
Businesses to the Buyers and in connection with the equipment, letterhead,
brochures, packages, labels, advertising and other assets relating to the
Businesses and existing on the Closing Date.
The Parent shall cause the proceeds from the sale of the Transferred Assets to
be applied in accordance with the terms of the Indenture dated September 23,
1997 pursuant to which the Parent's 10.75% Senior Notes were issued.
The Buyers covenant and agree with the Sellers as set forth in this
ARTICLE VII:
The Buyers have filed with the Federal Trade Commission and the Department of
Justice the notification and report form required under the HSR Act for the
transactions contemplated hereby and the Buyers shall cause to be filed as
promptly as practicable any supplemental information that may be reasonably
requested in connection therewith, which notification and report form does
comply and which supplemental information will comply in all material
respects with the requirements of the HSR Act. The filing fees incurred in
connection with compliance with the HSR Act shall be borne equally by the
Sellers on one hand and the Buyers on the other hand. The Buyers will make as
promptly as practicable the filings with, and take all commercially reasonable
<PAGE>
steps to obtain the authorizations, approvals, consents and other actions of,
Governmental Authorities described in SCHEDULE 5.3.
The Buyers shall use all commercially reasonable efforts to cause the
conditions set forth in SECTION 8.2 to be satisfied as soon as practicable
after the date hereof. To the extent that any Transferred Asset requires the
consent of any third Person for its assignment or any Assumed Liability requires
the consent of any third Person for its assumption as contemplated in this
Agreement, or any Related Agreement contemplates that certain consents may have
been obtained, or other actions may have been taken, prior to the execution and
delivery of such Related Agreement, the Buyers, at the request of the Sellers,
shall cooperate with the Sellers in attempting to obtain such consents or to
cause such other actions to be taken prior to the Closing Date.
The Buyers will, at and after the Closing, afford to the Sellers'
Representative and his agents reasonable access during normal business hours to
the properties, books, records, employees and auditors of the Businesses, to the
extent reasonably necessary for the Sellers' Representative to comply with
applicable Law and financial reporting requirements. Without limiting the
foregoing, the Buyers shall also cooperate with the Sellers in connection with
claims, suits, actions and proceedings of the types referred to in SECTION
12.2(A), including making available the personnel of the Buyers, whether as
witnesses or for informational purposes. The Sellers will hold all information
provided to it pursuant to this SECTION 7.3 (and any information derived
therefrom) in confidence and will not disclose any such information other
than (i) to directors, officers, employees and agents of the Sellers who need
to know such information for the purposes for which it was obtained and who
agree to be bound by this provision, and (ii) as required by applicable Law or
regulation.
The obligations of the Buyers to proceed with the Closing contemplated
hereby are subject to the satisfaction at or prior to the Closing of all of
the following conditions, any one or more of which may be waived, in whole or in
part, by the Buyers' Representative on behalf of all Buyers:
Each of the Sellers shall have complied with each of its covenants and
agreements contained herein to be performed at or prior to the Closing, and,
except as affected by any action expressly contemplated by or permitted under
this Agreement, each of the representations and warranties of the Sellers
contained in ARTICLE IV shall be true and correct in any and all respects which
the Buyers deem to be material in their reasonable judgment at the date hereof
and at and as of the Closing as if made at and as of the Closing (except to
the extent such representations and warranties expressly refer to an earlier
date, in
<PAGE>
which case they were true and correct as of such earlier date). There shall not
have occurred any event or circumstance that has or may be expected to have a
Material Adverse Effect.
The Buyers shall have received a certificate, dated the Closing Date, of each
Seller certifying as to the matters specified in SECTION 8.1(A).
The Buyers shall have received an opinion, dated the Closing Date, from Wyche,
Burgess, Freeman & Parham, P.A., counsel to the Sellers, in the form attached as
EXHIBIT D.
The waiting period under the HSR Act relating to the transactions contemplated
hereby, if applicable, shall have expired or been terminated.
There shall have been received (i) all of the consents, authorizations and
approvals from the Governmental Authorities set forth on SCHEDULE 4.3 (without
regard to any waiver by the Sellers of such consents, authorizations or
approvals set forth on such schedule) and SCHEDULE 5.3, (ii) all Permits, and
(iii) all other consents of third parties to the consummation of the
transactions contemplated hereby, which, with respect to CLAUSES (II) and (iii),
are necessary for the conduct of the Businesses or which the failure to obtain
would have a Material Adverse Effect, provided, however, that the Department of
Agriculture Business and Industry License shall not be required prior to
Closing.
There shall have been received all Permits issued by the SBA, including the
Section 7(a) Permits and the SBIC Permits.
The Parent and each Seller shall have executed and delivered each Related
Agreement to which it is a party. Each Key Employee shall have executed and
delivered the Retention Agreement to which he or she is a party.
Consummation by the Buyers of the transactions contemplated hereby, and by
the Buyers of the transactions contemplated by the Related Agreements, and the
performance by the Buyers hereof and thereof, shall not violate any order or
decree of any court or Governmental Authority having competent jurisdiction
entered after the date hereof or any Law or regulation applicable to the
Buyers becoming effective after the date hereof and no suit or action by any
Governmental Authority shall have been instituted that questions the validity
or legality of the transactions contemplated hereby; and no Governmental
Authority having jurisdiction over the Buyers or any of its Affiliates shall
have communicated any concern, formally or informally, in writing or orally,
with respect to the transactions contemplated hereunder, which is likely to
make consummation of such transactions unfeasible or materially burdensome for
such Buyers or any of its Affiliates.
<PAGE>
The Buyers shall have received (i) certified copies of each Seller's
certificate of incorporation or limited partnership agreement, as applicable,
(ii) certified copies of the Bylaws, if any, of each Seller, (iii) certified
copies of resolutions of the Board of Directors and shareholders of each of the
Sellers giving any necessary approval or authorization with respect to this
Agreement and the Related Agreements; and (iv) incumbency certificates as to
officers of the Sellers executing documents on behalf of the Sellers.
The Buyers shall have received payoff letters in form and substance acceptable
to the Buyers from each of the creditors of the Sellers with Encumbrances on any
of the Transferred Assets, together with the related Uniform Commercial Code
termination statements fully releasing such Encumbrances.
The Buyers and their respective agents and representatives shall have
completed to their satisfaction their due diligence investigation of the Sellers
and the Businesses pursuant to SECTION 6.2 which due diligence investigation
shall continue until such time as the Buyers' Representative shall have notified
the Sellers' Representative in writing that such due diligence investigation has
terminated.
Each Seller shall furnish to the Buyers on or before the Closing Date a
certification of the Seller's non-foreign status as set forth in Treasury
Regulation ss.1.1445-2(b).
TBCC shall have received the Shares duly assigned to it by Emergent Business
Capital, Inc.
The directors of EBCH shall have tendered written resignations.
Each of the Sellers and the Parent shall have delivered a Solvency Certificate
in form and substance reasonably satisfactory to the Buyers.
The Parent shall have prepared for delivery by the Buyers to the trustee on
the Closing Date (in forms reasonably acceptable to the Buyers), the Parent's
Board of Director resolutions, the officer's certificate, the opinion of counsel
and all other documents required to be delivered to the trustee in order to
release Emergent Business Capital, Inc., Emergent Commercial Mortgage, Inc. and
Emergent Business Capital Equity Group, Inc. as guarantors of the Parent's
10.75% Senior Notes due 2004.
The obligations of the Sellers to proceed with the Closing contemplated
hereby are subject to the satisfaction at or prior to the Closing of all of
the following conditions, any one or more of which may be waived, in whole or
in part, by the Sellers' Representative on behalf of all Sellers:
<PAGE>
The Buyers shall have complied with their covenants and agreements contained
herein to be performed at or prior to the Closing and, except as affected by
any action expressly contemplated by or permitted under this Agreement, each
of the representations and warranties of the Buyers contained in ARTICLE V
shall be true and correct at the date hereof and at and as of the Closing as if
made at and as of the Closing (except to the extent such representations and
warranties expressly refer to an earlier date, in which case they were true and
correct as of such earlier date).
The Sellers shall have received a certificate, dated the Closing Date, of each
Buyer certifying as to the matters specified in SECTION 8.2(A).
The Sellers shall have received an opinion, dated the Closing Date, from
Mayer, Brown & Platt, special counsel to the Buyers, in the form attached as
EXHIBIT E.
The waiting period under the HSR Act relating to the transactions
contemplated hereby, if applicable, shall have expired or been terminated.
There shall have been received all of the consents, authorizations and
approvals from Governmental Authorities set forth on SCHEDULE 4.3, and no such
consent, authorization or approval shall have been revoked.
Each Buyer shall have executed and delivered each Related Agreement to which
it is a party.
Consummation by the Sellers of the transactions contemplated hereby, and by
the Sellers of the transactions contemplated by the Related Agreements, and the
performance by the Sellers hereof and thereof, shall not violate any order or
decree of any court or Governmental Authority having competent jurisdiction
entered after the date hereof or any Law or regulation applicable to the
Sellers becoming effective after the date hereof and no suit or action by any
Governmental Authority shall have been instituted that questions the validity or
legality of the transactions contemplated hereby; and no regulatory authority
having jurisdiction over any Seller or any of its Affiliates shall have
communicated any concern, formally or informally, in writing or orally, with
respect to the transactions contemplated hereunder, which is likely to make
consummation of such transactions unfeasible or materially burdensome for the
Sellers or any of their Affiliates.
The Sellers shall have received (i) a certified copy of the certificate of
incorporation of each Buyer, (ii) a certified copy of the Bylaws of each Buyer,
(iii) certified copies of resolutions of the Board of Directors of each Buyer,
giving any necessary approval or authorization with respect to this Agreement
and the Related Agreements, and (iv) incumbency certificates as to officers of
each Buyer executing documents on behalf of such Buyer.
<PAGE>
At the Closing, the Buyers shall have paid the Estimated Closing Payment as
contemplated in SECTION 2.6.
The parties agree that in the event the Buyers waive the delivery of the SBIC
Permits prior to Closing, the Buyers shall be entitled to deduct the SBIC
Holdback from the Estimated Closing Payment and the SBIC Holdback shall be
placed in escrow in accordance with the terms of the Escrow Agreement. The
Sellers agree to cooperate with the Buyers after the Closing to effect the
transfer of the SBIC Permits to the SBIC Subsidiary. Upon the effective transfer
of the SBIC Permits to the SBIC Subsidiary, the SBIC Holdback shall be released
from escrow and distributed to the Sellers upon the request of the Parent in
accordance with the terms of the Escrow Agreement. If the SBIC Permits are not
transferred to the SBIC Subsidiary within six months of the Closing Date, then
the SBIC Holdback shall be released from escrow and distributed to the Buyers
upon the request of TBCC in accordance with the terms of the Escrow Agreement;
provided that, if the failure to obtain the SBIC Permits is a result of TBCC's
or the SBIC Subsidiary's abandonment of its efforts seeking to obtain a transfer
of the SBIC Permits to the SBIC Subsidiary, then the SBIC Holdback shall be
distributed to the Sellers in accordance with the terms of the Escrow Agreement.
For and in consideration of the Buyers purchasing the Transferred Assets and
assuming the Assumed Liabilities, during the period commencing on the Closing
Date and ending on the second anniversary of the Closing Date, Parent and each
of the Sellers covenants and agrees that neither Parent nor such Seller nor any
Affiliate of any thereof shall engage in any Competitive Activity in the
Territory except to the extent agreed to in advance in writing by the Buyers.
"COMPETITIVE ACTIVITY" means, directly or indirectly (or having any material
interest in any Person directly or indirectly): (a) engaging in any activity
that is the same as or substan-tially similar to providing mezzanine loans
(including the purchase of warrants and other equity investments in connection
therewith) or loans pursuant to Sections 7(a) or 504 of the Small Business Act;
(b) employing or soliciting for employment any Person employed by the Buyers
solely in connection with the Businesses; or (c) diverting or attempting to
divert from the Buyers any client or customer of the Businesses. "TERRITORY"
means every state of the United States of America in which any Seller carried on
a portion of the Businesses immediately prior to the Closing Date.
Notwithstanding the foregoing, it is understood and agreed that the current
activities of Emergent Business Capital Asset-Based Lending, Inc. and the
Sellers' activities in continuing to own, finance, service and use any Retained
Assets (other than Contracts that are subject to an arrangement to provide the
benefits thereof pursuant to SECTION 2.2(B)) or performing or discharging any
Retained Liabilities shall not be deemed a "Competitive Activity" for purposes
of CLAUSES (A) and (C).
<PAGE>
The parties understand and agree that the scope of the covenants contained in
this ARTICLE IX, as to activities, time and area covered, are necessary to
protect the interests of the Buyers in the Businesses and the Transferred Assets
while protecting the interests of the Sellers and its Affiliates in the
continuing business of the Seller and its Affiliates. It is the parties'
intention that these covenants be enforced to the greatest extent in time, area,
and degree of participation as is permitted by applicable Law. It is the
parties' intention that these covenants of the Sellers, the Parent (and their
respective Affiliates) shall inure to the benefit of any Person that may
succeed to the Businesses with the same force and effect as if these covenants
were made directly with such successor.
The parties agree that, in the event of a breach or threatened breach of the
Sellers' or Parent's covenants in SECTION 9.1, the damage or imminent damage
to the value of the Transferred Assets and Businesses will be irreparable and
extremely difficult to estimate, making any relief under ARTICLE XII
inadequate. Accordingly, the parties agree that the Buyers shall be entitled,
without the necessity of proving actual damages or posting any bond, to
injunctive relief against the Sellers (or applicable Affiliate thereof), upon
making an adequate showing of a breach or threatened breach of any of such
covenants by the Sellers or the Parent (or applicable Affiliates thereof), in
addition to any other relief available under ARTICLE XII of this Agreement.
The Sellers shall provide to the Buyers a true and complete list of all
employees of the Sellers and their Affiliates who were performing services in
connection with the Businesses as of July 31, 1998 together with the annual
compensation of such employees (the "EMPLOYEE LIST"). The Employee List shall be
updated by the Sellers immediately prior to the Closing Date to reflect new
employees of the Sellers employed in connection with the Businesses and
employees who terminate employment. Effective as of the Closing Date, TBCC shall
offer employment to all persons on the Employee List who either (a) immediately
prior to the Closing are actively performing services for the Businesses, or (b)
return to the active performance of services for the Businesses within six
months after the Closing. Persons who are offered employment by TBCC pursuant to
the immediately preceding sentence hereto shall be referred to as the
"EMPLOYEES." The offer of employment shall be at the same location as they were
employed by the Sellers. Employees who are hired by TBCC effective as of the
Closing Date (the "TRANSFERRED EMPLOYEES" ) shall generally be eligible to
participate in the employee benefit plans available to TBCC's similarly situated
employees on such terms and conditions as are customarily employed by TBCC. The
Sellers shall satisfy any severance obligations with respect to any Employees
who are not Transferred Employees.
The parties agree that any WARN liability (including the duty to issue
WARN notices) and any liability under similar Laws, which is attributable to
<PAGE>
terminations of employees of the Sellers before the Closing Date, is the
responsibility of the Sellers and that any WARN liability (including the duty to
issue WARN notices) and any liability under similar state Laws, which is
attributable to terminations of employment on or after the Closing Date, is the
responsibility of TBCC.
Effective as of the Closing Date, TBCC will count the service of each
Transferred Employee with the Sellers under the employee benefit plans, programs
and arrangements in which TBCC participates (the "TBCC BENEFIT PLANS")
applicable to such Transferred Employee; provided, however, that Transferred
Employees shall not receive credit under any of the TBCC Benefit Plans for
benefit accrual purposes but rather shall receive credit only for eligibility
and vesting purposes.
Effective as of the Closing Date, the Sellers shall vest fully all Transferred
Employees in their 401(k) plan accounts.
Nothing in this ARTICLE X shall be construed to limit or restrict the Buyers
or any of the Buyers' Affiliates in any way from amending or terminating any
employee benefit or compensation plan program or arrangement that it maintains
or to which it contributes.
Prior to the Closing, the Sellers shall pay all retention bonuses owed to
Employees of the Businesses pursuant to any plans maintained by the Sellers and
shall establish an accrual for, and pay to the Employees, all vacation time
earned by such Employees which has not been taken by such Employees as of the
Closing Date.
It is understood and agreed that all provisions contained in this Agreement
with respect to employee benefit plans or employee compensation are included for
the sole benefit of the respective parties hereto and do not and shall not
create any right in any other Person, including any participant in any employee
benefit or compensation plan or any beneficiary thereof or any Employee.
Except as otherwise specifically provided in the foregoing provisions of this
ARTICLE X, the Buyers shall not assume or be deemed to assume any Employee
Benefit Plan or any obligations under, in connection with or related to any
Employee Benefit Plan or to or with respect to any Employee or any other
employee of the Sellers or the Parent.
Any general communications proposed to be delivered prior to the Closing to
any of the employees identified on the Employee List regarding the matters
contained in or the transactions contemplated by this Agreement, or otherwise
respecting any changes or potential changes in employee benefit plans, employee
practices, or employee procedures which may or will occur in
<PAGE>
connection with the transactions contemplated by this Agreement, shall be
subject to the prior approval of the Buyers.
This Agreement may be terminated, and the transactions contemplated hereby
abandoned, prior to the Closing:
(a) by the mutual written agreement of the Sellers'
Representative and the Buyers' Representatives;
(b) by the Sellers' Representative or by the Buyers'
Representative if the purchase and sale of the Transferred Assets contemplated
hereby shall not have been consummated on or before October 31, 1998,
provided, however, that a party shall not have the right to so terminate this
Agreement if the failure of the purchase and sale to have occurred shall be due
to a breach by such party (or an Affiliate of such party) of any of its
agreements or covenants contained herein required to be performed by it at or
prior to the Closing pursuant to the terms hereof;
(c) by the Buyers' Representative, if the results of the Buyers'
investigation under SECTION 6.2 are not satisfactory in their sole discretion;
(d) by the Sellers' Representative, on the one hand, or the
Buyers' Representative, on the other hand, in the event of a material breach by
the Buyers or the Sellers, respectively, of any representation, warranty or
agreement contained herein, material to the overall transaction contemplated
hereby, which is not cured or cannot be cured within thirty (30) days after
written notice of such proposed termination has been delivered to the breaching
parties; or
(e) by the Sellers' Representative if any Buyer becomes Bankrupt,
or by the Buyers' Representative if the Parent, EBCH or any Seller becomes
Bankrupt.
Any party desiring to terminate this Agreement pursuant to any of the foregoing
CLAUSES (B) through (E) shall give notice of such proposed termination to the
other parties.
If this Agreement is terminated as permitted by SECTION 11.1, such termination
shall be without liability of any party (or any shareholder, Affiliate,
director, officer, employee, agent, consultant or representative of such party)
to the other parties to this Agreement; provided that if such termination shall
result from, subject to SECTION 8.1(K), a willful breach by a party of its
representations, warranties, agreements or covenants set forth in this
Agreement, such party which has so willfully breached shall be fully liable for,
subject to any applicable
<PAGE>
limitations in ARTICLE XII, any and all Indemnifiable Losses sustained or
incurred by the other party or parties as a result of such breach.
Notwithstanding anything in this SECTION 11.2 or any other provision in this
Agreement to the contrary, neither the Buyers, on the one hand, nor the Sellers,
on the other hand, shall have any liability to the other parties if the
transactions contemplated hereunder are not consummated by virtue of the failure
to obtain any approval, consent or other clearance from any Governmental
Authority required by any of them to be obtained by it in order to consummate
the transactions contemplated hereunder, except if such failure is directly
caused by the bad faith conduct of the Buyers or the Sellers, as applicable.
Nothing contained in this SECTION 11.2 shall be deemed to affect the right of
any party to compel specific performance by another party of its obligations
under this Agreement.
(a) The representations and war-ranties contained in this
Agreement or in any Related Agreement shall survive the Closing until the third
anniversary of the Closing Date, except that the representations and warranties
relating to title and authorization set forth in SECTIONS 4.1, 4.2 and 4.6 shall
survive the Closing until the expiration of any applicable statutes of
limitation and the representations and warranties set forth in SECTIONS 4.11 and
4.12 shall survive until 90 days after the expiration of any applicable statutes
of limitation. No claim regarding a breach of any such representation or
warranty shall be made for the first time after the date such representation or
warranty expires. Notwithstanding the preceding sentence, with respect to any
claim that is made in writing within the applicable time period described in
the preceding sentence, the period of time for making such claim shall be
extended to include any additional period as may be necessary to finally resolve
such claim. The agreements and covenants of the parties contained in this
Agreement or in any Related Agreement shall survive the Closing.
(b) The sole and exclusive monetary remedy of the Buyers and the
Buyer Parties and the Sellers and the Seller Parties for any breach of any
covenant or agreement, or any inaccuracy or other breach of any representation
or warranty, contained in this Agreement or any Related Agreement shall be the
indemnities contained in SECTIONS 12.2 and 12.3, respectively.
(a) Subject to SECTIONS 12.1 and 12.2(B), the Parent and each of
the Sellers hereby agrees to indemnify, jointly and severally, the Buyers and
the Buyer Parties against, and agrees to hold each of them harmless from,
<PAGE>
any and all Indemnifiable Losses incurred or suffered by any of them arising
out of:
(i) any inaccuracy or other breach of any representation
or warranty made by any Seller or the Parent in this Agreement or any of
the Related Agreements; provided, however, that the representations made
in SECTION 4.10 shall be read without the benefit of any exceptions
identified in SCHEDULE 4.10;
(ii) any breach of any covenant or agreement to be
performed by any Seller or the Parent pursuant to this Agreement or any
Related Agreement;
(iii) any legal, administrative or arbitration proceeding,
suit or action that relates to the Businesses or the Transferred Assets
which results from or arises out of any action or inaction prior to the
Closing Date (whether or not such action or inaction was disclosed on any
of the schedules hereto);
(iv) the Retained Liabilities and the Retained Assets;
(v) any Taxes for periods (or portions thereof) ending
on or prior to the Closing Date; or
(vi) the waiver provided in SECTION 13.5.
(b) The liability of the Sellers and the Parent to provide
indemnification pursuant to SECTION 12.2 shall be limited as follows:
(i) The Sellers and the Parent shall not be liable with
respect to any Indemnifiable Loss, except to the extent that the aggregate
amount of Indemnifiable Losses exceeds $50,000, at which point the Sellers
and the Parent shall be responsible for the amount of all such
Indemnifiable Losses in excess of such amount. For purposes of determining
if an Indemnified Party is entitled to indemnification hereunder and the
amount thereof, all representations and warranties contained herein shall
be considered without reference to materiality, Material Adverse Effect or
knowledge qualifiers or any dollar amounts specified therein.
(ii) The aggregate amount of Indemnifiable Losses for which
the Sellers and the Parent shall be responsible shall not, in any event,
exceed the Purchase Price.
<PAGE>
(a) Subject to SECTIONS 12.1, and 12.3(B) the Buyers hereby
agrees to indemnify the Sellers and the Seller Parties against, and agrees to
hold each of them harmless from, any and all Indemnifiable Losses incurred or
suffered by any of them arising out of:
(i) any inaccuracy or other breach of any represent-
ation or warranty made by the Buyers in this Agreement or any of the
Related Agreements;
(ii) any breach of any covenant or agreement to be
performed by any Buyer pursuant to this Agreement or any Related
Agreement;
(iii) any Assumed Liability (to the extent not subject to
indemnification by the Sellers and the Parent pursuant to SECTION 12.2);
(iv) any legal, administrative or arbitration proceeding,
suit or action that relates to the Businesses or the Transferred Assets
which results from or arises out of any action or inaction subsequent to
the Closing Date; or
(v) any Taxes for periods (or portions thereof) beginning
after the Closing Date.
(b) The liability of the Buyers to provide indemnification
pursuant to SECTION 12.2 shall be limited as follows:
(i) The Buyers shall not be liable with respect to any
Indemnifiable Loss, except to the extent that the aggregate amount of
Indemnifiable Losses exceeds $50,000, at which point the Buyers shall be
responsible for the amount of all such Indemnifiable Losses in excess of
such amount. For purposes of determining if an Indemnified Party is
entitled to indemnification hereunder and the amount thereof, all
representations and warranties contained herein shall be considered
without reference to materiality, Material Adverse Effect or knowledge
qualifiers or any dollar amounts specified therein.
(ii) The aggregate amount of Indemnifiable Losses for which
the Buyers shall be responsible shall not, in any event, exceed
$5,000,000.
(a) Except as provided in SECTIONS 12.4(B), as soon as is
reasonably practicable after becoming aware of a claim for indemnification
<PAGE>
under this ARTICLE XII and of any actual or reasonably likely Indemnifiable Loss
in connection therewith, the party hereto seeking such indemnification (an
"INDEMNIFIED PERSON") shall promptly give notice to the party hereto against
whom such indemnification is sought (the "INDEMNIFYING PERSON") of such claim
and, if known, the amount of the Indemnifiable Loss the Indemnified Person will
be entitled to receive hereunder from the Indemnifying Person (together with
such information as may be necessary for the Indemnifying Person to determine
that the limitations contained in SECTION 12.2(B) or 12.3(B), as applicable,
have been satisfied or do not apply). The failure of the Indemnified Person to
give such notice shall not relieve the Indemnifying Person of its obligations
with respect to such claim for indemnification except to the extent (if any)
that the Indemnifying Person shall have been materially prejudiced thereby.
(b) This SECTION 12.4(B) shall apply if a Person not a party
hereto (or an Affiliate of such party) shall assert any claim, or commence any
suit, action or proceeding against an Indemnified Person in respect of which
indemnity may be sought under this ARTICLE XII. The Indemnified Person shall
give notice as promptly as is reasonably practicable to the Indemnifying Person
of the assertion of such claim, or the commencement of any such suit, action or
proceeding (together with such information as may be necessary for the
Indemnifying Person to determine that the limitations contained in SECTION
12.2(B) or 12.3(B), as applicable, have been satisfied or do not apply). The
failure of the Indemnified Person to give notice shall not relieve the
Indemnifying Person of its obligations under this ARTICLE XII except to the
extent (if any) that the Indemnifying Person shall have been materially
prejudiced thereby. The Indemnifying Person may, at its own expense, (i)
participate in the defense of any such claim, suit, action or proceeding and
(ii) upon notice to the Indemnified Person, at any time during the course of
any such claim, suit, action or proceeding, assume the defense thereof;
provided, however, that the Indemnifying Person shall thereafter consult with
the Indemnified Person upon the Indemnified Person's reasonable request for
such consultation from time to time with respect to such claim, suit, action
or proceeding. If the Indemnifying Person assumes such defense, the
Indemnified Person shall have the right (but not the duty) to participate
in the defense thereof and to employ counsel, at its own expense, separate from
the counsel employed by the Indemnifying Person. If, however, the Indemnified
Person reasonably determines in its judgment that representation by the
Indemnifying Person's counsel of both the Indemnifying Person and the
Indemnified Person would present such counsel with a conflict of interest, then
such Indemnified Person may employ separate counsel to represent or defend it
in any such claim, action, suit or proceeding and the Indemnifying Person shall,
subject to the limitations contained in SECTION 12.2 or SECTION 12.3, as
applicable, pay the reasonable fees and disbursements of such separate
counsel.
<PAGE>
(c) Any settlement or compromise made or caused to be made by the
Indemnified Person or the Indemnifying Person, as the case may be, of any such
claim, suit, action or proceeding of the kind referred to in SECTION 12.4(b)
being defended by such Person shall be binding upon the other Person, in the
same manner as if a final judgment or decree had been entered by a court of
competent jurisdiction in the amount of such settlement or compromise.
Notwithstanding the foregoing, (i) no obligation, restriction or expense shall
be imposed on the Indemnified Person as a result of such settlement without its
prior written consent and (ii) the Indemnified Person will give the Indemnifying
Person at least thirty (30) days' notice of any proposed settlement or
compromise of any claim, suit, action or proceeding it is defending, during
which time the Indemnifying Person may reject such proposed settlement or
compromise; provided, however, that from and after such rejection, the
Indemnifying Person shall be obligated to assume the defense of such claim,
suit, action or proceeding (subject to any limitations on the Indemnifying
Person's obligation to indemnify the Indemnified Person set forth in this
Agreement).
(d) In the event that the Indemnifying Person, after written
notice thereof, does not elect to assume the defense of any claim, suit, action
or proceeding of the type referred to in SECTION 12.4(B), then any failure of
the Indemnified Person to defend or to participate in the defense of any such
claim, suit, action or proceeding, or to cause the same to be done, shall not
relieve the Indemnifying Person of its obligations hereunder.
(e) With respect to any claim, suit, action or proceeding of the
type referred to in SECTION 12.4(B) and whether or not the Indemnifying Person
chooses to defend or prosecute any such claim, suit, action or proceeding,
the Indemnified Person (and its Affiliates) shall fully cooperate with the
Indemnifying Person, including, as may be reasonably requested by the
Indemnifying Person, making available all relevant records and files with
respect to any such claim, suit, action or proceeding, providing access to
counsel of the Indemnified Person, if applicable, and making available the
personnel of such Indemnified Person (and its Affiliates), whether as witnesses
or for informational purposes.
On the Closing Date, the Holdback Amount shall be placed in escrow with the
escrow agent specified in the Escrow Agreement and in accordance with the terms
of the Escrow Agreement. Any Indemnifiable Loss determined to be payable by the
Sellers shall first be released from the Holdback Amount pursuant to the
provisions of the Escrow Agreement to the extent there are sufficient amounts
remaining in escrow to satisfy such obligations before proceeding against the
Sellers or Parent directly. The Holdback Amount plus all accrued and unpaid
interest thereon shall be distributed to the Parent, for the benefit of the
Sellers, on the third anniversary of the Closing Date, except to the extent and
for the amount of any unresolved claims filed by or on behalf of any Buyer Party
<PAGE>
during such three-year period. The existence and distribution of the Holdback
Amount shall not limit or waive in any manner the Buyers' rights to
indemnification provided pursuant to this ARTICLE XII.
(a) Each of the Sellers hereby irrevocably designates and
appoints each of John M. Sterling and Kevin Mast (either of them acting alone in
such capacity, the "SELLERS' REPRESENTATIVE") to act as its agent and
attorney-in-fact under this Agreement and any Related Agreement to which it is a
party and hereby authorizes the Sellers' Representative to take such action
on its behalf under this Agreement and any such Related Agreement, including
delivering, or accepting, such certificates and other documents contemplated
by this Agreement or such Related Agreement, making or accepting such payments
contemplated by this Agreement or such Related Agreement, entering into such
amendments or modifications of this Agreement or such Related Agreement,
terminating this Agreement or such Related Agreement and granting such waivers
under this Agreement or such Related Agreement, as the Sellers'
Representative deems appropriate. Any action taken by the Sellers'
Representative under or in connection with this Agreement or such Related
Agreement shall be binding on each of the Sellers, and the Buyers shall be
entitled to rely on any acts taken by the Sellers' Representative hereunder
on behalf of any of the Sellers as the binding act of such Sellers. The
appointment set forth herein shall be irrevocable but shall terminate upon
written notice of the Sellers' Representative to the Buyers.
(b) Each of the Buyers hereby irrevocably designates and
appoints Christopher Gillock (in his capacity as such, the "BUYERS'
REPRESENTATIVE") to act as its agent and attorney-in-fact under this Agreement
and any Related Agreement to which it is a party and hereby authorizes the
Buyers' Representative to take such action on its behalf under this
Agreement and any such Related Agreement, including delivering, or accepting,
such certificates and other documents contemplated by this Agreement or such
Related Agreement, making or accepting such payments contemplated by this
Agreement or such Related Agreement, entering into such amendments or
modifications of this Agreement or such Related Agreement, terminating this
Agreement or such Related Agreement and granting such waivers under this
Agreement or such Related Agreement, as the Buyers' Representative deems
appropriate. Any action taken by the Buyers' Representative under or in
connection with this Agreement or such Related Agreement shall be binding on
each of the Buyers, and the Sellers shall be entitled to rely on any acts taken
by the Buyers' Representative hereunder on behalf of any of the Buyers as
the binding act of such Buyers. The appointment set forth herein shall be
irrevocable
<PAGE>
but shall terminate upon written notice of the Buyers' Representative to the
Sellers.
(c) The Sellers and the Buyers acknowledge and agree that the
Sellers' Representative and the Buyers' Representative have been appointed
hereunder for administrative convenience only and, accordingly, neither the
Sellers' Representative nor the Buyers' Representative shall have any liability
of any nature whatsoever to any Seller or Buyer, respectively, by reason of
any act or omission taken or made in his respective capacity as agent
hereunder.
The Sellers shall supplement or amend any Sched-ule referred to in ARTICLE IV
and the Buyers shall supplement or amend SCHEDULE 5.3 from time to time prior
to or at the Closing, by notice in accordance with the terms of this
Agreement, including by delivering one or more supplements or amendments to
correct any matter which would constitute a breach of any representation or
warranty contained herein. No such supplemental or amended Schedule shall be
deemed to cure any breach for purposes of SECTIONS 8.1(A), 8.2(A), 12.2 or
12.3 as applicable. All references to any Schedule hereto which is
supplemented or amended as provided in this SECTION 13.2 shall, for all
purposes (other than SECTIONS 8.1(A), 8.2(A), 12.2 or 12.3), whether or not the
Closing occurs, be deemed to be a reference to such Schedule as so
supplemented or amended.
All notices and other communications hereunder shall be in writing and shall
be deemed given (i) when delivered, if delivered personally, (ii) when sent and
receipt is confirmed, if sent by facsimile transmission and (iii) five (5)
Business Days after mailing, if mailed by registered or certified mail, return
receipt requested, to the parties at the following addresses (or such other
addresses as they may hereafter specify by a notice complying herewith):
(a) If to the Sellers, to:
HomeGold Financial, Inc.
15 South Main Street
Wachovia Bank Building, Suite 750
Greenville, SC 29601
Attention: Kevin J. Mast
Facsimile No.: 864-271-8374
with a copy to: HomeGold Financial, Inc.
15 South Main Street
Wachovia Bank Building, Suite 750
Greenville, SC 29601
Attention: Mark Keegan, Esq.
Facsimile No.: 864-255-4425
<PAGE>
and: Wyche, Burgess, Freeman & Parham, P.A.
44 East Camperdown Way
Greenville, SC 29601
Attention: Cary Hall, Esq.
Facsimile No.: 864-235-8900
(b) If to the Buyers, to:
Transamerica Business Credit Corporation
9399 West Higgins
Suite 600
Rosemont, IL 60018
Attention: Stephen A. Read
Facsimile No.: 847- 685-1142
with a copy to: Transamerica Commercial Finance Corporation
5595 Trillium Boulevard
Hoffman Estates, IL 60192
Attention: Vincent Hillery, Esq.
Facsimile No.: 847-747-7455
Except as otherwise specifically provided herein, all legal and other costs
and expenses incurred in connection with the preparation, execution and
delivery of this Agreement and the Related Agreements and the consummation
of the transactions contemplated hereby and thereby shall be paid by the party
that incurred such costs and expenses.
The parties hereby waive compliance with the requirements of: (a) all
applicable state Tax laws that may require notification of state taxing
authorities and related actions in respect of bulk sales of assets outside of
the ordinary course of business, and (b) any bulk transfer laws (such as Article
6 of the Uniform Commercial Code as enacted in any state).
This Agreement shall be binding upon and shall inure to the benefit of the
parties and their respective successors and assigns, provided, however, that
neither this Agreement nor any right or obligation hereunder may be assigned by
any party without the consent of the other parties hereto, except that the
Buyers may, without the consent of the Sellers, assign this Agreement or any
Related Agreement or any portion hereof or thereof or any right or obligation
hereunder or thereunder to one or more of their respective Affiliates.
Any due diligence review, audit or other investigation or inquiry undertaken
or performed by or on behalf of the Buyers shall not limit, qualify, modify or
amend the representations, warranties and covenants of, and indemnities by, the
Parent and the Sellers made or undertaken pursuant to this Agreement,
irrespective of
<PAGE>
the knowledge and information received (or which should have been received)
therefrom by the Buyers.
Except for the Buyer Parties and the Seller Parties in connection with ARTICLE
XII and SECTION 13.15 this Agreement is solely for the benefit of the parties
hereto and no provision of this Agreement shall be deemed to confer upon any
other third party any remedy, claim, liability, reimbursement, cause of
action or other right.
(a) This Agreement and the documents referred to herein embodies
the entire agreement of the parties hereto with respect to the subject matter
hereof and thereof and supersedes all prior agreements with respect thereto,
including the letter agreement dated July 30, 1998 between the Parent and
Transamerica Corporation.
(b) Except as provided in SECTION 13.2, this Agreement may not be
amended except upon the written agreement of the parties. Any failure of any
Seller or Buyer to comply with any provision of this Agreement may be expressly
waived by the Buyers or the Sellers, respectively, but any such waiver or
failure to insist upon full compliance with such provision shall not operate as
a waiver of, or estoppel with respect to, any subsequent or other failure. No
failure to exercise and no delay in exercising any right, remedy or power
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy or power hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy or power provided
herein or by law or in equity. The waiver by any party of the time for
performance of any act or condition hereunder does not constitute a waiver of
the act or condition itself.
Prior to the Closing Date, except as required by law (including in connection
with any other transactions in which any Seller, any Buyer or any of their
respective Affiliates is a participant, with respect to filings with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended) or the rules of
any stock exchange, no public announcement or other publicity regarding the
transactions referred to herein shall be made by any Buyer, or any Seller or any
of their respective Affiliates without the prior agreement of the parties as
to content, form, timing and publication; provided, however, that nothing in
this SECTION 13.10 shall prevent such parties from discussing such
transactions with, or making such announcements to, those Persons the
notification of whom or whose approval, waiver, consent, agreement or opinion,
as the case may be, is required for consummation of such particular transaction
or transactions. Such parties shall exercise all reasonable efforts to assure
that such Persons will agree to keep confidential any information relating to
this Agreement.
<PAGE>
If any provision of this Agreement shall be held invalid, illegal or
unenforceable, the validity, legality or enforceability of the other provisions
hereof shall not be affected thereby, and there shall be deemed substituted for
the provision at issue a valid and enforceable provision as similar as
possible to the provision at issue.
Except as set forth in SECTION 13.15, the Buyers and the Sellers shall share
equally all sales, use, stamp, transfer and like Taxes, if any, (excluding
income and capital gains Taxes of the Sellers which become due and payable by
the Sellers) required to be paid in connection with the transfer of the
Transferred Assets pursuant hereto and shall share equally all recording,
filing, transfr and other fees (and the fees and costs of any agent retained
to effect any such recordation, filings or transfers) required to be paid in
connection with the transfer of the Transferred Assets pursuant hereto. This
Agreement may be executed in one or more counterparts, all of which shall
together constitute one and the same instrument, and shall become effective when
one or more counterparts hereof have been signed by the Buyers and delivered to
the Sellers and one or more counterparts hereof have been signed by the Sellers
and delivered to the Buyers.
Each of the Sellers, on the one hand, and the Buyers, on the other hand,
agrees to cooperate fully with the other in connection with obtaining the
satisfaction of the conditions set forth in ARTICLE VIII. Each of the Sellers,
on the one hand, and the Buyers, on the other hand, agrees to execute and
deliver such other documents, certificates, agreements and other writings and
to take such other actions as may be reasonable, and necessary or desirable, in
order to consummate or implement expeditiously the transactions
contemplated by this Agreement.
Any Taxes for any period beginning during and ending after the Pre-Closing Tax
Period (as hereinafter defined) shall be apportioned between the Pre-Closing Tax
Period and the subsequent period based on an interim closing of the books as of
the close of business on the Closing Date, except that exemptions, allowances,
deductions or other items that are calculated on an annual basis shall be
apportioned on a per diem basis. The Sellers shall be liable for and shall hold
the Buyer Parties harmless from and against all Taxes imposed on the Transferred
Assets and EBCH with respect to any Pre-Closing Tax Period and any deemed short
taxable year ending on and including the Closing Date. For purposes of this
SECTION 13.15, the term "PRE-CLOSING TAX PERIOD" means the period (including all
prior taxable periods) ending on and including the Closing Date.
<PAGE>
(i) The Sellers and the Buyers agree to furnish or cause to
be furnished to the other, upon request, as promptly as practicable, such
information (including access to books and records) and assistance
relating to the Transferred Assets and EBCH as is reasonably necessary for
the filing of any Tax Return, the preparation for any Tax audit, the
prosecution or defense of any claim, suit and proceeding relating to any
proposed Tax adjustment for which the Sellers retain liability under this
SECTION 13.15 and for the performance by the Sellers and the Buyers of
their respective obligations under this Agreement. The Sellers and the
Buyers shall keep all such information and documents received by them
confidential unless otherwise required by law.
(ii) The Sellers and the Buyers agree to retain or cause to
be retained all books and records pertinent to the Transferred Assets and
EBCH until the applicable period for assessment of Taxes under applicable
law (giving effect to any and all extensions or waivers) has expired, and
such additional period as necessary for any administrative or judicial
proceedings relating to any proposed assessment but in any event for a
period of at least six years after the Closing Date, and to abide by all
record retention agreements entered into with any taxing authority. The
Sellers and the Buyers agree to give each other reasonable notice prior to
transferring, discarding or destroying any such books and records relating
to Tax matters and, if so requested after giving such notice, the Sellers
and the Buyers shall allow the requesting party to take possession of such
books and records.
(iii) The Sellers and the Buyers shall cooperate with each
other in the conduct of any audit or other proceedings for any Tax
purposes and they shall each execute and deliver such powers of attorney
and other documents as are reasonably necessary to carry out the intent of
this Agreement.
(iv) The Parent shall bear responsibility for, and timely
pay, all applicable stock transfer Taxes, if any, due as a result of the
sale and transfer of the Shares.
EACH OF THE PARTIES HERETO AGREES THAT ANY LITIGATION BASED HEREON, OR ARISING
OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT SHALL BE BROUGHT AND
MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF ILLINOIS OR IN THE UNITED
STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS. EACH OF THE PARTIES
HERETO HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO JURISDICTION OF THE COURTS OF
THE STATE OF ILLINOIS AND OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF ILLINOIS. EACH OF THE PARTIES HERETO HEREBY
<PAGE>
EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH
LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY
SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
THIS AGREEMENT IS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF ILLINOIS, APPLICABLE TO CONTRACTS MADE AND TO BE ENTIRELY PERFORMED
IN SAID STATE.
TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HEREBY IRREVOCABLY
WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
The headings preceding the text of Articles, Sections and subsections and
Schedules included in this Agreement are for convenience only and shall not be
deemed part of this Agreement or be given any effect in interpreting this
Agreement. The use of the terms "including" or "include" shall, in all cases,
mean "including, without limitation," and "include, without limitation,"
respectively. The use of the masculine, feminine or neuter gender herein shall,
as applicable, also refer to the other genders. Except as the context otherwise
requires, the use of the singular form of any term shall also refer to the
plural, and vice versa. Unless the context otherwise requires, whenever the
terms "hereto", "hereunder", "herein" or "hereof" are used in this Agreement,
such terms shall be construed as referring to this entire Agreement and
references to "Articles", "Sections", "subsections", "clauses", "Schedules",
"Exhibits", "Preamble" and "Recitals" shall be construed as referring to those
of this Agreement. This Agreement is the result of negotiations among, and has
been reviewed by, counsel to the other parties thereto and is the product of all
parties. Accordingly, any rule of law or any legal decision that would require
interpretation of any claimed ambiguities in this Agreement against the party
that drafted it has no application and is expressly waived.
The Parent hereby irrevocably and unconditionally guarantees the full and
prompt performance of all of the covenants and agreements made by the Sellers
under this Agreement and the prompt and full payment of all of the obligations
and liabilities of the Sellers arising from or assumed under this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
TRANSAMERICA BUSINESS CREDIT CORPORATION
By: __________________________________
Name: ________________________________
Title: _______________________________
TRANSAMERICA GROWTH CAPITAL, INC.
By: __________________________________
Name: ________________________________
Title: _______________________________
TRANSAMERICA SMALL BUSINESS SERVICES, INC.
By: __________________________________
Name: ________________________________
Title: _______________________________
EMERGENT BUSINESS CAPITAL, INC.
By: __________________________________
Name: ________________________________
Title: _______________________________
EMERGENT COMMERCIAL MORTGAGE, INC.
By: __________________________________
Name: ________________________________
Title: _______________________________
<PAGE>
EMERGENT BUSINESS CAPITAL EQUITY GROUP, INC.
By: __________________________________
Name: ________________________________
Title: _______________________________
REEDY RIVER VENTURES LIMITED PARTNERSHIP
By: HOMEGOLD FINANCIAL, INC., its general partner
By: ____________________________
Name: ___________________________
Title: ___________________________
HOMEGOLD FINANCIAL, INC.
By: __________________________________
Name: ________________________________
Title: _________________________________
EXHIBIT A
---------
RETENTION AGREEMENT
Date:
Name:
Address:
Dear :
As you know, Transamerica has signed a letter of intent to acquire Emergent
Business Capital, Inc., Emergent Commercial Mortgage, Inc., and Emergent
Business Capital Equity Group. Contingent upon the sale closing, it is a
pleasure to extend an offer to you to join Transamerica Business Credit (TBCC),
in the
<PAGE>
position you currently hold as (OR SOME OTHER COMMENSURATE TITLE), for
Emergent Business Capital. In this capacity, you will be one of the key members
of the Transamerica Business Credit management team.
The following are the key elements of our offer:
1. BASE SALARY
-----------
Your base salary will be $________ per year, payable semi-monthly. As part
of our normal process, your salary will be reviewed on your anniversary
date. Your start date will commence upon the sale closing.
2. SPECIAL RETENTION BONUS
-----------------------
Because of your key role in serving our ongoing business needs, upon the
sale closing and your date of hire with Transamerica you will be eligible
for a Special Retention Bonus. This bonus will be equal to 15% of your base
salary, as of your date of hire, and will be paid to you in one lump sum
installment.
To receive the Special Retention Bonus, you must remain an active employee
of Transamerica through December 1, 1999 and must remain an employee in good
standing. Involuntary termination for misconduct, fraud or gross negligence
in the performance and discharge of your duties will forfeit your
eligibility for the Special Retention Bonus.
This bonus will be paid as soon as administratively practicable after
December 1, 1999. Any payments will be net of required Federal and state tax
withholding and other applicable deductions (if any).
3. BONUS ELIGIBILITY
-----------------
For plan year 1998, you will be eligible to receive a performance bonus
targeted at your 1997 bonus payout level, payable in early 1999. The actual
bonus paid will depend on TBCC's performance criteria and your personal
achievements in accordance with established objectives and expectations.
Payments will be subject to normal withholdings and will be reported as
taxable income to you. In addition, payments will be considered as part of
total compensation (base salary and incentives) towards Transamerica
Corporation Retirement Plan, and if you have elected to participate, to your
Stock Savings Plan benefits.
For plan years 1999 and beyond, you will be eligible to participate in the
TBCC incentive bonus plan, at target levels to be established, subject to
plan approvals.
<PAGE>
4. BENEFITS
--------
You will be eligible to enroll for coverage under the Transamerica Benefit
Plans from your date of hire, subject to enrollment criteria. These plans
include medical, dental, life, disability and accidental death and
dismemberment plans, as well as stock savings and retirement plans. You will
receive a complete orientation to these plans, including enrollment
criteria, following your start date.
5. VACATION
--------
You will be eligible for two weeks vacation accrual per year.
6. CONDITIONS TO OFFER
-------------------
This offer is contingent upon your completion of an application of
employment, acceptable references and receipt of satisfactory background
validation and proof of identification and work authorization as required by
the Immigration Reform and Control Act. We must ask you to present the
appropriate documents for identification as described on the enclosed
checklist of approved documents within 48 hours of your date of hire.
In accepting this offer, you understand and agree that the employment
relationship between you and Transamerica exists with the mutual consent of
both parties. Accordingly, either you or Transamerica may terminate the
employment relationship and all related compensation and benefits at will,
at anytime, with or without cause of notice. In addition, Transamerica may
eliminate or change any terms or conditions of your employment, including
your job assignment at will, at anytime, with or without cause or notice.
You further understand and agree that no employee or representative of TBCC
other than the President or Chief Executive Officer, has any authority to
make any agreement contrary to the terms contained in this letter. Any
modification of the at will nature of your employment must be in writing and
must be executed by the Senior Vice President of Human Resources and the
President or the Chief Executive Officer. Furthermore, you understand and
agree that no policy, guideline or other statement of business philosophy or
operating principle or standard contained in any TBCC handbook, manual or
other TBCC document, shall give rise to any contractual obligation
whatsoever.
Please acknowledge your acceptance of this offer and your understanding that
it reflects the entire understanding between you and TBCC with respect to
the nature of your employment relationship and supersedes any and all
<PAGE>
previous agreements, whether written or oral, express or implied, relating
to your employment relationship with Transamerica.
We look forward to your joining Transamerica Business Credit Corporation and
participating in the exciting opportunities before us.
Sincerely,
Steven Read
President & CEO
Transamerica Business Credit
I hereby acknowledge, subject to and upon the sale closing between the above
described parties, my acceptance of this offer of employment.
- ---------------------------- -------------------
Name Date
Encs.
<PAGE>
ESCROW AGREEMENT
This ESCROW AGREEMENT (this "Escrow Agreement") is entered into as of
October __, 1998 among Transamerica Business Credit Corporation, a Delaware
corporation ("TBCC"), HomeGold Financial, Inc., a South Carolina corporation
(the "Parent") and Carolina First Bank, a South Carolina banking corporation
(the "Escrow Agent").
WHEREAS, TBCC and certain of its subsidiaries and the Parent and certain
of its affiliates have entered into an Asset Purchase Agreement, dated as of
October 2, 1998 (the "Agreement"; terms used but not defined herein shall have
the meanings ascribed to them in the Agreement);
WHEREAS, pursuant to the Agreement, TBCC and the Parent have agreed to
enter into this Escrow Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements contained in this Escrow Agreement and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Section 1. Deposit of Escrow Amount. TBCC hereby delivers to the Escrow
Agent $4,000,000 to be held pursuant to the terms of the Agreement and this
Escrow Agreement (as such amount may be reduced from time to time in accordance
with the Agreement and this Escrow Agreement, the "Holdback Amount") and
$100,000 to be held pursuant to the terms of the Agreement and this Escrow
Agreement (the "SBIC Holdback," and together with the Holdback Amount, the
"Escrow Amount"). The Escrow Agent hereby acknowledges receipt of the Escrow
Amount.
Section 2. Holding of Escrow Amount. The Escrow Agent agrees to cause the
Escrow Amount to be deposited into an interest-bearing account. Interest earned
on the Escrow Amount shall be distributed to the Parent for the benefit of the
Sellers on the last Business Day of each calendar month during the term of this
Escrow Agreement
Section 3. Release of Holdback Amount.
---------------------------
(a) Whenever TBCC demands the release of any of the Holdback Amount from
escrow for payment of an Indemnifiable Loss which has been determined to be due
to any Buyer Party pursuant to Section 12.2 of the Agreement, TBCC shall give
notice thereof (a "Release Notice") to the Escrow Agent and to the Parent, which
Release Notice shall specify the dollar amount to be released from the Holdback
Amount. The Escrow Agent shall not be responsible for verifying that the amount
demanded complies with the terms of the Agreement. If, after 5 Business Days,
excluding day of receipt, after such Release Notice is received, the Escrow
Agent and TBCC have not received written notice (an "Objection Notice") of the
Sellers' objection to the release of such Holdback Amount, the Escrow Agent
shall release such Holdback Amount in accordance with the written
<PAGE>
instructions of TBCC. If the Parent gives an Objection Notice within such 5
Business Day period objecting to the release of all or any part of the Holdback
Amount described in the Release Notice, the Escrow Agent shall release any part
of the Holdback Amount not so objected to and shall not release any part of the
Holdback Amount the release of which was objected to in the Objection Notice
unless and until the Escrow Agent has received either (i) a written notice from
the Parent evidencing agreement with such release or (ii) a copy of an
arbitration ruling or final non-appealable court order directing such release.
(b) Whenever the Parent demands the release of any of the Holdback Amount
from escrow in accordance with the schedule for such release set forth in the
definition of Holdback Amount in the Agreement, the Parent shall give a Release
Notice to the Escrow Agent and to TBCC, which Release Notice shall specify the
dollar amount to be released from the Holdback Amount. The Escrow Agent shall
not be responsible for verifying that the amount demanded complies with the
terms of the Agreement. If, after 5 Business Days, excluding day of receipt,
after such Release Notice is received, the Escrow Agent and the Parent have not
received a written Objection Notice of the Buyers' objection to the release of
such Holdback Amount, the Escrow Agent shall release such Holdback Amount in
accordance with the written instructions of the Parent. If TBCC gives an
Objection Notice within such 5 Business Day period objecting to the release of
all or any part of the Holdback Amount described in the Release Notice, the
Escrow Agent shall release any part of the Holdback Amount not so objected to
and shall not release any part of the Holdback Amount the release of which was
objected to in the Objection Notice unless and until the Escrow Agent has
received either (i) a written notice from TBCC evidencing agreement with such
release or (ii) a copy of an arbitration ruling or final non-appealable court
order directing such release.
(c) Upon joint instruction from TBCC and the Parent, the Escrow Agent
shall release all or a portion of the remainder of the Holdback Amount to the
Parent for the benefit of the Sellers on the third anniversary of the date
hereof. Any of the Holdback Amount remaining in escrow after the third
anniversary of the date hereof shall be released to TBCC pursuant to the
provisions of clause (a) and/or to the Parent for the benefit of the Sellers
pursuant to the provisions of clause (b).
Section 4. Release of SBIC Holdback.
------------------------
(a) Whenever the Parent demands the release of the SBIC Holdback from
escrow in accordance with the terms of Section 8.3 of the Agreement, the Parent
shall give a Release Notice to the Escrow Agent and to TBCC, which Release
Notice shall specify that the SBIC Holdback is to be released from the Escrow
Amount. The Escrow Agent shall not be responsible for verifying that the amount
demanded complies with the terms of the Agreement. If, after 5 Business Days,
excluding day of receipt, after such Release Notice is received, the Escrow
Agent and the Parent have not received a written Objection Notice of the Buyers'
objection to the release of such SBIC Holdback, the Escrow Agent shall release
such SBIC Holdback in accordance with the written instructions of the Parent. If
TBCC gives an Objection Notice within such 5 Business
<PAGE>
Day period objecting to the release of the SBIC Holdback, the Escrow Agent shall
not release any part of the SBIC Holdback unless and until the Escrow Agent has
received either (i) a written notice from TBCC evidencing agreement with such
release or (ii) a copy of an arbitration ruling or final non-appealable court
order directing such release.
(b) Whenever TBCC demands the release of the SBIC Holdback from escrow in
accordance with the terms of Section 8.3 of the Agreement, TBCC shall give a
Release Notice to the Escrow Agent and to the Parent, which Release Notice shall
specify that the SBIC Holdback is to be released from the Escrow Amount. The
Escrow Agent shall not be responsible for verifying that the amount demanded
complies with the terms of the Agreement. If, after 5 Business Days, excluding
day of receipt, after such Release Notice is received, the Escrow Agent and TBCC
have not received a written Objection Notice of the Sellers' objection to the
release of such SBIC Holdback, the Escrow Agent shall release such SBIC Holdback
in accordance with the written instructions of TBCC. If the Parent gives an
Objection Notice within such 5 Business Day period objecting to the release of
the SBIC Holdback, the Escrow Agent shall not release any part of the SBIC
Holdback unless and until the Escrow Agent has received either (i) a written
notice from the Parent evidencing agreement with such release or (ii) a copy of
an arbitration ruling or final non-appealable court order directing such
release.
Section 5. Termination of Escrow. The escrow provided for herein shall
terminate on the date on which all of the Escrow Amount has been released
pursuant to Sections 3 and 4. Upon such release, all obligations of the Escrow
Agent under this Escrow Agreement shall cease.
Section 6. Duties of the Escrow Agent. The Escrow Agent's duties and
responsibilities in connection herewith shall be limited to those expressly set
forth herein. The Escrow Agent shall not be liable or responsible for any act
performed or omitted hereunder in good faith and in the exercise of its own best
judgment. The Escrow Agent may rely upon any written notice, demand, certificate
or other document which it believes in good faith to be genuine and executed or
delivered by the person purporting to execute or deliver such document. The
Escrow Agent may confer with legal counsel in the event of any dispute or
question with respect to its duties hereunder and shall be protected in acting
in good faith in accordance with the opinions and instructions of such counsel.
The Escrow Agent is hereby authorized to comply with any arbitration ruling or
final non-appealable court order which stays, enjoins, directs or otherwise
affects the transfer or release of the Escrow Amount. In the event of any
disagreement resulting from adverse claims or demands being made with respect to
the Escrow Amount, the Escrow Agent may refuse to comply with any such claims or
demands, or refuse to take any other action hereunder, so long as such
disagreement continues and the Escrow Agent shall not be liable to any person
for its failure or refusal to act and may continue to refuse to act until the
rights of the parties have been fully and finally adjudicated by an arbitration
panel or until the Escrow Agent shall have received a written notice signed by
all disagreeing parties instructing the Escrow Agent to act or refrain from
acting as specified therein.
<PAGE>
Section 7. Fees and Expenses of the Escrow Agent. The Escrow Agent shall
be paid an annual fee of $1,000 and shall be reimbursed for its reasonable
expenses incurred in connection with the administration of the escrow. All such
fees and expenses shall be shared equally between TBCC, on the one hand, and
Parent, on the other hand.
Section 8. Indemnification of the Escrow Agent. TBCC and the Parent
severally (but not jointly or jointly and severally) agree to indemnify the
Escrow Agent and hold it harmless against any loss, liability or expense
(including reasonable attorneys' fees and expenses) incurred by the Escrow Agent
and arising out of or in connection with the performance of its duties and
obligations in accordance with the provisions of this Escrow Agreement, except
for any loss, liability or expense incurred as a result of the negligence or
willful misconduct of the Escrow Agent. This indemnification obligation shall
survive the termination of this Escrow Agreement.
Section 9. Successor Escrow Agent. The Escrow Agent may resign as the
Escrow Agent under this Escrow Agreement by delivering 30 days' prior written
notice to TBCC and the Parent. TBCC and the Parent may mutually agree to remove
the Escrow Agent at any time upon written notice to the Escrow Agent. If the
Escrow Agent resigns or is removed, a successor Escrow Agent shall be appointed
by mutual agreement of TBCC and the Parent and such resignation or removal shall
take effect upon the effectiveness of such appointment and all obligations of
the predecessor Escrow Agent under this Escrow Agreement shall cease at such
time. Any successor Escrow Agent serving under this Escrow Agreement at any time
shall be entitled to all the rights and indemnities granted to the Escrow Agent
under this Escrow Agreement as if originally named herein.
Section 10. Notices. Any notice, request, instruction or other document to
be given hereunder by a party hereto shall be in writing and shall be deemed to
have been given, (i) when received if given in person, (ii) on the date of
transmission if sent by telex, facsimile or other wire transmission (or the next
succeeding Business Day, if such date of transmission is not a Business Day),
(iii) on the next Business Day if sent by a nationally-recognized overnight
courier, or (iv) three Business Days after being deposited in the U.S. mail,
certified or registered mail, postage prepaid:
(a) If to TBCC, addressed as follows:
Transamerica Business Credit Corporation
9399 West Higgins
Suite 600
Rosemont, IL 60018
Attention: Stephen A. Read
Facsimile No.: (847) 685-1142
with a copy to:
<PAGE>
Transamerica Commercial Finance Corporation
5595 Trillium Boulevard
Hoffman Estates, IL 60192
Attention: Vincent Hillery, Esq.
Facsimile No.: (847) 747-7455
(b) If to the Parent, addressed as follows:
HomeGold Financial, Inc.
15 South Main Street
Wachovia Bank Building, Suite 750
Greenville, SC 29601
Attention: Kevin J. Mast
Facsimile No.: (864) 271-8374
with a copy to:
HomeGold Financial, Inc.
15 South Main Street
Wachovia Bank Building, Suite 750
Greenville, SC 29601
Attention: Mark Keegan, Esq.
Facsimile No.: (864) 255-4425
(c) If to the Escrow Agent, addressed as follows:
Carolina First Bank
200 East Camperdown Way
Greenville, SC 29601
Attention: Nan L. Black
Facsimile No.: (864) 255-4946
or to such other individual or address as a party hereto may designate for
itself by notice given as herein provided.
Section 11. Arbitration. (a) If any dispute or differences arise between
the parties relating to the transactions contemplated in this Escrow Agreement,
the parties agree to use all reasonable good faith efforts to reach satisfactory
resolution among themselves. If the parties are unable to reach satisfactory
resolution among themselves, the dispute or differences shall be finally settled
by arbitration in accordance with this Section 11 and the Arbitration Rules for
the American Arbitration Association (the "AAA Rules"). In the event of any
conflict between this Section 11 and the AAA Rules, this Section 11 shall
control. Notwithstanding anything herein to the contrary, arbitration pursuant
to this Section 11 shall be the exclusive remedy of the parties hereto.
<PAGE>
(b) A panel of three arbitrators shall be formed in the following manner.
Each of TBCC and the Parent shall appoint one arbitrator, and those two
arbitrators shall choose the third arbitrator. All of the arbitrators shall be
unaffiliated in any manner with any of the parties and shall be generally
familiar with commercial escrow arrangements.
(c) Each party shall allow such limited discovery as the arbitrators
reasonably determine to be appropriate under the circumstances and shall resolve
the dispute as expeditiously as practicable, and in any event within sixty (60)
days after the selection of the arbitrators. The arbitrators shall hold a
conference with the parties as soon as practicable, to define and narrow the
issues and claims to be arbitrated, to define and limit discovery (if
applicable), and to identify the form of evidence to be presented. Except as
otherwise provided herein, the arbitrators shall conduct the arbitration
procedure in accordance with the AAA Rules. The judgment of the arbitrators
shall be accompanied by detailed written findings of fact and the conclusions
reached by the arbitrators, as well as the arbitrators' reasons for reaching
such conclusions. The decision of the arbitrators shall be final, binding, and
nonappealable with respect to all persons and shall be reviewable only to the
extent provided by the AAA Rules.
(d) The arbitrators shall not have authority to award non-monetary or
equitable relief of any sort or to allocate responsibility for the costs of the
arbitration or to award recovery of attorneys' fees and any monetary award shall
not exceed the Escrow Amount then in dispute. Judgment upon the award rendered
may be entered into any court having jurisdiction, or application may be made to
such court for a judicial recognition of the award or an order of enforcement
thereof, as the case may be. The arbitration shall be governed by the choice of
law set forth in this Escrow Agreement.
(e) All proceedings under this Section 11, and all evidence given or
discovered pursuant hereto, shall be maintained in confidence by all parties.
Neither the parties nor the arbitrators may disclose the existence, content or
results of the arbitration, except as necessary to comply with legal or
regulatory requirements. Before making any such disclosure, a party shall give
written notice to all other parties and shall afford such parties a reasonable
opportunity to protect their interests.
Section 12. Amendment. This Escrow Agreement may be amended, modified or
supplemented but only in writing signed by TBCC, the Parent and the Escrow
Agent.
Section 13. Waivers. The failure of a party hereto at any time or times to
require performance of any provision hereof shall in no manner affect its right
at a later time to enforce the same. No waiver by a party of any condition or of
any breach of any term, covenant, representation or warranty contained in this
Escrow Agreement shall be effective unless in writing, and no waiver in any one
or more instances shall be deemed to be a further or continuing waiver of any
such condition or breach in other instances or a waiver of any other condition
or breach of any other term, covenant, representation or warranty.
<PAGE>
Section 14. Counterparts. This Escrow Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 15. Interpretation. The headings preceding the text of Sections
included in this Escrow Agreement and the headings to Schedules attached to this
Escrow Agreement are for convenience only and shall not be deemed part of this
Escrow Agreement or be given any effect in interpreting this Escrow Agreement.
The use of the masculine, feminine or neuter gender herein shall not limit any
provision of this Escrow Agreement. The use of the terms "including" or
"include" shall in all cases herein mean "including, without limitation" or
"include, without limitation," respectively. References to Sections or Schedules
shall refer to those portions of this Escrow Agreement. Each of the parties
hereto has jointly participated in the negotiation and drafting of this Escrow
Agreement. In the event of any ambiguity or a question of intent or
interpretation arises, this Escrow Agreement shall be construed as if drafted
jointly by each of the parties hereto and no presumptions or burdens of proof
shall arise favoring any party by virtue of the authorship of any of the
provisions of this Escrow Agreement.
Section 16. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICTS OF LAWS.
Section 17. Further Assurances. Upon reasonable request of any party, each
other party will on and after the date hereof execute and deliver such other
documents, releases, assignments and other instruments as may be required to
carry out the purposes of this Escrow Agreement.
Section 18. Severability. If any provision of this Escrow Agreement shall
be held invalid, illegal or unenforceable, the validity, legality or
enforceability of the other provisions hereof shall not be affected thereby, and
there shall be deemed substituted for the provision at issue a valid, legal and
enforceable provision as similar as possible to the provision at issue.
Section 19. Entire Understanding. This Escrow Agreement and the Agreement
sets forth the entire agreement and understanding of the parties hereto with
respect to the matters set forth herein and supersedes any and all prior
agreements, arrangements and understand-ings among the parties.
IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement
to be executed and delivered as of the date first above written.
TRANSAMERICA BUSINESS CREDIT CORPORATION
<PAGE>
By: __________________________________
Name: ________________________________
Title: _______________________________
HOMEGOLD FINANCIAL, INC.
By: __________________________________
Name: ________________________________
Title: _________________________________
CAROLINA FIRST BANK
By: __________________________________
Name: ________________________________
Title: _________________________________
<PAGE>
EXHIBIT E
---------
October __, 1998
To the Persons Listed on
Schedule I
Ladies and Gentlemen:
We have acted as counsel for Transamerica Business Credit Corporation, a
Delaware corporation ("TBCC"), Transamerica Growth Capital, Inc., a Delaware
corporation (the "SBIC Subsidiary"), and Transamerica Small Business Services,
Inc., a Delaware corporation (the "Section 7(a) Subsidiary," and together with
TBCC and the SBIC Subsidiary, the "Buyers"), in connection with the Asset
Purchase Agreement, dated as of October 2, 1998 (the "Asset Purchase
Agreement"), among the Buyers and the persons listed on Schedule I. This opinion
is delivered to you pursuant to Section 8.2(c) of the Asset Purchase Agreement.
All capitalized terms used herein that are defined in the Asset Purchase
Agreement have the meanings ascribed to such terms therein unless otherwise
defined herein.
In connection with this opinion, we have reviewed the Asset Purchase
Agreement and such other records, instruments, certificates and other documents
as in our judgment are necessary to enable us to render the opinions expressed
below. In making such review, we have assumed the legal capacity of all natural
persons executing documents, the genuineness of all signatures, the authenticity
of original and certified documents and the conformity to original or certified
copies of all copies submitted to us as conformed or reproduction copies. As to
various questions of fact relevant to the opinions expressed herein, we have
relied upon, and assume the accuracy of, the representations and warranties
contained in the Related Agreements and certificates and oral or written
statements and other information of or from representatives of the Buyers and
others and assume compliance on the part of all parties to the Asset Purchase
Agreement and the Related Agreements with their covenants and agreements
contained therein. Insofar as statements herein are based upon our knowledge,
such phrase means and is limited to the conscious awareness of facts or other
information by lawyers in this firm who gave substantive attention to
representation of the Buyers in connection with the Asset Purchase Agreement and
the Related Agreements.
To the extent it may be relevant to the opinions expressed herein, we have
assumed that the parties to the Asset Purchase Agreement and the Related
<PAGE>
Agreements, other than the Buyers, have the power to enter into and perform such
agreement(s) and to consummate the transactions contemplated thereby and that
the Asset Purchase Agreement and the Related Agreements have been duly
authorized, executed and delivered by such parties. We have also assumed that
the Asset Purchase Agreement and the Related Agreements constitute the legal,
valid and binding obligations of the parties thereto, other than the Buyers.
Based upon the foregoing and subject to the limitations, qualifications and
assumptions set forth herein, we are of the opinion that:
1.Each of the Buyers is a corporation validly existing and in good standing
under the laws of the State of Delaware.
2.Each of the Buyers has the requisite corporate power and authority to
execute, deliver and perform its obligations under the Asset Purchase Agreement
and each of the Related Agreements to which it is a party and to consummate the
transactions contemplated thereby. All corporate acts and proceedings required
to be taken by or on the part of each Buyer to authorize it to execute, deliver
and perform the Asset Purchase Agreement and the Related Agreements to which it
is a party and to consummate the transactions contemplated thereby have been
duly and validly taken and remain in full force and effect. The Asset Purchase
Agreement and the Related Agreements constitute, the legal, valid and binding
agreements of such Buyer, enforceable against such Buyer in accordance with
their respective terms except as such enforcement may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors' rights
generally or by judicial discretion as to the availability of equitable remedies
or by general equitable principles.
3.The execution, delivery and performance of the Asset Purchase Agreement
and the Related Agreements by each Buyer do not, and the consummation by each
such Person of the transactions contemplated thereby will not: (a) violate or
conflict with the certificate of incorporation or by-laws of such Person; (b)
violate, contravene or conflict with any order, writ, injunction, directive,
judgment, award or decree of any Governmental Authority known to us to which
such Person is a party or to which any of its properties or assets is subject
or, except to the extent identified on Schedule 5.3 of the Asset Purchase
Agreement, any statute, law, ordinance, rule or regulation of any Governmental
Authority applicable to it or any of its properties or assets; (c) violate or
conflict with, result in a breach of, constitute a default under (whether with
notice or the lapse of time or both), or accelerate or permit the acceleration
of the performance required by, any material Contract known to us to which such
Person is a party or by which it is bound or by which any of its property is
bound; or (d) except to the extent identified on Schedule 5.3 of the Asset
Purchase Agreement, require any filing or registration by such Person with, or
approval, consent, authorization or other action with respect to it by, any
Governmental Authority.
The opinions expressed herein are subject to the following qualifications:
<PAGE>
(a) With respect to our opinion in Paragraph 3(b) above, our opinion is
limited to our review of only those laws that, in our experience, are normally
applicable to transactions of the type contemplated by the Asset Purchase
Agreement and the Related Agreements. We express no opinion thereunder as to any
federal, state or local antitrust, securities, tax or environmental, health,
safety or employment laws or laws applicable to the Buyers solely as a result of
the nature of its business activities.
(b) We express no opinion as to the validity, binding effect or
enforceability of Article IX of the Asset Purchase Agreement or of any
provisions of the Asset Purchase Agreement or the Related Agreements to the
extent that (i) enforcement of any such provision would result in the payment of
amounts in excess of the damages suffered by the indemnitee, (ii) any such
provision has had the effect of indemnifying a Person for damages resulting from
such Person's negligence, willful misconduct or unlawful conduct or (iii) any
such provision is determined to be unconscionable or against public policy.
The opinions expressed herein are limited to the laws of the United States
of America, the laws of the State of Illinois and the General Corporate Law of
the State of Delaware, each as currently in effect. Our opinions are limited to
the specific matters discussed herein. We assume no obligation to supplement
this opinion if any applicable laws change after the date hereof or if we become
aware of any facts that might change the opinions expressed herein after the
date hereof.
The opinions expressed herein are solely for your benefit in connection with
the Asset Purchase Agreement and the Related Agreements and may not be relied on
in any manner or for any purpose by any other person or entity and may not be
quoted in whole or in part without our prior written consent.
Very truly yours,
MAYER, BROWN & PLATT
SCHEDULE I
----------
EMERGENT BUSINESS CAPITAL, INC.
15 South Main Street
Wachovia Bank Building
Suite 750
Greenville, South Carolina 29601
<PAGE>
EMERGENT COMMERCIAL MORTGAGE, INC.
15 South Main Street
Wachovia Bank Building
Suite 750
Greenville, South Carolina 29601
EMERGENT BUSINESS CAPITAL EQUITY GROUP, INC.
15 South Main Street
Wachovia Bank Building
Suite 750
Greenville, South Carolina 29601
REEDY RIVER VENTURES LIMITED PARTNERSHIP
15 South Main Street
Wachovia Bank Building
Suite 750
Greenville, South Carolina 29601
<PAGE>
EXHIBIT B
---------
SYSTEMS TRANSITION AGREEMENT
This Systems Transition Agreement (collectively with the Appendices
attached hereto, this "Systems Transition Agreement") is entered into as of
October ___, 1998 by and among HomeGold Financial, Inc., a South Carolina
corporation (the "Provider"), and Transamerica Business Credit Corporation, a
Delaware corporation ("TBCC"), Transamerica Small Business Services, Inc., a
Delaware corporation (the "Section 7(a) Subsidiary"), and Transamerica Growth
Capital Inc., a Delaware corporation (the "SBIC Subsidiary"; collectively with
TBCC and the Section 7(a) Subsidiary, the "Purchasers").
Background
----------
A. Pursuant to the terms of that certain Asset Purchase Agreement dated as
of October 2, 1998 (the "Asset Purchase Agreement") by and among the Purchasers,
the Sellers named therein and the Provider, Purchasers will purchase from
Sellers, and Sellers will sell to Purchasers, substantially all of their assets
and Purchasers will assume certain of the Sellers' liabilities.
B. In connection with Purchasers' operation of the Businesses after the
Closing Date, Purchasers desire Provider to provide, and Provider is willing to
provide to Purchasers, certain data processing and related services on a
temporary basis as described herein.
Agreement
---------
NOW, THEREFORE, in consideration of the foregoing and mutual covenants and
agreements contained herein and in the Asset Purchase Agreement, the parties
agree as follows:
1. DEFINITIONS. Capitalized terms used herein, but not defined herein,
shall have the meanings set forth in the Asset Purchase Agreement. In addition,
the following terms shall have the following meanings when used herein.
"ADDITIONAL SERVICES" shall mean the services referenced in Section 3(c).
"ALL SERVICES" shall mean both the Basic Services and the Additional
Services.
"BASIC SERVICES" shall mean (i) the data processing services provided
through the HomeGold System, through which the Covered Receivables may be
processed, (ii) all "help desk", desktop/site support, telecommunications
support, data backup, disaster recovery, data security and application support
services
<PAGE>
that were provided by the Provider in the operation of the Businesses Prior to
the Closing Date, (iii) repair and replacement of defective or malfunctioning
components of the HomeGold System, including any such repair or replacement
relating to improper Year 2000 date processing or related malfunctions, and
(iv) any other services requested by the Purchasers that are being or have
been provided by the Provider in the operation of the Businesses Prior to the
Closing Date. The Basic Services shall include, but not be limited to, the
services listed on Appendix A.
"COVERED RECEIVABLES" shall mean the Receivables transferred pursuant to
the Asset Purchase Agreement, together with such additional loan receivables as
are originated by the Purchasers during the Term and with respect to which the
Purchasers request to be covered by this Systems Transition Agreement.
"HOMEGOLD SYSTEM" shall mean (i) the fixed asset, item entry system,
general ledger, accounting system (including customer information and loan
accounting systems) provided to the Provider by Information Technology, Inc.
under the terms of various software license agreements, and (ii) all software
(including personal computer and local area network software) and computer
hardware, printers, modems, storage, peripheral and related equipment in the
same or better configurations as used by or in connection with the Businesses
Prior to the Closing Date, including any of the foregoing located at the
Provider's or any of its Affiliate's corporate offices, but excluding any and
all of the foregoing included in the Transferred Assets. During the Term, the
processing capability of the HomeGold System shall continue to be at least of
the same level and type as was provided by the Provider to the Businesses Prior
to the Closing Date.
"PRIOR TO THE CLOSING DATE" shall mean the 12-month period immediately
prior to the Closing Date.
"TERM" shall mean the Initial Term and each Renewal Term elected by the
Purchasers pursuant to Section 2(a).
2. TERM AND TERMINATION.
--------------------
(a) Term. This Systems Transition Agreement shall be effective as of the
Closing Date and continue for a period of six months thereafter (the "Initial
Term"). The Purchasers may renew this Systems Transition Agreement for up to two
(2) additional six-month periods (each a "Renewal Term") by providing the
Provider written notice of renewal at least 30 days prior to the expiration of
the then-current term of this Systems Transition Agreement. The parties
acknowledge their present expectation that the Term of this Agreement will be as
short as possible.
(b) Termination. This Systems Transition Agreement shall expire, and the
Purchasers' obligation to pay compensation to the Provider shall cease, at the
<PAGE>
end of the Term. In addition, this Systems Transition Agreement may be
terminated as set forth below:
(i) Early Termination. This Systems Transition Agreement may be
terminated at any time by the Purchasers upon 30 days' prior written notice.
(ii) Termination upon Default. In the event either party (the
"Breaching Party") materially fails to observe, keep or perform any term or
condition of this Systems Transition Agreement required to be observed, kept or
performed by that party, the other party (the "Non-Breaching Party") shall give
the Breaching Party written notice describing any and all such failures. In the
event that the Breaching Party fails to cure such failures within 30 days after
receipt of written notice of such failure from the Non-Breaching Party, the
Non-Breaching Party shall be entitled to terminate this Systems Transition
Agreement upon written notice to the Breaching Party. It is understood and
agreed that the Purchasers may, without being deemed in default of this Systems
Transition Agreement, deduct or setoff any and all Service Credits (as defined
in Appendix B) from amounts otherwise due to the Provider hereunder. In addition
to the Purchasers' right to receive Service Credits, and notwithstanding
anything to the contrary contained in this Systems Transition Agreement, the
Purchasers shall not be required to pay any amount to the Provider after the
occurrence and during the existence of a material breach of this Systems
Transition Agreement by the Provider. The amount of payment withheld by the
Purchasers pursuant to the preceding sentence shall be based on the Purchasers'
then-current estimate of the potential economic impact of such breach upon the
Purchasers.
(iii) Termination Upon Transfer. This Systems Transition Agreement
shall terminate automatically upon the transfer by the Purchasers to a third
party of all of the Receivables being serviced pursuant to this Systems
Transition Agreement, provided that this Systems Transition Agreement shall not
terminate in the event such transfer is (i) to any current or future Affiliate
of any of the Purchasers, or (ii) in connection with any sale or securitization
of the Receivables in which any of the Purchasers or an Affiliate of any of the
Purchasers continues to service the Receivables.
3. SCOPE OF SERVICES.
-----------------
(a) Basic Services. During the Term hereof, the Provider shall perform and
provide to the Purchasers the Basic Services. The Basic Services relating to the
Covered Receivables shall be provided in accordance with the policies and
procedures applicable to the Covered Receivables at the Closing Date, as such
policies and procedures shall be reasonably changed upon reasonable notice from
the Purchasers from time to time during the Term hereof.
(b) Transferred Assets. It is understood that, during the Term hereof, the
Provider shall provide Basic Services for the Transferred Assets, such as
support
<PAGE>
and maintenance services, to the same extent and in the same manner as provided
by the Provider for the Transferred Assets Prior to the Closing Date. The
Provider will obtain the written approval of the Purchasers (i) prior to
replacing or repairing any component included in the Transferred Assets, where
the cost of such replacement or repair exceeds $500 and (ii) prior to installing
any new or replacement software on any desktop computer included in the
Transferred Assets.
(c) Additional Services. The Provider shall provide, or cause to be
provided to, the Purchasers all information they reasonably request regarding
the specifications of the HomeGold System for the purpose of assisting the
Purchasers and/or their designated services suppliers, in effecting an orderly
transfer of the Purchasers' data processing operations to a replacement system.
In addition, upon the request of the Purchasers, Provider shall provide, or
cause to be provided to, the Purchasers such additional services as may be
requested from time to time. This may include:
(i) the design and programming of new software to provide new
functionality in the HomeGold System (other than such functionality required for
or developed in connection with the servicing of the Covered Receivables Prior
to the Closing Date);
(ii) modifications to the HomeGold System required to accommodate
additional business locations or to merge operations of any of the Purchasers or
their Affiliates into the Businesses;
(iii) copying of data related to the Businesses in electronic form
agreeable to both Provider and Purchasers as required to transfer Purchasers'
data off of the HomeGold System at the conclusion of the Term;
(iv) programming for data conversion to a successor servicer;
(v) creation of new HomeGold System report formats for transition
purposes and in accordance with the Purchasers'
specifications; and
(vi) "help desk" telephone support hours for Service Calls (as
defined on Appendix B) in excess of 64 Service Calls in a
given calendar month, but excluding support hours spent on (a)
Service Calls placed at the request of a Provider employee or
otherwise relating to a single trouble "ticket" number or
problem report, (b) Service Calls placed as follow-ups to
earlier Service Calls not timely responded to by the Provider,
and (c) Service Calls that result in a Lapse (as defined on
Appendix B).
<PAGE>
Within 10 days after a request from any Purchaser for Additional Services,
Provider shall submit a written hourly estimate (with anticipated completion
dates) of the cost and times required to complete the requested work. Upon
receipt of such estimate, Purchasers may, in their sole discretion, engage
Provider or any third party approved by the Provider (such approval not to be
unreasonably withheld or delayed) to perform such work, provided that the
Provider's approval shall not be required unless the Additional Services require
modifications to the HomeGold System. The Provider shall use its best efforts to
assist the Purchasers and accommodate the Purchasers' requests regarding
scheduling and performance deadlines for Additional Services, with the goal of
transitioning the Purchasers from the HomeGold System to a replacement system
with minimal interference with the operation of the Purchasers' businesses. The
Provider agrees to provide its full cooperation and assistance to any third
party engaged by the Purchasers to provide Additional Services. Unless otherwise
agreed in writing by the Provider and the Purchasers prior to the start of any
Additional Services, all software and related materials (collectively, "Work
Product") provided or developed solely by or on behalf of the Provider as a
result of the Additional Services shall be owned by the Provider and the
Provider hereby grants to the Purchasers (and their successors and assigns) a
royalty-free, paid-up, perpetual, irrevocable, non-exclusive license to
sublicense, use, copy and modify the Work Product. The Provider shall not
provide to the Purchasers any Work Product for which the Provider does not have
the right to grant to the Purchasers the foregoing license, without the prior
written consent of the Purchasers. In the event the parties cooperatively
develop Work Product, then the parties shall have the rights of co-owners of the
Work Product.
(d) Standard of Care. In providing All Services, the Provider shall
exercise reasonable and ordinary care and diligence, but in any event with at
least the same level of care and diligence as were furnished with respect to the
Businesses Prior to the Closing Date. In the event the Provider fails to respond
to any of the Purchasers' Service Calls (as defined in Appendix B) within four
(4) business hours after the receipt thereof, the Purchasers shall be entitled,
as liquidated damages and not as a penalty, to receive the Service Credits
provided in Appendix B. Services Credits shall not exceed $9,000 during a single
calendar month.
(e) Cooperation. The Purchasers shall provide the Provider such reasonable
information and access to the Purchasers site as reasonably requested by the
Provider in order to facilitate the Provider's ability to timely perform All
Services.
(f) Permission to use the HomeGold System. The Provider hereby grants to
each of the Purchasers (and their successors and assigns) non-terminable,
royalty-free, non-exclusive permission to access and use the HomeGold System and
otherwise receive All Services during the Term hereof in furtherance of the
<PAGE>
Purchasers' operation of the Businesses. The foregoing permission shall be
deemed to include permission for the Purchasers to use the software licensed to
the Provider under license agreements with third parties and comprising the
HomeGold System. The Purchasers may extend this permission to each of their
respective Affiliates. The Purchasers understand that software licensed to the
Provider by Information Technology Inc. ("ITI") will remain at the Provider's
data center.
4. COMPENSATION.
------------
(a) The Provider shall be entitled to the compensation set forth on
Appendix C. The amounts set forth on Appendix C shall be the only compensation
payable to the Provider for the Basic Services and Additional Services.
(b) The Provider shall bill TBCC for the compensation payable hereunder on
a monthly basis by rendering to TBCC, with copies to each of the other
Purchasers, monthly itemized invoices with respect to Basic Services and
Additional Services provided during the previous month. Each such invoice shall
refer to this Systems Transition Agreement and shall describe in general the
Basic Services and in reasonable detail the Additional Services covered thereby,
and shall be due and payable within thirty (30) days after receipt thereof. In
the event of the discontinuation of the Basic Services or Additional Services,
as the case may be, in whole or in part, the Provider shall only be entitled to
receive a pro rata amount, determined by the ratio of the number of days elapsed
in a month at the time of such discontinuation to the number of days in the
month of discontinuation, of the compensation specified on Appendix C with
respect to such Basic Services or Additional Services, as the case may be. All
amounts herein provided to be paid to the Provider shall be paid at Post Office
Box 17526, Greenville, South Carolina 29606, Attn: Karen A. Miller, or at such
other place as the Provider may designate in a written notice to each of the
Purchasers.
5. WARRANTIES OF PROVIDER. The Provider hereby represents and warrants as
follows:
(a) Provider is a South Carolina corporation duly organized, validly
existing and in good standing under the laws of South Carolina.
(b) Provider has all necessary corporate power and authority to enter into
this Systems Transition Agreement and to perform all of the obligations to be
performed by it under this Systems Transition Agreement. This Systems Transition
Agreement has been duly authorized by all necessary corporate action of
Provider, and this Systems Transition Agreement has been duly executed and
delivered by Provider and constitutes the valid and binding obligation of
Provider, enforceable in accordance with its terms (except as such enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
laws relating to or affecting creditors' rights generally and by general equity
principles).
<PAGE>
(c) Neither the execution and delivery of this Systems Transition
Agreement by Provider nor the performance of the services or consummation of the
transactions contemplated hereby by Provider will (i) conflict with, result in
the breach of, constitute a default under, or accelerate the performance
required by the terms of any contract, instrument, or commitment to which
Provider is a party or by which Provider is bound, (ii) violate the charter or
bylaws, or any other equivalent organizational document of Provider, (iii)
require any consent or approval under any judgment, order, writ, decree, permit,
or license to which Provider is a party or by which Provider is bound, or (iv)
require the consent or approval of any other party to any contract, instrument,
or commitment to which Provider is a party or by which it is bound, other than
the approvals of regulatory authorities or Information Technology, Inc., which
have been obtained if required. Provider is not subject to any agreement with
any regulatory authority which would prevent the consummation by Provider of the
transactions contemplated by this Systems Transition Agreement.
(d) There is no claim, or any litigation, proceeding, arbitration,
investigation, or material controversy pending, to which Provider is a party,
which will have a material adverse effect on Provider's ability to consummate
the transactions contemplated hereby and, to the best of Provider's knowledge,
no such claim, litigation, proceeding, arbitration, investigation, or
controversy has been threatened or is contemplated.
(e) There is no federal or state law or regulation currently in effect
which would prevent Provider from entering into this Systems Transition
Agreement or performing the activities contemplated herein.
(f) Prior to the Closing Date All Services complied, and to the best of
the Provider's knowledge after the Closing Date All Services shall comply, with
all applicable national, federal, state or local laws, rules, regulations and
orders. All Services shall be performed in a good, workmanlike, timely and
professional manner by qualified persons fully familiar with the requirements
for such services and technology to be used to perform the same.
(g) To the extent permitted by the Provider's agreements with third
parties, the Provider hereby assigns, and shall assign, to the Purchasers, on a
non-exclusive basis, all warranties, representations and indemnities granted to
the Provider by third parties in the HomeGold System or any components thereof,
and all remedies for breach of such warranties, representations and indemnities.
(h) No Other Representations and Warranties. EXCEPT AS EXPRESSLY SET FORTH
IN THIS SYSTEM TRANSITION AGREEMENT OR THE ASSET PURCHASE AGREEMENT, PROVIDER
DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES, WHETHER EXPRESS OR IMPLIED,
CONCERNING THIS SYSTEM TRANSITION AGREEMENT, INCLUDING ANY IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A
<PAGE>
PARTICULAR PURPOSE AND ANY IMPLIED WARRANTIES ARISING FROM TRADE USAGE, COURSE
OF DEALING OR COURSE OF PERFORMANCE.
6. WARRANTIES OF THE PURCHASERS. The Purchasers hereby warrant and
represent that:
(a) Each of the Purchasers is an entity duly organized, validly existing
and in good standing under the laws of their respective jurisdictions of
incorporation.
(b) Each of the Purchasers has all necessary corporate power and authority
to enter into this Systems Transition Agreement and to perform all of the
obligations to be performed by it under this Systems Transition Agreement. This
Systems Transition Agreement has been duly authorized by all necessary corporate
actions of each of the Purchasers, and this Systems Transition Agreement has
been duly executed and delivered by each of the Purchasers and constitutes the
valid and binding obligation of each of the Purchasers, enforceable in
accordance with its terms (except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights generally and by general equity principles).
(c) Neither the execution and delivery of this Systems Transition
Agreement by the Purchasers nor the consummation of the transactions
contemplated hereby by each of the Purchasers will (i) conflict with, result in
the breach of, constitute a default under, or accelerate the performance
required by the terms of any contract, instrument, or commitment to which any of
the Purchasers is a party or by which any of the Purchasers is bound, (ii)
violate the charter or bylaws, or any other equivalent organizational document
of any of the Purchasers, (iii) require any consent or approval under any
judgment, order, writ, decree, permit, or license to which any of the Purchasers
is a party or by which any of the Purchasers is bound, or (iv) require the
consent or approval of any other party to any contract, instrument, or
commitment to which any of the Purchasers is a party or by which any is bound
other than the approvals of regulatory authorities, which have been obtained if
required. None of the Purchasers is subject to any agreement with any regulatory
authority which would prevent the consummation by each of the Purchasers of the
transactions contemplated by this Systems Transition Agreement.
(d) There is no claim, or any litigation, proceeding, arbitration,
investigation, or material controversy pending, to which any of the Purchasers
is a party, which would have a material adverse effect on any of the Purchasers'
ability to consummate the transactions contemplated hereby and, to the best of
each of the Purchasers' knowledge, no such claim, litigation, proceeding,
arbitration, investigation, or controversy has been threatened or is
contemplated.
<PAGE>
(e) There is no federal or state law or regulation currently in effect
which would prevent any of the Purchasers from entering into this Systems
Transition Agreement or performing the activities contemplated herein.
(f) No Other Representations and Warranties. EXCEPT AS EXPRESSLY SET FORTH
IN THIS SYSTEM TRANSITION AGREEMENT, EACH OF THE PURCHASERS DISCLAIMS ANY
REPRESENTATIONS OR WARRANTIES, WHETHER EXPRESS OR IMPLIED, CONCERNING THIS
SYSTEM TRANSITION AGREEMENT, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE AND ANY IMPLIED WARRANTIES ARISING FROM
TRADE USAGE, COURSE OF DEALING OR COURSE OF PERFORMANCE.
7. CONFIDENTIALITY.
---------------
(a) Ownership of Purchaser Confidential Information. Each party's
respective Confidential Information (as defined below) shall be and remain the
exclusive property of such party. Upon the Purchasers' request at any time or
times, during or after the expiration or termination of this Systems Transition
Agreement, the Provider shall cause to be promptly provided to the Purchasers a
copy of all (or a portion) of the Purchasers' Confidential Information
(including, without limitation, any computer backups) in an electronic or
printed form acceptable to such disclosing party and, to the extent that the
Purchasers request, the Provider shall cause to be destroyed all copies of the
Purchasers' Confidential Information in possession or under the control of the
Provider or any of its Affiliates. The Purchasers shall return or destroy the
Provider's Confidential Information, upon request, at the termination of this
Systems Transition Agreement. Neither party shall withhold, delay or condition
the provision to another party of such other party's Confidential Information or
any part thereof as a means of resolving any dispute or for any other improper
reason. Each party (the "possessing party") shall not, and shall not permit any
of its Affiliates to, use the Confidential Information of another party (the
"disclosing party") for any purpose other than for performing its obligations
hereunder (or, in the case of the Purchasers, for enjoying the benefits of the
Basic Services and Additional Services), and the possessing party shall not
cause or permit the disclosing party's Confidential Information or any part
thereof to be sold, assigned, leased, transferred or otherwise disposed of to
third parties by the possessing party, its Affiliates or any personnel of either
or to be commercially exploited by or on behalf of the possessing party, its
Affiliates or any personnel of either (except that the foregoing shall not be
construed to prevent the Purchasers from fully enjoying the benefits of the
Basic Services and Additional Services). A possessing party shall not, and shall
not permit any of its Affiliates to, possess or assert, and the possessing party
hereby waives, and shall cause its Affiliates to waive, any right to assert, any
Lien or other claim, privilege or right against or to the disclosing party's
Confidential Information or any part thereof.
<PAGE>
(b) Safeguarding Obligations. Each possessing party shall establish and
maintain safety and data security procedures and other safeguards against the
destruction, loss or alteration of a disclosing party's Confidential Information
in the possession or under the control of a possessing party that are (i)
reasonably acceptable to the disclosing party, (ii) no less rigorous than those
maintained by the possessing party for its own information of a similar nature
and (iii) in compliance with applicable Law. During the Term hereof, and at all
times thereafter, a possessing party shall not, and shall not permit any of its
Affiliates to, disclose or violate the confidentiality of a disclosing party's
Confidential Information. Notwithstanding the foregoing, a possessing party may
disclose such information to its employees and approved subcontractors, solely
to the extent that (i) use by such Person is authorized hereunder (or, in the
case of the Purchasers, as necessary to enjoy the benefits of the Basic Services
and Additional Services), (ii) such disclosure is necessary or otherwise
naturally occurs in that Person's scope of responsibility, (iii) the receiving
Person agrees in writing to assume the obligations described in this Section and
(iv) the possessing party assumes full responsibility for the acts or omissions
of such Person. Any disclosure to such Person shall be under the terms and
conditions as provided herein.
(c) Loss of Information, No Implied Rights. A possessing party shall
notify a disclosing party immediately in the event of any disclosure or loss of,
or inability to account for, Confidential Information or any part thereof and
shall, at its expense, immediately mitigate the effects of same. Except for the
permissions, rights and privileges provided to the Purchasers hereunder, nothing
contained herein shall be construed as granting to a possessing party any rights
or licenses to Confidential Information, whether by estoppel, implication,
waiver or otherwise.
(d) "Confidential Information" means any and all (i) information, lists,
organizational data, reports, customer and supplier lists, addresses, profiles,
financial information and other information relating to customers, records,
pricing policies, costs, financial information, trade secrets, know-how,
marketing and development plans, techniques, software and materials, methods of
production, use, operation and application relating to any party, its Affiliates
or other respective customers or employees, and (ii) data of any party, or any
third party, that are input or received through the HomeGold System or otherwise
made available to the parties hereto or their Affiliates in connection with this
Systems Transition Agreement. For the avoidance of doubt, (i) all data and
information relating to the Covered Receivables and the Transferred Assets,
including, without limitation, reports and other materials generated by the
HomeGold System, shall be deemed Confidential Information of the Purchasers and
(ii) the third party software licensed to the Provider and not included in the
Transferred Assets shall be deemed the Confidential Information of the Provider.
<PAGE>
(e) Exclusions. Notwithstanding any provision to the contrary herein,
Confidential Information shall not include any information that (i) is or
becomes generally available to the public without any breach of this Systems
Transition Agreement or breach of any other obligation of confidentiality or
(ii) is, after the Closing Date, disclosed on a non-confidential basis to the
possessing party (or its Affiliates) by a third party, provided that the
possessing party is not reasonably aware of, and there is no reasonable
indication that such third party is subject to, any obligation to maintain such
information as confidential.
(f) It is understood and agreed by the parties hereto that the performance
of the services is or may be subject to regulation and/or examination by
authorized representatives of any party hereto or by certain federal or state
regulatory agencies, and that each of the parties shall be authorized to submit
or furnish to any such representative or regulatory agency reports, information,
assurances or other data as may be required by them under applicable Law.
(g) This Section 7 shall survive any termination or expiration of this
Systems Transition Agreement.
8. GENERAL.
(a) Applicable Law. This Systems Transition Agreement shall be governed by
and interpreted in accordance with the laws of the State of Illinois without
regard to conflict of law principles.
(b) Amendment. This Systems Transition Agreement may be amended, modified
or supplemented, but only in writing signed by all of the parties hereto.
(c) Consequential Damages. EXCEPT FOR LIABILITY RESULTING FROM THE
PROVIDER'S BREACH OF SECTION 7, UNDER NO CIRCUMSTANCES SHALL ANY PARTY HERETO BE
RESPONSIBLE FOR CONSEQUENTIAL OR EXEMPLARY DAMAGES, LOST PROFITS OR OTHER
SPECIAL DAMAGES BASED ON ALL SERVICES.
(d) Force Majeure. In the event that either party fails to perform its
obligations under this Systems Transition Agreement to the extent such
non-performance is the consequence of matters beyond its reasonable control,
including but not limited to, non-performance by subcontractors, acts of God,
fire, explosion, public utility failure, accident, flood, embargo, war, nuclear
disaster, riot, or the declaration of a banking moratorium by federal or state
authorities, such failure to perform shall not be considered a breach of this
Systems Transition Agreement during the period of such disability, provided that
the Purchasers shall not be liable for any amounts due hereunder attributable to
any period of such disability. In the event either party is unable to perform
its obligations hereunder, it shall give the other party telephonic notice
thereof.
<PAGE>
(e) Notices. Any notices required or permitted to be given hereunder shall
be given in the manner set forth in Section 13.3 of the Asset Purchase
Agreement.
(f) Counterparts. This Systems Transition Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(g) Entire Understanding. This Systems Transition Agreement, including all
of the Appendices attached hereto, and the other agreements or documents
specifically referenced herein (which are hereby incorporated herein), sets
forth the entire agreement and understanding of the parties hereto in respect of
the transactions contemplated hereby and supersedes all prior agreements,
arrangements and understandings relating to the subject matter hereof.
(h) Interpretation. The headings preceding the text of Articles, Sections
and subsections included in this Systems Transition Agreement are for
convenience only and shall not be deemed part of this Systems Transition
Agreement or be given any effect in interpreting this Systems Transition
Agreement. The use of the terms "including" or "include" shall, in all cases,
mean "including, without limitation," and "include, without limitation,"
respectively. The use of the masculine, feminine or neuter gender herein shall,
as applicable, also refer to the other genders. Except as the context otherwise
requires, the use of the singular form of any term shall also refer to the
plural, and vice versa. Unless the context otherwise requires, whenever the
terms "hereto," "hereunder," "herein" or "hereof" are used in this Systems
Transition Agreement, such terms shall be construed as referring to this entire
Systems Transition Agreement and references to "Articles," "Sections,"
"subsections," "clauses" and "Appendices" shall be construed as referring to
those of this Systems Transition Agreement. This Systems Transition Agreement is
the result of negotiations among, and has been reviewed by, counsel to the other
parties thereto and is the product of all parties. Accordingly, any rule of law
or any legal decision that would require interpretation of any claimed
ambiguities in this Systems Transition Agreement against the party that drafted
it has no application and is expressly waived.
(i) Successors. This Systems Transition Agreement shall be binding upon
and inure to the benefit of Purchasers and any successor or assign of any
Purchaser, including any Person acquiring directly or indirectly all or a
substantial portion of the assets of any Purchaser, whether by merger,
consolidation, sale or otherwise and such successor or assign shall thereafter
be deemed a "Purchaser" for purposes of this Systems Transition Agreement.
(j) Assignment. Neither party may assign any interest in this Systems
Transition Agreement or any of its duties or rights hereunder without the prior
written consent of the other party (which consent shall not be unreasonably
withheld or conditioned), except that Purchasers may assign without such
<PAGE>
consent, upon written notice to Provider, any or all its duties or rights
hereunder (i) to any current or future affiliate of any Purchaser or its
Affiliates, (ii) in connection with any merger, acquisition or liquidation of
any Purchaser or (iii) in connection with the sale of all or a substantial
portion of the assets of any Purchaser.
[End of Page - Next Page is Signature Page]
IN WITNESS WHEREOF, this Systems Transition Agreement has been executed
by the parties hereto as of the date first above written.
Witness: HOMEGOLD FINANCIAL, INC.
BY:
TRANSAMERICA BUSINESS CREDIT CORPORATION
BY:
TRANSAMERICA SMALL BUSINESS SERVICES, INC.
BY:
TRANSAMERICA GROWTH CAPITAL INC.
BY:
Appendix A
Basic Services
1. Connectivity. At all times during the Term hereof, the Provider shall cause
the HomeGold System to be accessible to the Purchasers through the network
connections from the Provider's data center to at least the same degree as
provided by the Provider in connection with the operation of the Businesses
Prior to the Closing Date. Provider shall notify the Purchasers in writing of
any
<PAGE>
proposed changes to technical requirements affecting the Purchasers at least
30 days before the Provider proposes to implement any such changes.
2. Availability. Subject to Section 8(d), at all times during the Term hereof,
the Provider shall cause the HomeGold System to be Available (as defined below)
twenty-four (24) hours per day (except for scheduled maintenance, batch
processing and backup times consistent with the operation of the Businesses
Prior to the Closing Date) and the Basic Services to be provided during normal
business hours and at all other times that Provider provides information
technology services to its Affiliates and their respective users.
"Available" means that the HomeGold System is operating properly and in
accordance with all applicable specifications (consistent with the operation of
the Businesses Prior to the Closing Date) and that the Purchasers' users may
upload or otherwise transfer data to the HomeGold System and process
transactions, obtain reports and access data using the HomeGold System. The
Provider shall provide the Purchasers with reasonable advance notice of any
scheduled or other HomeGold System downtime.
3. Help Desk. The Provider shall provide to the Purchasers a help desk support
line during normal business hours and at all other scheduled times that the
Provider provides help desk support services to its Affiliates and their
respective users. Such help desk services shall include, without limitation, the
correction of any program logic or other errors, and the provision of manuals,
file layouts and other documentation associated with the HomeGold System to the
extent available, with at least the same care and diligence that the Provider
provided in connection with the Business Prior to the Closing Date.
4. Data Backups. The Provider shall create and maintain daily and periodic
backups of all of the Purchasers' data and records obtained for use or storage
on the HomeGold System, which backups shall be created in substantially the same
manner, and with at least the same care and diligence, as the Provider created
backups of similar data for the Business Prior to the Closing Date.
5. HomeGold System Performance. The Provider will ensure that the HomeGold
System performance provides to the Purchasers response times at least materially
equivalent to the response times experienced by the Provider's Affiliates that
are served by the HomeGold System. The HomeGold System shall be Available to the
Purchasers for on-line data entry and generating various reports of the types
generated Prior to the Closing Date (along with additional reports that the
Purchasers request as part of the Additional Services). Batch processing shall
be performed during each weekday night and, when required by the Businesses,
nightly on weekends. The Provider, with reasonable assistance from the
Purchasers, if necessary, will be responsible for resolving any communication
problems with the respective service providers.
<PAGE>
6. Configuration and Setup Services. The Provider shall assign any required
security access codes, import all relevant data into the HomeGold System, and
make all such data Available on the HomeGold System and complete any other tasks
or things specified in Annex 1 to this Attachment A and/or necessary for the
Purchasers to use the HomeGold System to operate the Businesses after the
Closing Date. The Provider shall complete all such tasks no later than two (2)
business days after the Closing Date.
7. Other Services. The following is a summary outline of additional services to
be provided as part of the Basic Services:
a. Help Desk (for currently existing locations of the Businesses)
i. Problem determination and resolution for applicable software.
ii. Timely responses and follow-up.
b. Desktop/Site support
i. Fix problems.
ii. Desktop operating system support for Windows 95 (printing,
creating folders).
iii. Desktop non-mission critical software support.
iv. Mission critical software support (for ITI software only).
c. Telecommunications Support services
i. Data Network
(1) Cabling.
(2) Monitoring network traffic (for ITI software
only).
(3) Monitoring network security (for ITI software
only).
(4) Maintenance of Netware servers.
(5) Maintenance of Routers, Ethernet switches, hubs,
UPS (for currently existing locations of the
Businesses).
(6) Operations for networks consistent with hours of
operation Prior to the Closing Date.
(7) Controlled and transparent upgrades with prior
notification (for ITI software only).
ii. Voice Network
(1) Cabling.
(2) PBX programming services and support.
(3) Controlled and transparent upgrades with prior
notifications.
d. Operations: Data Backup services.
e. Disaster Recovery services
f. Data security
i. Database/application security (for ITI software only).
<PAGE>
g. Mission Critical application support and services (Lotus Notes
support is not included)
i. ITI (Servicing and accounting).
-- Intercom terminal emulation software/Attachmate
file-express software.
ii. T-soft.
iii. Lewtan - interfaces only.
Annex 1
Configuration and Setup Services
The Provider shall perform the following tasks in accordance with Appendix A:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
TI/MAINFRAME SUPPORT TEAM PROJECTS
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
TASKS DURATION STATUS PROJECTED ACTUAL COMMENTS ASSIGNED
COMPLETION COMPLETION PROVIDER
DATE DATE PERSONNEL
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Create WFL to 4 hours Completed 9/30/98 9/17/98 Backups will Robert
perform special be performed
backups on the last
day of
business for
EBC
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Change EBC insts. 1 hour 10/1/98 Need tax ID Nancy/Robert
to Transamerica and address
information
for
Transamerica
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Create scripts to 16 hours Will meet 10/1/98 Must be Robert/Tom
zero out YTD with completed
interest paid Tom D. before close
after of business
appropriate on first day
fields are as
identified Transamerica
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Create scripts to 24 hours Will meet 10/1/98 Must be Robert/Tom
zero out EOY with completed
information in APS Tom D. before close
after of business
appropriate on first day
fields are as
identified Transamerica
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Create APS 40 hours Meeting with 9/30/98 Project must Nancy
Positive Pay Tim Sparrow be completed
system for and before EBC
Nations bank Jill Harbin sale finalized
check
reconciliation
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Create Operations 2 hours Completed 9/18/98 Robert
task list for
special
processing on
night of sale
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Identify and 4 hours 9/21/98 Scott Lining Robert
download reports needs these
that contain text files
TAXID, ASAP
name/address, YTD
paid information
- -----------------------------------------------------------------------------------------------
</TABLE>
Appendix B
Service Credits
1. Required Responsiveness. All calls by any of the Purchasers to the Provider's
help desk ("Service Calls") will be responded to by the Provider's service
technicians within four (4) business hours after receipt of Service Call, such
Provider response to be by personal telephone call and not by recorded message
(and the Provider will be deemed to have responded if (i) the return call is
made in a timely manner, (ii) no one answers the return call at the Purchasers'
location, and (iii) a phone message is left by the Provider). Such response
shall include the timely commencement of best efforts to resolve the issues
reported. In the event
<PAGE>
that the Provider does not respond within such four (4) business hour period,
the Purchasers shall receive, in addition to any other remedies available to the
Purchasers, a credit toward amounts due to the Provider under this Systems
Transition Agreement in the amounts provided below (the "Service Credit").
2. Service Credits. Service Credits will be based on the number of Lapses during
a given calendar month period.
A. A "Lapse" will be deemed to occur whenever the Provider fails to
respond to a Service Call within four (4) business hours after
receipt thereof (the "Lapse Period"). For example, a Lapse will be
deemed to occur in the event a Service Call is placed at 8:00 AM,
but not responded to by the Provider until 12:01 PM.
B. Only one (1) Lapse may occur for each Lapse Period.
C. FOR SERVICE CALLS REPORTING THE SAME PROBLEM (I.E., HAVING A SINGLE
---------------------------------------------------------------------
TROUBLE TICKET NUMBER AND REPORTED BY THE SAME EMPLOYEE), a new
--------------------------------------------------------------
Lapse Period will begin when a follow-up Service Call is placed
after the end of the preceding Lapse Period for such problem. For
example, (i) the Lapse Period for a Service Call on problem "A"
placed at 8:00 AM will end at 12:00 PM and (ii) a second Lapse
Period will begin when a follow-up Service Call on problem "A" is
placed any time after 12:00 PM.
D. FOR SERVICE CALLS REPORTING DIFFERENT PROBLEMS (I.E., INVOLVING
---------------------------------------------------------------------
DIFFERENT EMPLOYEES AND TROUBLE TICKET NUMBERS) , Lapse Periods for
--------------------------------------------------
reported problems may run concurrently or overlap, as the case may
be. For example, assuming (i) caller "1" reports problem "A" at
8:00 AM and (ii) caller "2" reports problem "B" at 8:10 AM, then the
initial Lapse Period with respect to problem "A" will end at 12:00
PM and the initial Lapse Period with respect to problem "B" will end
at 12:10 PM. Likewise, a second Lapse Period for problem "A" will
begin when a follow-up Service Call on problem "A" is placed any
time after 12:00 PM, and a second Lapse Period for problem "B" will
begin when a follow-up Service Call is placed on problem "B" any
time after 12:10 PM.
3. Calculation of Service Credits. Service Credits shall be determined as
follows:
- -------------------------------------------------------------------------------
NUMBER OF LAPSES IN A
SEVERITY LEVEL CALENDAR MONTH SERVICE CREDIT
- -------------------------------------------------------------------------------
Severity 1 or Severity 2 4 through 6 $1,000
- -------------------------------------------------------------------------------
Severity 1 or Severity 2 7 through 11 $3,000
- -------------------------------------------------------------------------------
Severity 1 or Severity 2 12 or greater $6,000
- -------------------------------------------------------------------------------
The number of Lapses in
the applicable month is
greater than 50% of the
total number of Severity
3 Service Calls during
Severity 3 such month. $3,000
- -------------------------------------------------------------------------------
Within five (5) business days after the end of each calendar month during the
Term hereof, the Provider shall provide the Purchasers with a complete and
accurate written report indicating the time and date of (i) each Service Call
and (ii) the Provider's response(s) to such Service Call. The Purchasers shall
notify the Provider of any credits to which it believes it is due hereunder. The
Provider shall, within 10 days of its receipt of such notice, notify the
Purchasers if the Provider believes that the Purchasers are not due such credit,
in which case the Provider shall meet with the Purchasers to promptly resolve
any disagreement. Service Calls shall be categorized according to the following
criteria:
Severity 1: Any problem that causes or may cause down time or impairment in the
performance of critical business operations for multiple staff members of the
Purchasers, such as downtime relating to the ITI software or Internet connection
downtime.
Severity 2: Any problem that is not a Severity 1 or Severity 3 problem, but is
causing down time or impaired performance at a hub location, such telephone
system problems at the "Greenville" office or a lost frame relay connection to
the "Denver" office.
<PAGE>
Severity 3: Any problem that is localized and is causing down time for a single
person, such as a single desktop computer that fails to boot or a single printer
that stops working.
Appendix C
Compensation
(i) Basic Services. The Provider will provide the Basic Services at a total
fixed fee of $6,000 for each calendar month. Fees for Basic Services
provided during partial months shall be prorated.
(ii) Additional Services. Additional Services requested and authorized in
writing by TBCC and performed by the Provider shall be billed monthly at a
rate of $60.00 per hour. Additional Services authorized in writing by TBCC
and performed by third parties shall be billed monthly at a rate agreed
upon in writing in advance by the Purchasers. Reasonable documentation
with respect to Additional Services shall be furnished to the Purchasers.
(iii) Pass-Through Expenses.
---------------------
(a) The Provider shall be entitled to pass through to the Purchasers the
actual amount of any increased compensation paid by Provider to
Information Technology, Inc. ("ITI") to the extent attributable to the
Covered Receivables, provided that the Provider provides to the Purchasers
reasonable written documentation indicating the amount of and basis for
such increased compensation. This increased compensation may result from
increased volume of Covered Receivables after the Closing Date.
(b) The Provider may pass through to the Purchasers, at the Provider's cost,
the actual costs of repairs to, or replacement of, components included
within the Transferred Assets performed in accordance with Section 3(b),
provided that the Provider obtains the Purchasers' prior written
authorization for each such repair or replacement exceeding $500.
(c) The Provider may pass through to the Purchasers, on a monthly basis,
actual (i) third party network communication charges and (ii) postage,
freight and/or courier service charges paid by the Provider to the extent
required for the Purchasers' use of and access to the HomeGold System.
The Purchasers may discontinue receiving and paying for all or a portion
of such network communication services upon 35 days' prior written notice
to the Provider. Such pass-through to the Purchasers shall be conditioned
upon the Provider providing to the Purchasers reasonable itemization and
written documentation for such expenses. The Provider represents that
its current network communications charges are as follows for fiber optic
connections to the Provider's data center:
---------------------------------------------------
LOCATION CONNECTING TO MONTHLY NETWORK
PROVIDER'S DATA CENTER COMMUNICATION CHARGES
---------------------------------------------------
Downtown Greenville $2,941.05
---------------------------------------------------
Tampa $612
---------------------------------------------------
Dallas $555
---------------------------------------------------
Denver $388
---------------------------------------------------
In addition, the Provider represents that its current total monthly charges for
Internet connections for the Basic Services are $1,826.00.
