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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 (Dated of earliest event reported): February 4, 1999
Resource America, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-4408 72-0654145
(State of incorporation (Commission (I.R.S. Employer
or organization) File Number) Identification No.)
1521 Locust Street, 4th Floor Philadelphia, PA 19102
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (215) 546-5005
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Item 2. Acquisition or Disposition of Assets
Pursuant to a Stock Purchase Agreement (the "Agreement") dated December
15, 1998 (as amended), Fidelity Leasing, Inc. ("FLI") acquired all of the
capital stock (the "JLA Stock") of JLA Credit Corporation ("JLA") from Japan
Leasing (U.S.A.), Inc. ("Japan Leasing") for cash consideration of $38 million,
including $5 million used to fund an escrow account (the "Closing Escrow
Account") for the purposes of (i) satisfying an obligation of JLA to Barclays
Bank and (ii) securing the obligation of Japan Leasing to reimburse FLI in the
event of any breach of Japan Leasing's representations and warranties under the
Agreement. The obligation owed to Barclay's Bank was satisfied by payment of $1
million from the Closing Escrow Account at closing.
At the time of acquisition, JLA's assets were subject to approximately
$305 million of outstanding debt obligations (excluding an additional $14
million of accounts payable and other current obligations). In connection with
(and as a condition to) closing the acquisition of the JLA Stock, these
obligations were partially refinanced as follows:
1. $143 million of obligations owed to a consortium of Japanese banks
was refinanced by a securitization loan from First Union Capital Markets Corp.
The loan is secured by a pledge of certain JLA lease assets. In addition, the
Company and FLI guaranteed the obligations of the borrower, a subsidiary of JLA,
arising from any breach of any representation, warranty, covenant or agreement
of the borrower contained in the loan documents.
2. An additional $2.3 million of obligations owed to the bank
consortium were repaid from funds in a pre-existing escrow account established
for that purpose by JLA.
3. An additional $8.7 million of obligations owed to the bank
consortium were repaid directly by FLI.
4. $6.7 million of obligations owed to Japan Leasing were assumed by
FLI through delivery of its promissory note (the "FLI Note") to Japan Leasing.
The FLI Note matures in five years and bears interest at 250 basis points above
the 5-year Treasury rate for the first two years and at 400 basis points above
the 5-year Treasury rate for the last three years. The FLI Note is secured by
certain lease assets and guaranteed by the Company.
At closing, Japan Leasing was unable to deliver complete lease files on
certain of JLA's lease assets. As a consequence, the balance of the Closing
Escrow Account ($4 million), after the payment to Barclays Bank, was paid to
FLI. To the extent that any lease file is subsequently completed, FLI must pay
66.15% of the net investment value of such lease (calculated as of the time the
file is completed) into the Closing Escrow Account. The maximum aggregate amount
which can be paid to the Closing Escrow Account is approximately $4 million. The
remaining 33.85% of the lease's net investment value will be applied to increase
the outstanding principal balance of the FLI Note. The maximum aggregate amount
by which the principal balance of the FLI Note can be increased is approximately
$2.1 million. Any amounts in the Closing Escrow Account as of April 30, 1999
will be released to Japan Leasing, unless at that time FLI has an
indemnification claim pending against Japan Leasing.
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In determining the amount of consideration paid for the JLA Stock, FLI
considered the book value of JLA's assets as well as the value of JLA as an
ongoing business, among other factors.
JLA underwrites, finances and services non-cancelable, full-payout
equipment leases, generally involving equipment costing $25,000 to $500,000, for
small- and medium-sized businesses. JLA originated leases with an aggregate
original equipment purchase price of $181.0 million and $151.0 million during
the years ended December 31, 1998 and 1997, respectively. As of December 31,
1998, JLA had a net investment in leases of $312.1 million.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
The required financial statements will be filed with the
Securities and Exchange Commission on or before April 20,
1999.
(b) Pro Forma Financial Information
The required pro forma financial information will be filed
with the Securities and Exchange Commission on or before April
20, 1999.
(c) Exhibits
2.1 Stock Purchase Agreement, dated as of December 15,
1998, between Japan Leasing (U.S.A.), Inc. and
Fidelity Leasing, Inc.
Omitted schedules:
Exhibit 1: Accounting Policies
Seller Disclosure Letter
Exhibit 6.12(b): Promissory Note
Exhibit 6.16: Employee Escrow Agreement
Exhibit 7.1(g): Consents
Exhibit 7.1(h): Escrow Agreement
Exhibit 7.1(i): Security Agreement
Exhibit 7.1(j): Assignment and Assumption of
Interests in Receivables
Exhibit 7.2(j): Skadden Arps opinion
Exhibit 7.2(p): Secretary's Certificate
2.2 Amendment No. 1 to Stock Purchase Agreement, dated as
of December 31, 1998
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2.3 Amendment No. 2 to Stock Purchase Agreement, dated as
of January 12, 1998
2.4 Amendment No. 3 to Stock Purchase Agreement, dated as
of February 2, 1999
Omitted schedules:
Exhibit 4.28: Seller Disclosure
Exhibit 6.12(b): Promissory Note
Exhibit A: Guarantee
Exhibit 7.1(i): Security Agreement
Exhibit 7.2(j): Skadden Arps opinion
Exhibit 7.2(r): Minerva opinion
Exhibit 7.2(s): Reiko Kasano opinion
2.5 Amendment No. 4 to Stock Purchase Agreement, dated as
of January 3, 1999
Omitted schedules:
Schedule 2.4: Leases without original documentation
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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.
RESOURCE AMERICA, INC.
By: /s/ Steven J. Kessler
-------------------------
Steven J. Kessler
Chief Financial Officer
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STOCK PURCHASE AGREEMENT
by and between
FIDELITY LEASING, INC.
and
JAPAN LEASING (U.S.A.), INC.
dated as of
December 15, 1998
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Section 1.1 Definitions 2
ARTICLE II
PURCHASE AND SALE OF SHARES
Section 2.1 Sale and Transfer of Shares 12
Section 2.2 Purchase Price 13
Section 2.3 Purchase Price Adjustment 13
ARTICLE III
THE CLOSING
Section 3.1 Closing 15
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Section 4.1 Organization 16
Section 4.2 Capitalization 17
Section 4.3 Authorization; Validity of Agreement 18
Section 4.4 No Violations; Consents and Approvals 19
Section 4.5 Financial Statements 20
Section 4.6 Absence of Certain Changes 21
Section 4.7 No Undisclosed Liabilities 21
Section 4.8 Litigation; Compliance with Law 22
Section 4.9 Employee Benefit Plans; ERISA 22
Section 4.10 Real Property 26
Section 4.11 Intellectual Property 28
Section 4.12 Computer Software 29
Section 4.13 Material Contracts 29
Section 4.14 Taxes 31
Section 4.15 Affiliated Party Transactions; Sensitive Payments 32
Section 4.16 Environmental Matters 33
Section 4.17 No Brokers 33
Section 4.18 Receivables, Inventory and Payables 34
Section 4.19 Disclosure 34
Section 4.20 Tangible Personal Property 34
Section 4.21 Permits 35
Section 4.22 Insurance; No Casualty Events 35
Section 4.23 Employees; Labor Relations 36
Section 4.24 Registration Rights 38
Section 4.25 Exemption from Registration; Restrictions on Offer and
Sale of Same or Similar Securities 38
Section 4.26 Financing Contracts 38
Section 4.27 Accurate and Complete Disclosure 40
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Section 5.1 Organization 40
Section 5.2 Authorization: Validity of Agreement 41
Section 5.3 No Violations; Consents and Approvals 41
Section 5.4 Litigation; Compliance with Law 42
Section 5.5 No Brokers 43
Section 5.6 Investigation by Purchaser 43
Section 5.7 Investment Intent 44
ARTICLE VI
COVENANTS
Section 6.1 Conduct of the Business by the Company Pending the Closing 44
Section 6.2 Access to Information 47
Section 6.3 Best Efforts 48
Section 6.4 Consents 49
Section 6.5 HSR Filings 49
Section 6.6 Public Announcements 50
Section 6.7 Employee Receivables and Payables 50
Section 6.8 Employee Benefits 51
Section 6.9 Notification of Certain Matters 51
Section 6.10 Tax Matters 52
Section 6.11 Seller Non-Competition and Non-Solicitation Covenants 58
Section 6.12 Payment of Company Debt; Release of Guaranties 59
Section 6.13 Powers of Attorney; Accounts 61
Section 6.14 Inquiries and Negotiations 62
Section 6.15 Delivery of November Financial Statements and December
Financial Statements 65
Section 6.16 Employee Bonuses 65
Section 6.17 Collection of Certain Receivables and Partial Remittance 66
Section 6.18 Assignment 67
Section 6.19 Commitment Letter; Certain Termination Rights 67
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ARTICLE VII
CONDITIONS
Section 7.1 Conditions to Seller's Obligations 68
Section 7.2 Conditionsto Purchaser's Obligations 70
ARTICLE VIII
DOCUMENTS TO BE DELIVERED AT THE CLOSING
Section 8.1 Documents to Be Delivered by Seller 72
Section 8.2 Documents to Be Delivered by Purchaser 72
ARTICLE IX
TERMINATION
Section 9.1 Termination 73
Section 9.2 Effect of Termination 74
ARTICLE X
SURVIVAL OF OBLIGATIONS; INDEMNIFICATION; REMEDIES
Section 10.1 Indemnification by Seller 75
Section 10.2 Indemnification by Parent and Purchaser 76
Section 10.3 Certain Other Indemnity Matters 76
Section 10.4 Time Limitations 77
Section 10.5 Limitations on Amount 78
Section 10.6 Procedure for Indemnification; Third Party Claims 78
Section 10.7 Security for Indemnification 81
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ARTICLE XI
MISCELLANEOUS
Section 11.1 Fees and Expenses 81
Section 11.2 Amendments 82
Section 11.3 Notices 82
Section 11.4 Interpretation 83
Section 11.5 Headings 84
Section 11.6 Counterparts 84
Section 11.7 Entire Agreement 84
Section 11.8 Severability 84
Section 11.9 Governing Law 84
Section 11.10 Assignment 84
Section 11.11 Specific Performance; Submission to Jurisdiction 85
Section 11.12 Waiver 86
Section 11.13 Time of Essence 86
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of
December 15, 1998, by and between, Fidelity Leasing, Inc., a Pennsylvania
corporation ("Purchaser"), and Japan Leasing (U.S.A.), Inc., a Delaware
corporation ("Seller"),
W-I-T-N-E-S-S-E-T-H:
WHEREAS, Resource America, Inc., a Delaware corporation ("Parent"),
owns all of the issued and outstanding capital stock of Resource Leasing, Inc.,
a Delaware corporation, which in turn owns all of the issued and outstanding
capital stock of Purchaser; and
WHEREAS, Seller owns all of the issued and outstanding capital stock of
JLA Credit Corporation, a Delaware corporation (the "Company"); and
WHEREAS, the Company is a specialty commercial finance company engaged
in the business of originating, acquiring, securitizing and servicing
non-cancellable, full-payout equipment leases in the United States (the
"Business"); and
WHEREAS, Purchaser desires to purchase from Seller all of the issued
and outstanding capital stock of the Company (the "Shares") upon and subject to
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein, the
parties hereto hereby agree as follows:
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ARTICLE I
DEFINITIONS
Section 1.1 Definitions . As used in this Agreement, each of the
following terms shall have the respective meaning set forth below:
Term Defined in Section
- ---- ------------------
Accounting Dispute Notice 2.3(b)
Agreement Preamble
Approvals 4.10(d)
Acquisition Transaction 6.14(a)
Audited Financial Statements 4.5
Barclays 10.1(b)
Benefit Arrangement 4.9(a)
Business Recitals
Change-in-Control Amounts 6.16(a)
Closing 3.1
Closing Date 3.1
Commitment Letter 6.19
Commitment Letter Due Date 6.19
Company Recitals
Company Employee 4.13(a)
Company Insurance Policies 4.22
Company Lenders 6.12(a)
Confidentiality Agreement 6.2(b)
Consents 6.4
Contract 4.13(a)
DAF Report 2.3(b)
Damages 10.1(a)
Date of Notice of Claim 10.6(d)
Election 6.10(a)
Employment Agreements 6.16(a)
Environmental Laws 4.16
Existing Employee 6.8
Financial Statements 4.5
Governmental Entity 4.4(b)
Information 6.2(b)
Intellectual Property 4.11
Leases 4.10(b)
Material Contracts 4.13(a)
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Material Lease 4.10(b)
Material Leased Real Property 4.10(b)
Modified ADSP 6.10(b)
Net Asset Value Report 2.3(a)
Notice of Claim 10.6(a)
Owned Real Property 4.10(a)
Parent Recitals
PBGC 4.9(a)
Plans 4.9(a)
Promissory Note 6.12(b)
Purchase Price 2.2
Purchaser Preamble
Purchaser Indemnified Persons 10.1(a)
Purchaser's Closing Documents 8.2
Section 6.19(b) Last Termination Date 6.19(b)
Seller Preamble
Seller Disclosure Letter Article IV
Seller Indemnified Persons 10.2
Seller's Closing Documents 8.1
Seller Tax Returns 6.10(d)(ii)
Shares Recitals
Special Contingent Liability 10.1(b)
Tax Audit 6.10(f)(i)
Unaudited Financial Statements 4.5
"Affiliate," with respect to any Person, shall include (i) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such Person and (ii) in the case of Seller, the
Company, each Company Subsidiary, and its respective directors and officers. For
purposes of this definition, "control," when used with respect to any Person,
means the power to direct the management and policies of such Person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have meanings that
correspond to the foregoing.
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"Antitrust Law" means the Sherman Act, each the Clayton Act, the HSR
Act, the Federal Trade Commission Act, each as amended, and all other federal,
state and foreign statutes, rules, regulations, orders, decrees, administrative
and judicial doctrines, and other laws that are designed or intended to
prohibit, restrict or regulate actions having the purpose or effect of
monopolization or restraint of trade.
"Assignment" means the Assignment and Assumption of Interests in
Receivables, to be executed and delivered at the Closing by the Company, on the
one hand, and Seller, on the other hand, in substantially the form of Exhibit
7.1(j).
"Bankruptcy Exception" means, in respect of any agreement, contract,
commitment or obligation, any limitation thereon imposed by any bankruptcy,
insolvency, fraudulent conveyance, reorganization, receivership, moratorium or
similar law affecting creditors' rights and remedies generally and, with respect
to the enforceability of any agreement, contract, commitment or obligation, by
general principles of equity, including principles of commercial reasonableness,
good faith and fair dealing, regardless of whether enforcement is sought in a
proceeding at law or in equity.
"Business Day" means each day other than Saturday, Sunday or any day on
which banks located in the State of New York are authorized or obligated to
close.
"Change in Control" has the meaning set forth in Section 6 of each of
the Employment Agreements.
"Closing Date Balance Sheet" means the consolidated balance sheet for
the Company and the Company Subsidiaries prepared as of the close of business on
the Closing Date before giving effect to the Closing or any of the other
transactions contemplated hereby to occur on the Closing Date and in accordance
with GAAP applied on a basis consistent with the preparation of the Audited
Financial Statements.
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"Closing Date Net Asset Value" means the amount by which the total
assets of the Company and the Company Subsidiaries on a consolidated basis
exceeds the total liabilities of the Company and the Company Subsidiaries on a
consolidated basis, in each case as derived from the Closing Date Balance Sheet.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Material Adverse Effect" means any event, condition or
circumstance that would be reasonably likely to have a material adverse effect
on (A) the business, results of operations or financial condition of the Company
and the Company Subsidiaries, taken as a whole, but excluding any such effect
resulting from any bankruptcy or similar filings made, as of the date hereof, by
Seller or any of its Affiliates (other than the Company or any of the Company
Subsidiaries), including any defaults or cross-defaults caused by such filings
under any agreements to which the Company or any of its Affiliates is a party
and the defaults disclosed in the Seller Disclosure Letter or (B) the ability of
Seller to perform any of its obligations under this Agreement or consummate the
transactions contemplated hereby.
"Company Subsidiary" means any of JLA Funding Corporation, JLA Funding
Corporation II or JLA Funding Corporation III.
"Corporate Affiliate" means an Affiliate that is not a natural person.
"Credit Enhancement" means any (i) security deposit, unapplied advance
rental payment or dealer investment, (ii) investment certificate, certificate of
deposit, authorization to hold funds, hypothecation of account or like
instrument, (iii) letter of credit, repurchase agreement, agreement of
indemnity, guarantee, lease guarantee bond or postponement agreement, (iv)
recourse agreement, (v) security agreement, (vi) property, (vii) certificate
representing shares or the right to purchase shares in the capital of any
corporation, (viii) Financing Contract or (ix) bond or debenture, in each case
pledged, assigned, mortgaged,
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made, delivered or transferred as security for the performance of any obligation
under or with respect to a Financing Contract or Non-Recourse Note.
"December Financial Statements" means the unaudited consolidated
balance sheet and the related unaudited consolidated income statement of the
Company and the Company Subsidiaries for the twelve months ending December 31,
1998, to be delivered by Seller to Purchaser following the date hereof pursuant
to Section 6.15.
"Designated Accounting Firm" means PriceWaterhouseCoopers LLP, or if
PriceWaterhouseCoopers LLP shall decline or otherwise be unable to perform the
engagement in question, another firm of independent certified public accountants
of nationally recognized standing (other than the Purchaser Accountants and the
Seller Accountants) mutually acceptable to the parties hereto.
"DOJ" means the Antitrust Division of the United States Department of
Justice.
"Employee Escrow Agreements" means two agreements, each in
substantially the form of Exhibit 6.16, to be executed and delivered by the
Company and the relevant Company Employee at the Closing.
"Employment Agreements" means the Employment Agreements, effective as
of the first day of January, 1998 and existing as of the date hereof, between
the Company, on the one hand, and each of Allan Hauskens and Steven A. Dietsch,
on the other hand.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agreement" means an agreement in substantially the form of
Exhibit 7.1(h), to be executed and delivered by Purchaser and Seller at the
Closing.
"Financing Contract" means any contract (including any schedule or
amendment thereto or assignment, assumption, renewal or novation thereof) in
existence on or prior to the Closing Date and any ancillary agreements relating
thereto which is in the form of a lease
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or rental agreement with respect to property, or any sale contract (including an
installment sale contract or conditional sale agreement) arising out of the sale
of property or any secured or unsecured financing of property, or any secured or
unsecured loan with respect to which the Company and/or a Company Subsidiary is
either (i) the lessor, seller, lender, secured party or obligee (whether
initially or as an assignee) or (ii) the holder of a Non-Recourse Note secured
thereby.
"Financing Records" means all material records in the possession or
control of the Company or any Company Subsidiary relating to the Financing
Contracts and any Credit Enhancement with respect thereto, including
applications, agreements, promissory notes, security agreements, insurance
policies and any other collateral security of any nature whatsoever held by the
Company or any Company Subsidiary, including any relevant documents or
instruments held by the Company or any Company Subsidiary as collateral
security, credit files, computer records, correspondence, collection histories,
underwriting criteria and policy and procedure manuals.
"FTC" means the Federal Trade Commission.
"GAAP" means generally accepted accounting principles in effect in the
United States of America at the time of any determination, and which are applied
on a consistent basis during the periods involved, as adjusted in the case of
the Closing Date Balance Sheet by the accounting policies set forth in Exhibit
1. Any accounting term or other term used in this Agreement with respect to an
accounting matter shall have the meaning given to that term by GAAP, unless
otherwise defined herein or the context of this Agreement otherwise requires.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
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"Income Tax" means any federal, state, local or foreign Tax (a) based
upon, measured by or calculated with respect to net income, profits or receipts
(including capital gains Taxes and minimum Taxes) or (b) based upon, measured by
or calculated with respect to multiple bases (including corporate franchise
taxes) if one or more of the bases on which such Tax may be based, measured by
or calculated with respect to, is described in clause (a), in each case together
with any interest, penalties or additions to such Tax.
"JLC" means Japan Leasing Corporation, a Japanese corporation.
"Knowledge" of Seller, the Company or any Company Subsidiary, "known"
to Seller, the Company or any Company Subsidiary, matters of which Seller, the
Company or any Company Subsidiary is "aware" and language of similar import
shall mean all matters actually known by any of Mitsumasa Sakka, Allan Hauskens,
Steven A. Dietsch, Katsuro Hamada, Jun Ogihara or Chiaki Kojima.
"Liens" means all mortgages, claims, charges, liens, security
interests, pledges, options, easements, rights of way, or other encumbrances of
any nature whatsoever.
"Net Asset Value" means the amount by which (i) the total assets of the
Company and the Company Subsidiaries on a consolidated basis exceeds (ii) the
total liabilities of the Company and the Company Subsidiaries on a consolidated
basis, in each case as derived in reliance on the accounting principles and the
methods of applying such principles used in preparing the Financial Statements.
"Non-Recourse Note" means (i) a promissory note or assignment of
chattel paper issued by (and the obligor on which is) an owner of a Financing
Contract, which note or assignment is secured by a security interest in (and
collateral assignment of) such Financing Contract and all proceeds thereof or
(ii) an assignment of a stream of current and/or future
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payments due under a Financing Contract, which assignment is secured by a
security interest in (and collateral assignment of) such Financing Contract and
all proceeds thereof.
"November Financial Statements" means the unaudited consolidated
balance sheet and the related unaudited consolidated income statement of the
Company and the Company Subsidiaries for the eleven months ending November 30,
1998, to be delivered by Seller to Purchaser following the date hereof pursuant
to Section 6.15.
"October Financial Statements" means the unaudited consolidated balance
sheet and the related unaudited consolidated income statement of the Company and
the Company Subsidiaries for the ten months ending October 31, 1998 delivered by
Seller to Purchaser prior to the date hereof.
"Permits" means all licenses, permits, certificates of authority,
authorizations, approvals, registrations, franchises and similar consents
granted or issued by any Governmental Entity.
"Permitted Liens" means (i) those liens set forth in Section 4.10 of
the Seller Disclosure Letter, (ii) (A) any state of facts that would be set
forth in the public records of a Governmental Entity, (B) Liens for current
water and sewage charges and current Taxes not yet due and payable or being
contested in good faith, and (C) mechanics', carriers', workers', repairers',
materialmen's, warehousemen's and other similar Liens arising or incurred in the
ordinary course of business, in each case that do not materially interfere with
the operation of the Company and the Company Subsidiaries, taken as whole, or
(iii) Liens arising or resulting from any action taken by Purchaser or any of
its Affiliates.
"Person" means a natural person, partnership, joint venture, trust,
corporation, limited liability company or other entity (including any government
or political subdivision or any agency, department or instrumentality thereof).
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"Pre-Closing Period" means any taxable period ending on or prior to the
Closing Date.
"Purchaser Accountants" means Grant Thorton LLP.
"Purchaser Material Adverse Effect" means any event, condition or
circumstance that would be reasonably likely to have a material adverse effect
on the ability of Purchaser to perform any of its obligations under this
Agreement or consummate the transactions contemplated hereby.
"Purchaser Plans" means employee benefit plans, as defined in Section
3(3) of ERISA, or such nonqualified employee benefit or deferred compensation
plans, stock option, bonus or incentive plans or other employee benefit or
fringe benefit programs that may be in effect generally for employees of
Purchaser or its Subsidiaries from time to time.
"Securities Act" means the Securities Act of 1933, as amended.
"Securitized 90+ Contracts" means Financing Contracts of any of the
Company Subsidiaries with payments more than 90 days past due as of the date
that is two Business Days prior to the Closing Date.
"Security Agreement" means an agreement in substantially the form of
Exhibit 7.1(i), to be executed and delivered by Purchaser and Seller at the
Closing for the purpose of securing the Promissory Note.
"Seller Accountants" means Arthur Andersen LLP.
"Straddle Period" means any taxable period that begins before and ends
after the Closing Date.
"Subsidiary" of a Person means any entity of which the securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are at the
time directly or indirectly owned by such Person or such Person otherwise has
the right to vote or to direct the vote of such securities or other ownership
interests.
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"Target Net Asset Value" means $38,000,000.
"Tax Affiliate" means any entity that is a member of an affiliated
group of corporations (within the meaning of Section 1504(a) of the Code) filing
a consolidated U.S. federal Income Tax Return, and a group of corporations
filing a consolidated or combined Tax Return for state, local or foreign Tax
purposes (each, a "Consolidated Group"), if the Company could be held liable for
the Taxes of such entity or of such Consolidated Group.
"Taxes" means any and all taxes, charges, fees, levies or other
assessments, including income, gross receipts, excise, real or personal
property, sales, withholding, social security, retirement, unemployment,
occupation, use, service, net worth, payroll, franchise, license, gains,
customs, transfer and recording taxes, imposed by any taxing authority, and
shall include any interest, penalties or additions to tax.
"Tax Return" means any report, return, document, declaration or other
information or filing required to be supplied to any taxing authority with
respect to Taxes.
ARTICLE II
PURCHASE AND SALE OF SHARES
Section 2.1 Sale and Transfer of Shares. Subject to the terms and
conditions set forth in this Agreement, at the Closing, Seller shall sell,
convey, assign, transfer and deliver the Shares to Purchaser, free and clear of
all Liens (other than restrictions arising under the Securities Act or any other
applicable state securities laws), and Purchaser shall purchase, acquire and
accept the Shares from Seller.
Section 2.2 Purchase Price. Subject to the terms and conditions of
this Agreement, in consideration of the aforesaid sale, conveyance, assignment,
transfer and delivery of the
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Shares, Purchaser agrees to pay to Seller at the Closing the sum of $38,000,000
(the "Purchase Price"), which sum shall be payable in immediately available
funds by (a) a wire transfer in the amount of $5,000,000 to such bank account as
may be specified in writing by the Escrow Agent (as defined in the Escrow
Agreement) to Purchaser prior to the Closing for deposit in accordance with the
terms of the Escrow Agreement and (b) a wire transfer in the amount of
$33,000,000 to such bank account as may be specified in writing by Seller to
Purchaser prior to the Closing.
Section 2.3 Purchase Price Adjustment.
(a) As promptly as practicable, but not later than 60 days
after the Closing Date, Purchaser shall cause to be prepared and delivered to
Seller (i) the Closing Date Balance Sheet audited by the Purchaser Accountants
and (ii) a report (the "Net Asset Value Report") setting forth a calculation of
the Closing Date Net Asset Value. Purchaser shall, and shall cause the Purchaser
Accountants to, make available to Seller and the Seller Accountants all books
and records of the Company and each Company Subsidiary and all work papers used
in connection with the preparation and audit of the Closing Date Balance Sheet
or the preparation of the Net Asset Value Report. The Closing Date Balance Sheet
and the Net Asset Value Report delivered pursuant to this Section 2.3 shall not
be binding on Seller if Seller timely exercises its right to dispute the same
pursuant to the procedures set forth in this Section 2.3. If Seller does not
exercise such right with respect to the Closing Date Balance Sheet or the Net
Asset Value Report on a timely basis under this Section 2.3, then Seller shall
be deemed to have accepted the same as delivered pursuant to this Section 2.3.
(b) If Seller disputes any item in the Net Asset Value Report,
then Seller shall, within 30 days after the delivery of the Closing Date Balance
Sheet and Net Asset Value Report, give Purchaser written notice of such dispute
(an "Accounting Dispute Notice")
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setting forth in reasonable detail each of the items in dispute. If no
Accounting Dispute Notice is given to Purchaser within such 30-day period, the
Closing Date Net Asset Value as set forth in the Net Asset Value Report shall be
deemed to be final and binding upon all the parties hereto. In the event that an
Accounting Dispute Notice is given to Purchaser within such 30-day period,
Seller and Purchaser shall attempt to resolve in good faith and by mutual
agreement the items in dispute within 15 days after the delivery of such
Accounting Dispute Notice to Purchaser. Failing agreement on all items in
dispute within such 15-day resolution period, Purchaser and Seller shall submit
such items in dispute for resolution to the Designated Accounting Firm. The
Designated Accounting Firm shall be instructed to resolve such disputed items,
based solely on written presentations by Purchaser and Seller and not by
independent review, and to deliver a written report to the parties hereto upon
such disputed items (the "DAF Report") in accordance with Section 11.3, all
within 15 days after the submission of such disputed items to it. The DAF Report
shall be (i) within the range of proposals established for such dispute by
Purchaser and Seller and (ii) deemed to be an agreement between Seller and
purchaser with respect to the issues in dispute, and upon the delivery of the
DAF Report to Purchaser and Seller, the Closing Date Net Asset Value as set
forth in the DAF Report shall be deemed to be final, conclusive and binding upon
all the parties hereto.
(c) The fees and expenses of the Designated Accounting Firm
incurred in connection with the resolution of a dispute pursuant to Section
2.3(b) shall be borne equally by Purchaser and Seller.
(d) If the Closing Date Net Asset Value (as deemed to be final
and binding pursuant to Section 2.3(b)) is less than the Target Net Asset Value,
then the principal amount payable under the Promissory Note shall be reduced by
the amount by which the
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Target Net Asset Value exceeds the Closing Date Net Asset Value; provided,
however, that in the event that the amount by which the Target Net Asset Value
exceeds the Closing Date Net Asset Value is less than $250,000, no adjustment
shall be made to the principal amount payable under the Promissory Note.
ARTICLE III
THE CLOSING
Section 3.1 Closing. The sale and transfer of the Shares by Seller to
Purchaser (the "Closing") shall take place at the offices of Ledgewood Law Firm,
Philadelphia, Pennsylvania at 10:00 a.m., local time, on January 19, 1999 or, if
the conditions to close set forth in Article VII have not been satisfied or
waived by such date, two Business Days following the satisfaction or waiver of
all conditions to close set forth in Article VII (the "Closing Date"), unless
another date or place is agreed to in writing by the parties hereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as otherwise disclosed to Purchaser in those sections of a
letter delivered to Purchaser by Seller prior to the execution hereof relating
to the following representations and warranties (the "Seller Disclosure
Letter"), Seller represents and warrants to Purchaser as follows:
Section 4.1 Organization.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as it is now being
conducted. The Company is duly qualified or licensed to do business as a foreign
corporation and is in good standing in each jurisdiction in which the nature of
the
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business conducted by it makes such qualification or licensing necessary. Seller
has heretofore delivered to Purchaser a complete and correct copy of each of the
Company's Certificate of Incorporation and Bylaws, as currently in effect.
(b) Section 4.1(b) of the Seller Disclosure Letter lists (i)
the name of each Company Subsidiary and the jurisdiction of its incorporation,
(ii) the amount of its authorized, and its issued and outstanding, capital stock
or other equity interests and (iii) the principal lines of business in which
each Company Subsidiary is participating or engaged. Each Company Subsidiary is
a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted. Each Company Subsidiary is duly qualified
or licensed to do business as a foreign corporation and is in good standing in
each jurisdiction in which the nature of the business conducted by it makes such
qualification or licensing necessary. Seller has heretofore delivered to
Purchaser a complete and correct copy of each of the Company Subsidiary's
Certificate of Incorporation and Bylaws, as currently in effect. All of the
outstanding shares of capital stock of or other equity interests in each Company
Subsidiary have been duly authorized and validly issued, are fully paid and
nonassessable, and are owned, beneficially and of record, by the Company free
and clear of all Liens. Neither the Company nor any of the Company Subsidiaries
owns, directly or indirectly, of record or beneficially, any equity,
partnership, limited liability company, joint venture or other interest in any
Person or has any obligation, direct or indirect, present or contingent, (i) to
purchase or subscribe for any interest in, advance or loan money to, or in any
way make investments in, any Person or (ii) to share any profits or capital
investments or both.
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(c) The stock and minute books of the Company and each Company
Subsidiary contain accurate and complete records of all requisite meetings and
consents in lieu of meetings of the respective board of directors (and any
committee thereof) and of stockholders since the time of each of their
incorporation and accurately reflect all transactions referred to therein.
Section 4.2 Capitalization.
(a) The authorized capital stock of the Company consists of
64,000 shares of Common Stock, par value $500 per share. Sixty thousand shares
of Common Stock are issued and outstanding (and such shares of Common Stock
constitute the "Shares"), all of which are owned of record and beneficially by
Seller, free and clear of all Liens, and no shares of Common Stock are issued
and held in the treasury of the Company. All of the Shares are duly authorized,
validly issued, fully paid and nonassessable. There are no existing (i) options,
warrants, calls, preemptive rights, subscriptions or other rights, convertible
securities, agreements or commitments of any character obligating the Company or
any Company Subsidiary to issue, transfer, sell or otherwise dispose of any
shares of capital stock of, or other equity interest in, the Company or any
Company Subsidiary, or which restrict the transfer of such shares, (ii)
contractual obligations of the Company or any Company Subsidiary to repurchase,
redeem or otherwise acquire any capital stock of the Company or any Company
Subsidiary, or (iii) voting trusts or similar agreements to which the Company,
any Company Subsidiary or Seller is a party with respect to the voting of the
capital stock of the Company or any Company Subsidiary.
Section 4.3 Authorization; Validity of Agreement. Seller has the
requisite corporate power and authority to execute, deliver and perform this
Agreement and to consummate the transactions contemplated hereby. The execution,
delivery and performance by Seller of this
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Agreement and the consummation of the transactions contemplated hereby have been
duly and validly authorized by the Board of Directors of Seller, and no other
corporate proceedings on the part of Seller are necessary to authorize the
execution, delivery and performance of this Agreement by Seller and the
consummation of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Seller and, assuming due authorization, execution
and delivery of this Agreement by Purchaser, is a valid and binding obligation
of Seller enforceable against Seller in accordance with its terms, except as may
be limited by the Bankruptcy Exception.
Section 4.4 No Violations; Consents and Approvals.
(a) The execution, delivery or performance of this Agreement by
Seller does not, and the consummation by Seller of the transactions contemplated
hereby will not, (i) violate any provision of the Certificate of Incorporation
or Bylaws of Seller, (ii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, amendment, cancellation or acceleration) under, any of
the terms, conditions or provisions of any material note, bond, mortgage,
indenture, guarantee, other evidence of indebtedness, license, contract,
agreement or other instrument to which Seller, the Company or any Company
Subsidiary is a party or by which any of them or any of their properties or
assets may be bound or otherwise subject or (iii) violate any order, writ,
judgment, injunction, decree, law, statute, rule or regulation applicable to the
Seller, the Company or any Company Subsidiary or any of their respective
properties or assets, except in the case of clauses (ii) or (iii) for such
violations, breaches or defaults that become applicable as a result of the
business or activities in which Purchaser or its Affiliates is or proposes to be
engaged or as a result of any acts or omissions by, or the status of any facts
pertaining to, Purchaser or its Affiliates.
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(b) No filing or registration with, notification to, or
authorization, consent or approval of, any court, legislative, executive or
regulatory authority or agency (each a "Governmental Entity") is required in
connection with the execution, delivery and performance of this Agreement by
Seller or the consummation by Seller of the transactions contemplated hereby,
except for filings with the FTC and with the DOJ pursuant to the HSR Act.
Section 4.5 Financial Statements. Seller has furnished the Purchaser
with (i) true and complete copies of the audited consolidated financial
statements of the Company and the Company Subsidiaries (including the related
notes) for the fiscal years ending December 31, 1996 and 1997 (the "Audited
Financial Statements"), and (ii) the unaudited consolidated balance sheet and
the related unaudited consolidated income statement of the Company and the
Company Subsidiaries for the nine months ended September 30, 1998 (the
"Unaudited Financial Statements" and, together with the Audited Financial
Statements, the "Financial Statements"). The Audited Financial Statements fairly
present in all material respects the financial position, results of operations
and cash flows of the Company and the Company Subsidiaries as of the dates and
for the periods specified therein, all in conformity with GAAP. The Unaudited
Financial Statements and the October Financial Statements fairly present, and
the November Financial Statements and the December Financial Statements shall
fairly present, in all material respects the consolidated combined results of
operations and cash flows of the Company and the Company Subsidiaries for the
periods specified therein, all in conformity with GAAP (subject to normal
year-end audit adjustments that will not have or reflect a Company Material
Adverse Effect) and except as otherwise noted therein. The books and records of
the Company and each Company Subsidiary are complete and correct in all material
respects, have been maintained in accordance with good business practices and
GAAP, and accurately reflect the basis for the financial condition and results
of
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operations as set forth in the Financial Statements. Throughout the periods
covered by the Financial Statements, there has been no change in the accounting
principles followed by the Company or any of the Company Subsidiaries or the
methods of applying such principles. Except as expressly provided in this
Section 4.5, no representation is made by Seller as to any financial information
of the Company or the Company Subsidiaries provided to Purchaser, including any
financial information set forth in the Confidential Memorandum dated July 1998
regarding the Company and the Company Subsidiaries provided to Purchaser by
Piper Jaffray, Inc. Without limiting the generality of the foregoing, no
representation is made as to the accuracy, fairness or reasonableness of any
projections regarding the Company or any Company Subsidiary provided to
Purchaser or the assumptions used in preparing the same or as to the likelihood
that such projections will be achieved.
Section 4.6 Absence of Certain Changes. Except as (a) disclosed in the
Financial Statements or (b) expressly required by this Agreement, between
September 30, 1998 and the date hereof, (i) no event that would result in a
Company Material Adverse Effect has occurred and (ii) the Company has not taken
action that, if taken after the date hereof, would constitute a violation of
Section 6.1.
Section 4.7 No Undisclosed Liabilities. Except for liabilities and
obligations incurred in the ordinary course of business, between September 30,
1998 and the date hereof, neither the Company nor any Company Subsidiary has
incurred any liabilities or obligations that would be required to be disclosed,
reflected or reserved against in a consolidated balance sheet of the Company
(including the related notes thereto, where appropriate) prepared in accordance
with GAAP.
Section 4.8 Litigation; Compliance with Law. As of the date hereof,
there is no action, suit or proceeding pending or,
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to the Knowledge of Seller, any investigation pending or, to the Knowledge of
Seller, any action, suit or proceeding threatened, involving the Company or any
Company Subsidiary, by or before any court, Governmental Entity or arbitration
panel or any other Person. The business and the operations of the Company and
the Company Subsidiaries are not being conducted in violation of any applicable
law, ordinance, rule, regulation, decree or order of any court or Governmental
Entity or other regulatory authority, or arbitration panel. Neither the Company
nor any Company Subsidiary has been the subject of any investigation or
proceeding by any Governmental Entity within the past three years.
Section 4.9 Employee Benefit Plans; ERISA.
(a) Section 4.9(a) of the Seller Disclosure Letter lists any
"employee pension benefit plan" or "employee welfare benefit plan" within the
meaning of Sections 3(1) and 3(2) of ERISA established or maintained or
contributed to by the Company or any Company Subsidiary, or in respect of which
the Company or any Company Subsidiary is considered an "employer" under Section
414 of the Code, in each case which provides benefits for an employee of the
Company or any Company Subsidiary (collectively, "Plans"). None of the Company
or any Company Subsidiary is required, or was required within the immediately
preceding five years, to make any contribution to any "multiemployer plan"
within the meaning of Section 3(37) of ERISA. None of the Company or any Company
Subsidiary has any unpaid liability to the Pension Benefit Guaranty Corporation
("PBGC") in respect of any Plans established or maintained and to which
contributions are or were made by it.
Section 4.9(a) of the Seller Disclosure Letter also lists each
deferred compensation plan, bonus plan, stock option plan, employee stock
purchase plan and any other employee benefit plan, agreement, arrangement or
commitment not required under the preceding paragraph to be listed on Section
4.9(a) of the Seller Disclosure Letter (other than normal policies concerning
holidays, vacations and salary continuation during short absences for illness
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or other reasons) maintained by the Company or any of the Company Subsidiaries
(together with the Plans, collectively, "Benefit Arrangements").
(b) No Plan (i) has incurred any "accumulated funding
deficiency," as defined in Section 412 of the Code (whether or not waived), or
(ii) has incurred any liability to the PBGC. None of the Company or any Company
Subsidiary has breached any of the responsibilities, obligations or duties
imposed on it by ERISA or the Code with respect to any Plan maintained by it,
which breach has given rise to, or would reasonably be expected in the future to
give rise to, an obligation of the Company or such Company Subsidiary to pay a
sum of money, including the obligation to make contributions to any Plan that
has become due prior to the date hereof for any Plan year ending prior to the
Closing Date. There is no contribution due for any Plan for the year in which
the Closing occurs. None of the Company or any Company Subsidiary or, to the
Knowledge of the Seller or the Company, any "party in interest," as defined in
Section 3(14) of ERISA, in respect of any such Plan has engaged in any
non-exempt prohibited transaction described in Sections 406 and 408 of ERISA or
Section 4975 of the Code which would reasonably be expected to have a
significant adverse effect on the Company or any Company Subsidiary. No
reportable event, as defined in Section 4043 of ERISA (other than any reportable
event as to which the 30-day notice period has been waived by statute or
regulation), has occurred with respect to any Plan; and no Plan subject to Title
IV of ERISA has been terminated by the plan administrator thereof or by the
PBGC. None of the Company or any Company Subsidiary has incurred any unpaid
liability with respect to any Plan under Title IV of ERISA.
(c) No action, suit, grievance, arbitration or other manner of
litigation, or claim with respect to the assets of any Plan (other than the
routine claims for benefits made in the ordinary course of Plan administration
for which plan administrative review procedures
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have not been exhausted) is pending or has been threatened against such Plan,
the Company or any Company Subsidiary, or, to the Knowledge of the Seller, any
fiduciary (as defined in ERISA ss.3(21)) of the Plan (including any action,
suit, grievance, arbitration or other manner of litigation, or claim regarding
conduct which allegedly interferes with the attainment of rights under the
plan), and to the Seller's knowledge, no facts exist which would reasonably be
expected to give rise to any such action, suit, grievance, arbitration or other
manner of litigation, or claim.
(d) None of the Company or any Company Subsidiary has
communicated to any employee any intention or commitment to modify any Benefit
Arrangement (except as required by law or by contract in effect as of the date
hereof and described on Section 4.9(d) of the Seller Disclosure Letter) or to
establish or implement any other employee or retiree benefit or compensation
arrangement not listed in Section 4.9(a) of the Seller Disclosure Letter.
(e) None of the Company or any Company Subsidiary (i) maintains
or contributes to any Plan which provides, or has any liability to provide, life
insurance, medical, severance or other employee welfare benefits to any employee
upon such employee's retirement or termination of employment, except as may be
required by Section 4980B of the Code; or (ii) has ever represented, promised,
or contracted (whether in oral or written form) to any employee (either
individually or to employees as a group) that such employee(s) would be provided
with life insurance, medical, severance or other employee welfare benefits upon
their retirement or termination of employment, except to the extent required by
Section 4980B of the Code.
(f) The consummation of the transactions contemplated by this
Agreement will not (either alone or upon the occurrence of any additional or
subsequent events) (i)
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constitute an event under any Benefit Arrangement as in effect as of the date
hereof that will result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any employee, or (ii)
result in the triggering or imposition of any restrictions or limitations on the
right of the Company or any Company Subsidiary to amend or terminate any Benefit
Arrangement and, as applicable with respect to any employee pension benefit
plan, receive the full amount of any excess assets remaining or resulting from
such amendment or termination, subject to applicable taxes. No payment or
benefit which will be made by the Company or any Company Subsidiary with respect
to an employee pursuant to any Benefit Arrangement as in effect as of the date
hereof will be characterized as an "excess parachute payment," within the
meaning of Section 280G(b)(1) of the Code.
(g) No Benefit Arrangement is funded by a trust described in
Section 501(c)(9) of the Code.
(h) With respect to each Plan that is an "employee welfare
benefit plan" within the meaning of Section 3(1) of ERISA, all claims incurred
(including claims incurred but not reported) by employees thereunder prior to
the Closing for which the Company or any Company Subsidiary is, or will become,
liable are (i) insured pursuant to a contract of insurance whereby the insurance
company bears any risk of loss with respect to such claims; (ii) covered under a
contract with an insurer pursuant to which the insurer bears the liability for
such claims; or (iii) will be reflected as a liability or accrued for on the
Financial Statements.
(i) None of the Company or any Company Subsidiary has any
liability, contingent or otherwise, to, or with respect to any benefit plan
(other than the Benefit Arrangements),
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which is now or previously has been sponsored, maintained, contributed to, or
required to be contributed to, by the Company or any Company Subsidiary.
(j) Each of the Company and the Company Subsidiaries have
provided, or will have provided prior to the Closing, to individuals entitled
thereto, all required notices and coverage pursuant to Sections 601 through 609
of ERISA or Section 4980B of the Code with respect to any "qualifying event" (as
defined in Section 4980B(f)(3) of the Code) occurring prior to the Closing Date,
and no tax payable on account of Section 4980B of the Code has been incurred
with respect to any current or former employees (or their beneficiaries).
Section 4.10 Real Property.
(a) Section 4.10(a) of the Seller Disclosure Letter is a list
of all real property owned by the Company or any Company Subsidiary (the "Owned
Real Property"). Either the Company or a Company Subsidiary has good and
marketable title to the Owned Real Property in fee subject to no Liens, except
for Permitted Liens.
(b) Section 4.10(b) of the Seller Disclosure Letter is a list
(including all amendments) of all leases and subleases of real property under
which the Company or any Company Subsidiary is tenant or subtenant (the
"Leases") that in any 12-month period of lease term requires total lease or rent
payments by the Company or any Company Subsidiary of more than $10,000 (each
such Lease, a "Material Lease"), including the date of the Material Lease, the
premises demised thereunder, the name of the lessee and lessor, the commencement
date and expiration date of such Material Lease and the annual rent payable by
the lessee under such Material Lease. As used herein, the term "Material Leased
Real Property" shall mean the real property demised by Material Leases.
(c) Copies of the Material Leases have been made available to
Purchaser by Seller. The Material Leases are in full force and effect and are
enforceable in all material
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respects in accordance with their respective terms, except as such
enforceability may be subject to or limited by the Bankruptcy Exception. None of
the Material Leases has been amended since August 1998. Neither the Company nor
any Company Subsidiary has assigned, pledged or otherwise transferred, or has
sublet the premises demised by, any Material Lease. Either the Company or a
Company Subsidiary is in possession of the premises demised by the Material
Leases. No event has occurred or failed to occur that, with the giving of notice
or the passage of time, or both, would constitute a default by the lessee under
any Material Lease. No security deposit in excess of $5,000 is being held under
any Material Lease. As of the date of this Agreement, no lessor or lessee under
any Material Lease has exercised any option or right to (i) cancel or terminate
such Material Lease or shorten the term thereof, (ii) lease additional premises,
(iii) reduce or relocate the premises demised by such Material Lease or (iv)
purchase any property.
(d) All licenses, Permits and permanent certificates of
occupancy (the "Approvals"), if any, needed in connection with the construction,
use, occupancy and maintenance of any Owned Real Property or any Material Leased
Real Property are in full force and effect in accordance with the respective
terms thereof.
(e) The Owned Real Property and the Material Leased Real
Property, including all building systems, structural components, and building
equipment, are in good condition and repair, normal wear and tear excepted.
Section 4.11 Intellectual Property . Section 4.11 of the Seller
Disclosure Letter lists all material trademarks, trade names, service marks,
service names, mark registrations, logos, assumed names and copyright
registrations, patents and all applications therefor owned by the Company or any
Company Subsidiary and used in the business and operations of the Company or any
Company Subsidiary, as currently conducted (collectively, the "Intellectual
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Property"). As of the date hereof, there are no pending or threatened claims, of
which Seller has been given written notice, by any Person relating to the
Company's use, or any Company Subsidiary's use, of any Intellectual Property.
The Company or a Company Subsidiary has such ownership and use (free and clear
of all Liens) of, or rights by license, lease or other agreement to use (free
and clear of all Liens), the Intellectual Property as are necessary to permit
the Company and the Company Subsidiaries to conduct the business and the
operations of the Company and the Company Subsidiaries, as currently conducted,
and neither the Company nor any Company Subsidiary is obligated to pay any
royalty or similar fee to any Person in connection with the Company's use, or
any Company Subsidiary's use, or license of any of the Intellectual Property.
Section 4.12 Computer Software. The Company and the Company
Subsidiaries have such title or such rights by license, lease or other agreement
to the computer software programs, including application software, used by the
Company and the Company Subsidiaries and material to the conduct of the business
and operations of the Company and the Company Subsidiaries, as currently
conducted, as are necessary to permit the conduct of such business and
operations.
Section 4.13 Material Contracts.
(a) Except for Financing Contracts, Non-Recourse Notes and
Credit Enhancements, Section 4.13 of the Seller Disclosure Letter sets forth, as
of the date hereof, a true, complete and correct list of every contract,
agreement, loan, lease, license, guarantee, understanding or commitment (each
such item, a "Contract") to which the Company or any Company Subsidiary is a
party or by which it is bound that (i) provides for aggregate future payments by
the Company or any Company Subsidiary, or to the Company or any Company
Subsidiary, of more than $50,000 and has an unexpired term exceeding one year
and may not
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be canceled upon 60 days' notice without any liability, penalty or premium
(excluding purchase orders and invoices entered into or incurred in the ordinary
course of business); (ii) was entered into by the Company or a Company
Subsidiary with a stockholder, officer, director or significant employee of the
Company, a Company Subsidiary or Seller (other than contracts identified in
Section 4.9 of the Seller Disclosure Letter); (iii) is a collective bargaining
or similar agreement; (iv) guarantees or indemnifies or otherwise causes the
Company or any Company Subsidiary to be liable or otherwise responsible for the
obligations or liabilities of any other Person or provides for a charitable
contribution by the Company or any Company Subsidiary; (v) involves an agreement
with any bank, finance company or similar organization for borrowed money or
indebtedness of the Company or any Company Subsidiary; (vi) materially restricts
the Company or any Company Subsidiary from engaging in any business or activity
anywhere in the world; (vii) is an employment agreement, consulting agreement or
similar arrangement with any Person who is an employee or former employee of the
Company or any Company Subsidiary (each, a "Company Employee"), or any other
Person (other than Contracts identified in Section 4.9 of the Seller Disclosure
Letter); (viii) is an agreement for the purchase or sale of a portfolio of
Financing Contracts or Non-Recourse Notes with an aggregate value in excess of
$500,000; (ix) is an agreement pursuant to which any Person is entitled or
obligated to (A) manage, service, administer, enforce or make collections on any
Financing Contract or Non-Recourse Note or (B) repossess or otherwise convert
the ownership of any Portfolio Property or to sell or otherwise dispose of
Portfolio Property; (x) is an agreement with a collection agency for the
collection of past-due payments under Financing Contracts or Non-Recourse Notes;
or (xi) is an agreement or commitment by investors to purchase any Non-Recourse
Notes or Financing Contracts, or interests on participations therein, or an
agreement or commitment to sell any Non-Recourse
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Notes or Financing Contracts, or interests or participations therein (the
foregoing, collectively, "Material Contracts"). For purposes hereof, Material
Contracts shall not include Material Leases. True, complete and correct copies
of all Material Contracts have been made available to Purchaser.
(b) As of the date hereof, (i) there is not and, to Seller's
Knowledge, there has not been claimed or alleged by any Person, with respect to
any Material Contract, any existing default or event that, with notice or lapse
of time or both, would constitute a default or event of default on the part of
the Company or any Company Subsidiary or, to Seller's Knowledge, on the part of
any other party thereto, and (ii) no consent, approval, authorization or waiver
from, or notice to, any Governmental Entity or other Person is required in order
to maintain in full force and effect any of the Material Contracts, other than
such consents and waivers that have been obtained and are unconditional and in
full force and effect and such notices that have been duly given.
Section 4.14 Taxes.
(a) The Company and each Company Subsidiary has (A) duly and
timely filed with the appropriate governmental authorities all Tax Returns
required to be filed by it, and such Tax Returns are true, correct and complete
in all material respects, and (B) duly and timely paid in full or made provision
for such payment in accordance with GAAP for the payment of all Taxes shown to
be due on such Tax Returns.
(b) No federal, state, local or foreign audits or other
administrative proceedings or court proceedings are presently pending or
proposed (in each case, in writing) with regard to any Taxes or Tax Returns of
the Company or any Company Subsidiary.
(c) There are no Liens for Taxes upon any property or assets of
the Company or any Company Subsidiary, except for Permitted Liens.
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(d) The federal income Tax Returns of or including the Company
or any Company Subsidiary have been examined by the Internal Revenue Service (or
the applicable statutes of limitation for the assessment of federal income Taxes
for such periods have expired) for all periods through the taxable year ended
1995 but excluding the taxable year 1994.
(e) There are no agreements in effect to extend (A) the time to
file any Tax Return of the Company or any Company Subsidiary, (B) the period of
limitations for the assessment or collection of any Taxes for which the Company
or any Company Subsidiary would be liable or (C) the time for the assessment of
any deficiency or adjustment for any year for the Company or any Company
Subsidiary.
(f) All deficiencies of Taxes asserted or proposed (in each
case, in writing) have been paid, adequate provision therefore has been made on
the Financial Statements or are being contested in good faith.
(g) The Company and each Company Subsidiary is a member of a
U.S. consolidated return filing group of which Seller is the common parent.
Section 4.15 Affiliated Party Transactions; Sensitive Payments. No
contracts or agreements in which the amount involved, either alone or together
with all similar items, exceeds $100,000 are in effect as of the date hereof
between the Company or any Company Subsidiary, on the one hand, and Seller or
its Affiliates, on the other hand. To the Knowledge of the Seller, none of the
Company, any Company Subsidiary, or any director, officer, employee or agent of
the Company or any Company Subsidiary has made, on behalf of the Company or any
Company Subsidiary, directly or indirectly, since January 1, 1993 any illegal
contribution, gift, bribe, rebate, payoff, kickback or other payment to any
Person, whether in money, property or services.
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Section 4.16 Environmental Matters. (a) The Company and each Company
Subsidiary is in material compliance with all applicable federal, state and
local laws governing pollution or the protection of human health or the
environment ("Environmental Laws"), (b) neither the Company nor any Company
Subsidiary has received any written notice with respect to the business or
operations of the Company or any Company Subsidiary or to any property owned or
leased by the Company or any Company Subsidiary from any Governmental Entity or
third party alleging that the Company or any Company Subsidiary is not in
material compliance with any Environmental Law, and (c) no Hazardous Substance,
as that term is defined in the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. 9601 et seq., has been stored or
disposed of on any real property owned, leased or occupied by the Company or any
Company Subsidiary that is used in the business and operations of the Company
and the Company Subsidiaries, as currently conducted, except as permitted by or
in accordance with applicable law.
Section 4.17 No Brokers. Except for Piper Jaffray, Inc., whose fees
shall be borne solely by Seller, Seller has not employed any broker, finder or
similar agent or incurred any liability for any brokerage or investment banking
fees, commissions, finders' fees or other similar fees in connection with the
transactions contemplated by this Agreement.
Section 4.18 Receivables, Inventory and Payables. All accounts
receivable (including lease receivables), inventory and accounts payable of the
Company or any Company Subsidiary have arisen, and as of the Closing Date will
have arisen, from bona fide transactions in the ordinary course of business
consistent with past practice.
Section 4.19 Disclosure. For purposes of the representations and
warranties of Seller contained herein, disclosure in any Section of the Seller
Disclosure Letter or other document delivered pursuant to this Agreement of any
facts or circumstances shall be
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deemed to be adequate response and disclosure of such facts or circumstances
with respect to all representations or warranties by Seller calling for
disclosure of such information, whether or not such disclosure is specifically
associated with or purports to respond to one or more or all of such
representations or warranties. The inclusion of any information in any Section
of the Seller Disclosure Letter or other document delivered by Seller pursuant
to this Agreement shall not be deemed to be an admission or evidence of the
materiality of such item, nor shall it establish a standard of materiality for
any purpose whatsoever.
Section 4.20 Tangible Personal Property. Either the Company or a
Company Subsidiary is in possession of and has good and marketable title to, or
has valid leasehold interests in or valid rights under contract to use, all
tangible personal property used in the conduct of the Business as currently
conducted, including (a) all equipment reflected on the balance sheet included
in the Unaudited Financial Statements and (b) all equipment acquired by the
Company or such Company Subsidiary since September 30, 1998 (in each case other
than equipment disposed of since such date in the ordinary course of business
consistent with past practice or the terms of this Agreement). All such tangible
personal property is free and clear of all Liens, other than Permitted Liens,
and is adequate and suitable for the conduct by the Company and the Company
Subsidiaries of the Business presently conducted by them, and is in good working
order and condition, ordinary wear and tear excepted.
Section 4.21 Permits. Section 4.21 of the Seller Disclosure Letter
contains a true and complete list of all Permits used in and material to the
conduct of the Business, setting forth the issuing jurisdiction, the function
and (where applicable) the expiration date of each. Either the Company or a
Company Subsidiary owns or validly holds all Permits that are material to the
conduct of the Business. Each Permit listed in Section 4.21 of the Seller
Disclosure Letter is valid, binding and in full force and effect, and neither
the Company nor any Company Subsidiary is, or has received any notice that it
is, in default (or with the giving of notice or lapse of time or both, would be
in default) under any such Permit.
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Section 4.22 Insurance; No Casualty Events. Section 4.22 of the Seller
Disclosure Letter contains a true and complete list (including policy numbers)
of all liability, property, workers' compensation, directors' and officers'
liability and other insurance policies (including self-insurance programs, if
any) (the "Company Insurance Policies") currently in effect that insure the
business, operations, employees, officers or directors of the Company or any
Company Subsidiary or affect or relate to the ownership, use or operation of any
of the assets and properties of the Company or any Company Subsidiary. Each of
the Company Insurance Policies has been issued to the Company or a Subsidiary
thereof and the insurance coverage provided by the Company Insurance Policies
will not terminate or lapse by reason of the transactions contemplated by this
Agreement. Each of the Company Insurance Policies is valid and binding and in
full force and effect in all material respects, all premiums due thereunder have
been paid when due, and none of the Seller, the Company or any Company
Subsidiary has received any notice of cancellation or termination in respect of
any such policy.
Section 4.23 Employees; Labor Relations.
(a) (i) Neither the Company nor any Company Subsidiary is
engaged in any unfair labor practice, (ii) no unfair labor practice complaint is
pending or, to the Knowledge of the Seller, threatened against either the
Company or a Company Subsidiary before the National Labor Relations Board, (iii)
no grievance or arbitration proceeding arising out of or under any collective
bargaining agreement is pending or, to the Knowledge of the Seller, threatened
against the Company or any Company Subsidiary, (iv) no strike, labor dispute,
slowdown or stoppage is pending or, to the Knowledge of the Seller, threatened
against the Company or any Company Subsidiary, (v) no union representation
question exists with respect to employees of the Company or any Company
Subsidiary and, to the Knowledge of the Seller, no union organizing activities
are taking place with respect to any such employees or have taken place within
the last three years, and (vi) neither the Company nor any Company Subsidiary is
a party to, or has any obligation under, any collective bargaining agreement or
other labor union contract, white paper or side agreement with any labor union
or organization, or has any obligation to recognize or deal with any labor union
or organization.
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(b) The Company and each Company Subsidiary has at all times
since January 1, 1995 been in material compliance with all applicable laws
relating to employment, wages, hours, compensation, benefits, occupational
health and safety, and payment and withholding of taxes in connection with
employment. Each of the Company and the Company Subsidiaries has withheld all
amounts required by law or agreement to be withheld by it from wages, salaries
and commissions, and neither the Company nor any Company Subsidiary is liable
for any arrears of wages or any taxes or penalties for failure to comply with
any of the foregoing. As of the date hereof, there are no actions or proceedings
pending or, to the Knowledge of the Seller, threatened against the Company or
any Company Subsidiary before any Governmental Entity involving or relating to
any past or present employee or applicant for employment of the Company or any
Company Subsidiary, or relating to any acts, omissions or practices of the
Company or any Company Subsidiary relating to employment, wages, hours,
compensation or benefits. Neither the Company nor any Company Subsidiary is
party to or bound by any order of any kind respecting the employment, wages,
hours, compensation or benefits of any employees or prospective employees of the
Company or any Company Subsidiary.
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(c) Section 4.23 of the Seller Disclosure Letter sets forth
the name and current annual rate of compensation (including bonuses) paid by the
Company and each Company Subsidiary to each officer or employee of the Company
and each director, officer and employee of any Company Subsidiary.
Section 4.24 Registration Rights. None of the Seller, the Company or
any Company Subsidiary has granted registration rights to any holder of any of
the securities of the Company or any Company Subsidiary.
Section 4.25 Exemption from Registration; Restrictions on Offer and
Sale of Same or Similar Securities. Assuming the representations and warranties
of the Purchaser set forth in Section 5.7 hereof are true and correct in all
material respects, the offer and sale of the Shares made pursuant to this
Agreement is exempt from the registration requirements of the Securities Act.
None of the Seller, the Company, the Company Subsidiaries or any Person
authorized to act on behalf of any of them has, in connection with the offering
of the Shares, engaged in (a) any form of general solicitation or general
advertising (as those terms are used in Rule 502(c) under the Securities Act),
(b) any action involving a "public offering" within the meaning of Section 4(2)
of the Securities Act, or (c) any action that would require the registration
under the Securities Act of the offering and sale of the Shares pursuant to this
Agreement or that would violate applicable state securities or "blue sky" laws.
None of the Seller, the Company, the Company Subsidiaries or any Person
authorized to act on behalf of any of them has made, directly or indirectly, any
offer or sale of any of the Shares or of securities of the same or a similar
class as the Shares that could cause the offer and sale of the Shares
contemplated hereby to fail to be entitled to exemption from the registration
requirements of the Securities Act. As used herein, the terms "offer" and "sale"
have the meanings specified in Section 2(3) of the Securities Act.
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Section 4.26 Financing Contracts.
(a) Section 4.26 of the Seller Disclosure Letter includes a
list of each Financing Contract as of the date hereof. All Financing Records
relating to the Financing Contracts, including any Credit Enhancements with
respect thereto, have been furnished or made available for inspection by
Purchaser. The Company or a Company Subsidiary has in its possession (i) an
executed original or a true, correct and complete copy of any lease, note or
chattel paper relating to each Financing Contract, (ii) an executed original or
a true, correct and complete copy of all other documents relating to each such
Financing Contract and each Credit Enhancement relating thereto and (iii) all
other documents reasonably necessary to enforce such Financing Contracts and
Credit Enhancements or perfect the security interest thereunder.
(b) Each Financing Contract, and each Credit Enhancement
relating thereto, is valid, binding and enforceable by the Company or the
appropriate Company Subsidiary against the lessee, obligor or borrower
thereunder in accordance with its written terms, except as may be limited by the
Bankruptcy Exception, and (ii) arose out of a bona fide business transaction
entered into in the ordinary course of business; provided, however, that Seller
makes no representation or warranty with respect to the ability of the obligor
under any Financing Contract or Credit Enhancement to discharge its payment
obligations thereunder.
(c) (i) There are no payments under any Financing Contract
that are more than 90 days past due as of December 1, 1998, (ii) the Company or
the appropriate Company Subsidiary is not in breach or default of any of its
material obligations under any Financing Contract or Credit Enhancement related
thereto and (iii) neither the Company nor any Company Subsidiary has received
any notice of (A) any event other than a payment default which is, or with
notice and/or lapse of time would constitute, a material default under any
Financing Contract or Credit Enhancement related thereto by any other party
thereto or (B) any claim that any obligation to the Company or the appropriate
Company Subsidiary under any Financing Contract or Credit Enhancement related
thereto is subject to any defense, offset, claim, right of rescission or
counterclaim of any party.
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Section 4.27 Accurate and Complete Disclosure. The written information
furnished to Purchaser by employees of the Company in connection with its
investigation of the Company and the Company Subsidiaries, whether before or
after the date of this Agreement, is true and correct in all material respects,
and no representation or warranty of Seller contained herein contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained therein, in light of the circumstances under which they
were made, not misleading.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as follows:
Section 5.1 Organization. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as it is now being
conducted, except where the failure to be so existing and in good standing or to
have such power and authority would not in the aggregate have a Purchaser
Material Adverse Effect. Purchaser is qualified or licensed to do business as a
foreign corporation and is in good standing in each jurisdiction in which the
nature of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so duly qualified, licensed and in
good standing, to have such power and authority or to be so qualified or
licensed would not have a Purchaser Material Adverse Effect. Purchaser has
heretofore delivered to Seller complete and correct copies of its Certificate of
Incorporation and Bylaws, in each case, as currently in effect.
Section 5.2 Authorization: Validity of Agreement. Purchaser has the
requisite corporate power and authority to execute, deliver and perform this
Agreement and to consummate the transactions contemplated hereby. The execution,
delivery and performance by Purchaser of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
the Board of Directors of Purchaser, and no other corporate proceedings on the
part of Purchaser are necessary to authorize the execution, delivery and
performance of this Agreement by Purchaser and the consummation by Purchaser of
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by Purchaser and, assuming due authorization, execution and delivery
of this Agreement by Seller, is a valid and binding obligation of Purchaser
enforceable against Purchaser in accordance with its terms, except as such
enforceability may be subject to or limited by the Bankruptcy Exception.
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Section 5.3 No Violations; Consents and Approvals.
(a) The execution, delivery or performance of this Agreement
by Purchaser does not, and the consummation by Purchaser of the transactions
contemplated hereby will not, (i) violate any provision of the Certificate of
Incorporation or Bylaws of Purchaser, (ii) result in a violation or breach of,
or constitute (with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation or acceleration) under,
any of the terms, conditions or provisions of any material note, bond, mortgage,
indenture, guarantee, other evidence of indebtedness, license, contract,
agreement or other instrument to which Purchaser is a party or by which
Purchaser or any of its properties or assets may be bound or otherwise subject
or (iii) violate any order, writ, judgment, injunction, decree, law, statute,
rule or regulation applicable to Purchaser, or any of its properties or assets,
except in the case of clauses (ii) and (iii) for violations, breaches or
defaults that would not have a Purchaser Material Adverse Effect.
(b) No filing or registration with, notification to, or
authorization, consent or approval of, any Governmental Entity is required in
connection with the execution, delivery and performance of this Agreement by
Purchaser or the consummation by Purchaser of the transactions contemplated
hereby, except for (i) filings with the FTC and with the DOJ pursuant to the HSR
Act and (ii) such other consents, approvals, orders, authorizations,
notifications, registrations, declarations and filings the failure of which to
be obtained or made would not have a Purchaser Material Adverse Effect.
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Section 5.4 Litigation; Compliance with Law. There is no action, suit
or proceeding pending or, to the Knowledge of Purchaser, any investigation
pending or, to the Knowledge of Purchaser, any action, suit or proceeding
threatened, that in any way involves or affects Purchaser, by or before any
court, Governmental Entity or arbitration panel or any other Person that would
have a Purchaser Material Adverse Effect. The business and operations of
Purchaser are not being conducted in violation of any applicable law, ordinance,
rule, regulation, decree or order of any court or Governmental Entity except for
violations that, individually or in the aggregate, would not have a Purchaser
Material Adverse Effect.
Section 5.5 No Brokers. Purchaser has not employed any broker, finder
or similar agent or incurred any liability for any brokerage or investment
banking fees, commissions, finders' fees or other similar fees in connection
with any of the transactions contemplated by this Agreement.
Section 5.6 Investigation by Purchaser. Purchaser has conducted its
own independent review and analysis of the businesses, assets, condition,
operations and prospects of the Company and the Company Subsidiaries and
acknowledges that Purchaser has been provided access to the properties, premises
and records of the Company and each Company Subsidiary for this purpose. In
entering into this Agreement, Purchaser has relied upon its own investigation
and analysis, and Purchaser agrees, to the fullest extent permitted by law, that
none of Seller or its Subsidiaries, or any of their respective directors,
officers, employees, affiliates, controlling persons, agents or representatives,
will have any liability or responsibility whatsoever to Purchaser, its
directors, officers, employees, affiliates, controlling persons, agents or
representatives on any basis (including in contract or tort, under federal or
state securities laws or otherwise) based upon any information provided or made
available, or statements made, to Purchaser or its directors, officers,
employees, affiliates, controlling persons, agents or representatives (or any
omissions therefrom) except as and only to the extent expressly set forth in the
representations, warranties, covenants and agreements of Seller contained herein
and pursuant to the rights to indemnification by Seller provided for herein,
subject in each case to the limitations and restrictions contained herein and in
the Seller Disclosure Letter.
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Section 5.7 Investment Intent. Following the Closing, the Shares shall
not be transferred by Purchaser except in a transaction registered or exempt
from registration under the Securities Act.
ARTICLE VI
COVENANTS
Section 6.1 Conduct of the Business by the Company Pending the Closing.
During the period from the date hereof to the Closing, unless Purchaser will
otherwise agree in writing, except as required by applicable law or as otherwise
contemplated by this Agreement, Seller shall cause the Company and each Company
Subsidiary to conduct its respective business in the ordinary course and
consistent with past practice. Without limiting the generality of and in
addition to the foregoing, and except as set forth in the Seller Disclosure
Letter or as otherwise provided in this Agreement, prior to the Closing, Seller
shall cause the Company and each Company Subsidiary not to, without the prior
written consent of Purchaser (which consent shall not be unreasonably withheld
or delayed): (a) amend its Certificate of Incorporation or Bylaws;
(b) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or otherwise)
any stock of any class or any other securities;
(c) split, combine or reclassify any shares of its capital
stock, declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its capital
stock or redeem or otherwise acquire any of its securities;
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(d) (i) incur or assume any material long-term debt or, except
in the ordinary course of business under existing lines of credit, incur or
assume any material short-term debt; (ii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for any material obligations of any other Person; or (iii) make any
material loans, advances or capital contributions to, or investments in, any
other Person (other than customary loans or advances to employees in accordance
with past practices);
(e) enter into, adopt or (except as otherwise required by law
or existing contract disclosed in the Seller Disclosure Letter) materially amend
or terminate any Benefit Arrangement or (except for normal increases in the
ordinary course of business that are consistent with past practice) increase in
any manner the compensation or fringe benefits of any Company Employee or pay
any benefit not required by any existing Benefit Arrangement;
(f) acquire, sell, lease, transfer or dispose of any of its
properties or assets except in the ordinary course of business and consistent
with past practice or any of its properties or assets that are material,
individually or in the aggregate, to the business or operations of the Company
or any Company Subsidiary or enter into any material commitment or transaction
except in the ordinary course of business and consistent with past practice;
(g) modify any policy or procedure with respect to credit to
customers or collection of receivables;
(h) pay, discharge or satisfy before it is due any material
claim or liability of the Company or any Company Subsidiary, or fail to pay any
such item in a timely manner given the Company's or any Company Subsidiary's
prior practices;
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(i) cancel any material debts or waive any claims or rights of
substantial value;
(j) except to the extent required by applicable law or as is
customary in the ordinary course of business, change any accounting principle or
method or make any election for foreign, federal, state or local Income Tax
purposes;
(k) take or suffer any action that would result in the
creation, or consent to the imposition, of any Lien on any of the properties or
assets of the Company or any Company Subsidiary;
(l) make any capital expenditure or commitment for additions
to property, plant, equipment or other capital assets in excess of $30,000;
(m) except in the ordinary course of business consistent with
past practice, amend, waive, surrender or terminate or agree to the amendment,
waiver, surrender or termination of any Material Contract, Material Lease or
Approval;
(n) except in the ordinary course of business consistent with
past practice, exercise any right or option under any Lease or extend or renew
any Material Contract or Material Lease; or
(o) take, or agree in writing or otherwise to take or consent
to, any of the foregoing actions.
Section 6.2 Access to Information.
(a) Between the date of this Agreement and the Closing, during
normal business hours, Seller shall give Purchaser and its authorized
representatives reasonable access to all offices and other facilities and to all
books and records of Seller with respect to the Company and each Company
Subsidiary, and the Company will permit Purchaser to make such
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inspections as it may reasonably require and will cause its officers and those
of each Company Subsidiary to furnish Purchaser with such financial and
operating data and other information as Purchaser may from time to time
reasonably request. Purchaser and its authorized representatives will conduct
all such inspections in a manner which will minimize any disruptions of the
business and operations of the Company or any Company Subsidiary.
(b) Purchaser and Seller agree that the provisions of the
confidentiality agreement between Seller and Purchaser, dated August 27, 1998
(the "Confidentiality Agreement") shall remain binding and in full force and
effect until the Closing, that the information contained herein, in the Seller
Disclosure Letter and provided to Purchaser or its authorized representatives
pursuant hereto shall be subject to the Confidentiality Agreement as
"Information" (as defined therein) until the Closing and that, for that purpose
and to that extent, the terms of the Confidentiality Agreement are incorporated
herein by reference.
(c) Following the Closing, Purchaser shall cause the Company
and each Company Subsidiary to provide to Seller, in a timely manner and at the
Company's expense, such financial and other information as the Seller may
reasonably require in order to account properly for the financial results and
operations of the Company and each Company Subsidiary prior to the Closing.
(d) Following the Closing and for so long as Purchaser's
obligations under Section 6.17 are in effect, Purchaser shall give Seller and
its authorized representatives, during normal business hours, reasonable access
to all books and records of Seller with respect to the Company and each Company
Subsidiary, and the Company will permit Seller and its authorized
representatives to make such inspections as it may reasonably require and will
cause its officers and those of each Company Subsidiary to furnish Seller with
such financial and operating data and other information as Seller may from time
to time reasonably request, in each case in order to permit Seller to account
for any obligation it may owe to Purchaser, or Purchaser may owe to it, pursuant
hereto. Purchaser and its authorized representatives will conduct all such
inspections in a manner which will minimize any disruptions of the business and
operations of the Company or any Company Subsidiary.
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(e) Unless otherwise consented to in writing by Seller, at no
time after the Closing shall Purchaser cause or permit the Company or any
Company Subsidiary to destroy or otherwise dispose of any of its respective
books and records that (i) exist as of the Closing and (ii) are less than five
years old at the time of such destruction or disposition.
Section 6.3 Best Efforts. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its reasonable best efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
Section 6.4 Consents. Seller and Purchaser shall cooperate, and use
their respective best efforts, in as timely a manner as is reasonably
practicable, to make all filings with, and obtain all licenses, Permits,
consents, approvals, authorizations, qualifications and orders from, all
Governmental Entities and other Persons necessary or required to be obtained for
Purchaser and Seller, as applicable, to consummate the transactions contemplated
by this Agreement (collectively, the "Consents"). Each of the parties hereto
shall furnish to the other party such necessary information and reasonable
assistance as such other Persons may reasonably request in connection with the
foregoing and shall provide the other party with (i) copies of all filings made
by such party with any Governmental Entity or other Person or any other
information supplied by such party in connection with this Agreement and the
transactions contemplated hereby and (ii) all consents obtained from any third
party to any Contract or any Material Lease and any Approval with respect to any
Material Leased Real Property and the Owned Real Property.
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Section 6.5 HSR Filings.
(a) In addition to and without limiting the agreements of the
parties contained in Section 6.4, Seller and Purchaser shall (i) take promptly
all actions necessary to make the filings required of them or any of their
Affiliates under the HSR Act and seek early termination of the waiting period
thereunder, (ii) comply at the earliest practicable date with any request for
additional information or documentary material received by Seller or Purchaser,
as applicable, or any of their Affiliates from the FTC or DOJ pursuant to the
HSR Act, (iii) cooperate with each other in connection with any filing under the
HSR Act and in connection with resolving any investigation or other inquiry
concerning the transactions contemplated by this Agreement commenced by the FTC,
DOJ or any attorney general and (iv) use all reasonable commercial efforts to
resolve such objections, if any, as may be asserted under any Antitrust Law with
respect to the transactions contemplated by this Agreement.
(b) Each of Seller and Purchaser shall promptly inform the
other party of any material communication received by such party from the FTC,
DOJ or any other Governmental Entity regarding any of the transactions
contemplated hereby, and of any understandings, undertakings or agreements (oral
or written) that such party proposes to make or enter into with the FTC, DOJ or
any other Governmental Entity in connection with the transactions contemplated
hereby.
(c) Seller and Purchaser shall each pay one-half of the HSR filing fee
at the time of filing.
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Section 6.6 Public Announcements. Purchaser and Seller shall consult
with each other before issuing any press release or otherwise making any public
statements with respect to the transactions contemplated by this Agreement and
shall not issue any such press release or make any such public statement prior
to such consultation, except as may be required by applicable law.
Section 6.7 Employee Receivables and Payables. Seller shall ensure
that (a) any receivable due to the Company or any Company Subsidiary from any
employee of the Company will be paid in full on or before the Closing Date and
(b) any payable due from the Company or any Company Subsidiary to any employee
of the Company, excluding such payables as become payable in the ordinary course
of business, will be waived or paid on or before the Closing Date.
Section 6.8 Employee Benefits. Each employee of the Company or any
Company Subsidiary as of the Closing Date (an "Existing Employee") who continues
as an employee of the Company or a Company Subsidiary shall be entitled to
participate in all Purchaser Plans. For purposes of determining the level of
benefits to which an Existing Employee is entitled and the vesting of such
benefits, all years (or any portion thereof) of service of such Existing
Employee while in the employ of the Company or a Company Subsidiary shall be
counted.
Section 6.9 Notification of Certain Matters.
(a) Subject to Section 6.9(b), Seller shall give prompt notice
to Purchaser, and Purchaser shall give prompt notice to Seller, of (i) the
occurrence or nonoccurrence of any event the occurrence or nonoccurrence of
which would cause any representation or warranty contained in this Agreement
(including the Seller Disclosure Letter) to be untrue or inaccurate in any
material respect at the Closing and (ii) any material failure of the Seller or
Purchaser, as the case may be, to comply with or satisfy any covenant, warranty,
obligation, condition or agreement to be observed, complied with or satisfied by
it hereunder.
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(b) Seller may from time to time prior to or on the Closing
Date by notice in accordance with this Agreement supplement or amend the Seller
Disclosure Letter, including one or more supplements or amendments to correct
any matter that would otherwise constitute a breach of any representation,
warranty or covenant contained herein. If a supplement or amendment of any
section of the Seller Disclosure Letter materially and adversely affects the
benefits to be obtained by Purchaser under this Agreement, then Purchaser shall
have the right to terminate this Agreement with such termination being
Purchaser's sole remedy relating to matters set forth in amendments to
supplements to any section of the Seller Disclosure Letter. Notwithstanding any
other provision hereof, the Seller Disclosure Letter and the representations and
warranties made by the Seller shall be deemed to include and reflect such
supplements and amendments as of the date hereof and as of the Closing Date.
Section 6.10 Tax Matters.
(a) With respect to the Company and the Company Subsidiaries,
Seller and Purchaser shall jointly make the election provided for by Section
338(h)(10) of the Code and Section 1.338(h)(10)-1 of the Treasury Regulations
and any comparable election under state or local tax law (the "Election"). As
soon as practicable after the Closing, with respect to such Election, Seller and
Purchaser shall mutually prepare a Form 8023-A, with all attachments, and Seller
and Purchaser shall sign such Form 8023-A. Purchaser and Seller 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 timely the Election in accordance with the
provisions of Section 1.338(h)(10)-1 of the Treasury Regulations (or any
comparable provisions of state or local tax law) or any successor provisions).
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(b) With respect to the Election, Purchaser and Seller shall
agree upon the modified Aggregate Deemed Sales Price (the "modified ADSP") and
allocate the modified ADSP among the assets of the Company pursuant to Treasury
Regulation 1.338(h)(10)-1. Purchaser shall provide to Seller a schedule and
supporting material reflecting such allocation. The parties shall take no action
inconsistent with, or fail to take any action necessary for the validity of, the
Election, and shall adopt and utilize the asset values determined from such
allocation for the purpose of all Tax Returns filed by them, and shall not
voluntarily take any position inconsistent therewith upon examination of any
Return, in any refund claim, in any litigation or otherwise with respect to such
Returns.
(c) Seller and Purchaser shall and shall cause their
respective Affiliates to provide the requesting party with such assistance and
documents as may be reasonably requested by such party in connection with (i)
the preparation of any Tax Returns of the Company, (ii) the conduct of any Tax
Audit relating to liability for or refunds or adjustments with respect to Taxes,
and (iii) any other Tax-related matter that is a subject of this Agreement.
(d) (i) For purposes of this Agreement, (x) the amount of
Taxes attributable to the pre-closing portion of a Straddle Period shall be
determined based on an interim closing of the books as of the close of the
Closing Date, except that the amount of any such Taxes that are imposed on a
periodic basis shall be determined by reference to the relative number of days
in the pre-closing and post-closing portions of such Straddle Period and (y) the
taxable year of any partnership or other pass-through entity in which the
Company is partner or other beneficial interest holder shall be deemed to
terminate on the Closing Date.
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(ii) Purchaser shall cause the Company to join, for
all Pre-Closing Periods for which the Company is required or eligible to do so,
in all consolidated, combined or unitary federal, state or local Income Tax or
franchise Tax Returns of Seller (or any Tax Affiliate) for all Pre-Closing
Periods, and shall, in each jurisdiction where this is required or permissible
under applicable law, cause the taxable year of the Company to terminate as of
the close of the Closing Date. Seller shall cause to be prepared and timely
filed all Tax Returns relating to Pre-Closing Periods ("Seller Tax Returns") and
shall cause to be timely paid all Taxes shown to be due on such Seller Tax
Returns.
(iii) Purchaser shall cause to be prepared and timely
filed all Income Tax Returns of the Company other than those referred to in
Sections 6.10(d)(ii) and all other Tax Returns of the Company required to be
filed for the Straddle Period.
(iv) The Tax Returns referred to in Section
6.10(d)(ii) and (iii) shall be prepared in a manner consistent with past
practice, unless a contrary treatment is required by an intervening change in
applicable law. Purchaser shall cause each such Tax Return that covers any
Straddle Period, together with all relevant work papers and other information,
to be made available to Seller for its review and approval no later than 30 days
prior to the due date for the filing of such Tax Return (taking into account
proper extensions).
(e) (i) Without duplication, Seller shall indemnify, defend
and hold the Purchaser Indemnified Persons harmless from and against any and all
Damages that may be suffered or incurred by them in respect of or relating to,
directly or indirectly (i) Taxes of or attributable to the Company with respect
to all Pre-Closing Periods, (ii) Taxes of or attributable to the Company with
respect to the pre-closing portion of any Straddle Period, (iii) Taxes payable
by the Company with respect to any Pre-Closing Period or Straddle Period by
reason of the Company being severally liable for the Tax of any Tax Affiliate
pursuant to
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Treasury Regulation Section 1.1502-6 or any analogous state or local Tax law,
and (iv) any liability for Taxes attributed to breaches by Seller with respect
to its obligations under Sections 6.10(a) and 6.10(b); provided, however, that
payment pursuant to this Section 6.10(e)(i) shall be made by Seller only if, and
to the extent that, any Damages attributable to such Taxes exceed (x) the total
aggregate amount of Taxes accrued on the Closing Date Balance Sheet less (y) any
amounts paid to Seller pursuant to Section 6.10(d) (ii) of this Agreement; and
provided, further, that Damages shall not include, and the Purchaser shall not
be entitled to indemnification with respect to, any amounts paid to Seller
pursuant to Section 6.10(d)(ii) of this Agreement.
(ii) Without duplication, Purchaser shall indemnify,
defend and hold the Seller Indemnified Persons harmless from and against any and
all Damages that may be suffered or incurred by them in respect of or relating
to, directly or indirectly (i) Taxes of or attributable to the Company with
respect to all Post-Closing Periods, (ii) Taxes of or attributable to the
Company with respect to the post-Closing portion of any Straddle Period, and
(iii) any liability for Taxes attributable to breach by Purchaser with respect
to its obligations under Section 6.10(a) and 6.10(b).
(iii) Any payment required to be made pursuant to
this Section 6.10(e) shall be made within 15 Business Days after written request
therefor.
(f) (i) Each of Seller and Purchaser shall notify the other
party in writing within 30 days of receipt of written notice of any pending or
threatened examination, audit or other administrative or judicial proceeding (a
"Tax Audit") that could reasonably be expected to affect the liability for Taxes
of such other party pursuant to this Agreement. If the recipient of such notice
of a Tax Audit fails to provide such prompt notice to the other party, it shall
not be entitled to indemnification for any Taxes arising in connection with such
Tax Audit.
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(ii) If a Tax Audit relates to any period ending on or prior
to the Closing Date or for any Taxes for which the Seller is liable in full
hereunder, Seller shall at its expense control the defense and settlement of
such Tax Audit. If such Tax Audit relates to any period beginning after the
Closing Date or for any Taxes for which Purchaser is liable in full hereunder,
Purchaser shall at its expense control the defense and settlement of such Tax
Audit. The party not in control of the defense shall have the right to observe
the conduct of any Tax Audit at its own expense, including through its own
counsel and other professional experts. Purchaser and Seller shall jointly
represent the Company in any Tax Audit relating to a Straddle Period, and fees
and expenses related to such representation shall be paid by Purchaser and
Seller in proportion to each party's liability for such Taxes as determined
pursuant to this Agreement.
(g) In the event that a dispute arises between Seller and
Purchaser as to the amount of Taxes or indemnification or any other matter
relating to Taxes, the parties shall attempt in good faith to resolve such
dispute, and any agreed upon amount shall be paid to the appropriate party. If
such dispute is not resolved within 15 days, the parties shall submit the
dispute to the national office of the Designated Accounting Firm for resolution,
which resolution shall be final, conclusive and binding on the parties hereto.
Notwithstanding anything in this Agreement to the contrary, the fees and
expenses of the Settlement Accountants in resolving the dispute shall be borne
equally by Seller and the Buyer, other than fees and expenses relating to a
dispute as to the amount of the Taxes owed by either of the Parties with respect
to the Straddle Period Tax Return, in which case such fees and expenses shall be
paid by Seller and Purchaser in proportion to each party's respective liability
for Taxes as determined by the Settlement Accountants. Following the decision of
the Settlement Accountants, the parties shall each take or cause to be taken any
action that is necessary or appropriate to implement such decision of the
Settlement Accountants, including the prompt payment of underpayments or
overpayments, with interest calculated on such underpayments or overpayments at
the rate specified under Section 6621(a)(2) of the Code from the date that such
payment was due through the date such underpayment or overpayment is due or
refunded.
(h) Any Tax sharing agreement or contract between the Company
and any other Person shall be terminated on, and effective as of, the Closing
Date, and no Person shall have any rights or obligations under such Tax sharing
agreement or contract after such termination, and no such rights or obligations
shall be included in the Closing Date Balance Sheet.
(i) Purchaser shall be responsible for any and all sales or
use Taxes, real or personal property transfer Taxes, recording fees and charges
and all other similar charges and transfer Taxes imposed by any taxing authority
upon or by reason of the transactions to be effected pursuant to this Agreement.
(j) Any refunds or credits of Taxes of the Company plus any
interest received with respect thereto from the applicable taxing authorities
for any Pre-Closing Period (including refunds or credits arising from amended
returns filed after the Closing Date) shall be for the account of Seller and
shall be paid by Purchaser to Seller within 10 days after Purchaser receives
such refund or after the relevant Tax Return is filed in which the credit is
applied against Purchaser or the Company's liability for Taxes. Any refunds or
credits of Taxes of the Company for any Straddle Period shall be apportioned
between Seller and Purchaser in the same manner as the liability for such Taxes
is apportioned pursuant to Section 6.10(d)(i).
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(k) Notwithstanding anything to the contrary in this
Agreement, the covenants of the parties contained in this Section 6.10 shall
survive the Closing until the date 90 days after the expiration of any
applicable statute of limitations, including extensions.
Section 6.11 Seller Non-Competition and Non-Solicitation Covenants .
Seller agrees that, for a period of three years following the Closing, Seller
shall not, and Seller shall cause its Corporate Affiliates (it being understood
that for the purposes of this Section only that JLC shall be deemed to be the
ultimate parent of Seller) not to, directly or indirectly, (a) engage or
participate (other than for existing arrangements) as an owner, partner,
shareholder, joint venturer or in any other capacity calling for the making of
any investment or the rendering of any services or any acts of management,
operation or control in any business in the United States that is the same as,
similar to or competitive with the Business as it has been or is being conducted
as of the date hereof or (b) materially alter the Company's or any Company
Subsidiary's relationship with, take away or employ (or attempt to materially
alter the Company's or any Company Subsidiary's relationship with, solicit,
divert, take away or employ) any of the customers, business or employees
(excluding Mitsumasa Sakka and Ario Sato) of the Company or any Company
Subsidiary; provided, however, that during such three-year period neither Seller
nor any Corporate Affiliate of Seller shall employ Mitsumasa Sakka or Ario Sato
in the United States except with the Company's consent or pursuant to a
consulting agreement with the Company. Notwithstanding anything contained in the
foregoing sentence, nothing in this Section 6.11 shall, during such three-year
period or otherwise, prevent or otherwise limit (a) Seller or any Corporate
Affiliate of Seller from continuing to engage in cross-border leasing
transactions into the United States where such transactions involve one or more
items of equipment and each such item of equipment has a cost of $2,500,000 or
more, (b) Seller or any Corporate Affiliate of Seller from employing [outside
the United States] any former employee of the Company or any Company Subsidiary
whose employment has been terminated by the Company or such Company Subsidiary
without cause, or (c) any Person (including any of such Person's Affiliates)
that may, following the date hereof, control JLC from engaging in any of the
prohibited activities described herein.
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Section 6.12 Payment of Company Debt; Release of Guaranties.
(a) Purchaser agrees that prior to or at the Closing, it shall
(i) pay, or cause to be paid, to the Persons, including Affiliates of the
Company other than Seller, (collectively, the "Company Lenders") listed in
Section 6.12 of the Seller Disclosure Letter the amount necessary to discharge
and terminate the debt obligations of the Company to the Company Lenders and
(ii) shall secure, or cause to be secured, the release by the Company Lenders of
the guaranties and letters of awareness listed in Section 6.12 of the Seller
Disclosure Letter. Not less than five Business Days prior to the Closing Date,
Seller shall deliver, or cause to be delivered, to Purchaser copies of payoff
letters and waivers of payment of any interest at default rates, late payment
fees and Company Lender expenses from each of the Company Lenders.
(b) Purchaser agrees that, at the Closing, Purchaser shall
execute and deliver to Seller a promissory note in substantially the form of
Exhibit 6.12(b) (the "Promissory Note") in a principal amount equal to (i) the
amount necessary to discharge and terminate all outstanding indebtedness of the
Company or any Company Subsidiary to Seller as of the Closing, including
$3,500,000 in respect of federal and state income Tax liabilities of the Company
payable to Seller, less (ii) an amount equal to the book value of the
Securitized 90+ Contracts on a net investment basis as of the date that is two
Business Days prior to the Closing Date. Each of the parties hereto acknowledges
that, in determining the principal amount of the Promissory Note pursuant to
this Section 6.12(b), (i) the amount of $3,500,000 set forth in the foregoing
sentence shall account for the entire indebtedness of the Company to Seller in
respect of federal and state income Tax liabilities as of the Closing (it being
understood that such amount is in lieu of the actual net of (A) aggregate
federal and state income Tax benefits of the Company and (B) aggregate federal
and state income Tax liabilities of the Company, which aggregate benefits and
liabilities netted $3,774,326 at October 31, 1998, as disclosed in the October
Financial Statements) and (ii) the outstanding indebtedness of the Company and
the Company Subsidiaries to Seller as of the Closing will be reduced by the sum,
as set forth on Schedule A of the Assignment, of the book values (on a net
investment basis) of the Financing Contracts set forth on Schedule A of the
Assignment. In connection with the foregoing, each of the parties hereto further
acknowledges that no amounts received by the Company following the date hereof
in respect of any income Tax refund from the State of California shall be deemed
an indebtedness of the Company or any Company Subsidiary to Seller and,
accordingly, shall not be payable to Seller pursuant hereto. For purposes of
determining the principal amount of the Promissory Note pursuant to this Section
6.12(b), not less than one Business Day prior to the Closing Date, Seller shall
deliver, or cause to be delivered, to Purchaser (i) a statement of all
outstanding indebtedness of the Company or any Company Subsidiary to Seller as
of the Closing (without giving effect to any of the transactions contemplated
hereby to occur on the Closing Date), (ii) Schedule A to the Assignment,
including a statement of the book value (on a net investment basis) of each
Financing Contract set forth thereon as of the date that is two Business Days
prior to the Closing Date, and (iii) a separate schedule setting forth a list of
the Securitized 90+ Contracts, including a statement of the book value (on a net
investment basis) of each such contract as of the date that is two Business Days
prior to the Closing Date.
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Section 6.13 Powers of Attorney; Accounts. Seller shall cause to be
prepared and provided to Purchaser at least seven Business Days prior to the
Closing Date a schedule setting forth a list of the names and addresses of all
persons holding a power-of-attorney on behalf of the Company or any Company
Subsidiary, the names and addresses of all banks or other financial institutions
at which the Company or any Company Subsidiary has any account, deposit, lockbox
or safe-deposit box, with the names of all persons authorized to draw on such
accounts or deposits or to have access to such boxes and the account or other
box numbers thereof. Seller shall, on or before the Closing Date, take all
actions reasonably necessary to remove those persons who are signatories or
holders of powers-of-attorney in respect of any such accounts, deposits,
lockboxes or safe-deposit boxes (except such as shall be specified in writing by
Purchaser) and otherwise to extinguish their signing authority or access with
respect thereto. To the extent requested in writing by Purchaser at least five
Business Days prior to the Closing Date, Seller shall, on or before the Closing
Date, (i) terminate any and all arrangements pursuant to which the Company's and
the Company Subsidiaries' funds or receipts are swept into or otherwise
transferred into any bank account or other deposit account maintained by or
under the control of Seller or any of its affiliates, (ii) use its reasonable
best efforts to transfer and close any deposit accounts relating to lockboxes
maintained by the Company or any Company Subsidiary and (iii) take all actions
necessary to terminate any other powers-of-attorney made by the Company and any
Company Subsidiary in favor of any person.
Section 6.14 Inquiries and Negotiations.
(a) Notwithstanding anything to the contrary set forth in this
Agreement, prior to receipt from Purchaser of a copy of the Commitment Letter,
Seller shall be entitled to (i) continue existing, and solicit and initiate new,
activities, discussions and negotiations with
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any Person in respect of the acquisition of all or any substantial part of the
business and properties of the Company and the Company Subsidiaries, whether by
sale of assets or the Shares, or by merger, consolidation, recapitalization,
liquidation or similar transaction (each, an "Acquisition Transaction") and (ii)
accept an offer for an Acquisition Transaction and enter into a definitive
agreement in respect thereof. Notwithstanding anything to the contrary set forth
in this Agreement, prior to receipt from Purchaser of a copy of the Commitment
Letter, (i) Seller, and Seller's officers, employees, representatives and
agents, shall be permitted, directly and indirectly, to (A) solicit and initiate
discussions and negotiations with, and provide any non-public information to,
any Person concerning an Acquisition Transaction, and (B) otherwise solicit,
initiate and encourage inquiries and the submission of any proposal
contemplating an Acquisition Transaction and (ii) Seller shall be under no
obligation to communicate to Purchaser the terms of any inquiry or proposal that
it may receive in respect of an Acquisition Transaction. The parties hereto
hereby acknowledge that (i) at any time prior to Seller's receipt from Purchaser
of a copy of the Commitment Letter, Seller shall be entitled to terminate this
Agreement by paying to Purchaser Two Million Dollars as liquidated damages and
(ii) upon the making of such liquidated damages payment, this Agreement shall be
deemed automatically terminated, null and void and without further force or
effect..
(b) Upon receipt from Purchaser of a copy of the Commitment
Letter, Seller shall immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any Person conducted theretofore in
respect of any and all Acquisition Transactions. Following receipt from
Purchaser of a copy of the Commitment Letter, Seller shall not, and shall not
permit its officers, employees, representatives or agents to, directly or
indirectly, (i) solicit or initiate discussions or negotiations with, or provide
any non-public
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information to, any Person other than Purchaser or its Affiliates concerning an
Acquisition Transaction, or (ii) otherwise solicit, initiate or encourage
inquiries or the submission of any proposal contemplating an Acquisition
Transaction. Following receipt from Purchaser of a copy of the Commitment
Letter, Seller shall promptly communicate to Purchaser the terms of any inquiry
or proposal that it may receive in respect of an Acquisition Transaction, or has
received or solicited, directly or indirectly, after the date of such receipt.
Seller's notification under this Section 6.14(b) shall include the identity of
the Person making such proposal or any other such information with respect
thereto as Purchaser may reasonably request. Nothing contained in this Agreement
shall be construed to prohibit Seller, following receipt from Purchaser of a
copy of the Commitment Letter, from (i) if advised in writing by counsel to be
required by fiduciary obligations under applicable law, providing non-public
information to, and participating in negotiations with, a Person who has made a
bona fide offer to effect an Acquisition Transaction for a purchase price in
excess of the Purchase Price and payment of all amounts required by Section 6.12
and (ii) accepting an offer for an Acquisition Transaction which the Board of
Directors of Seller, on the advice in writing of its financial advisor, believes
is more favorable to the Seller than the transaction contemplated hereby. If an
offer for an Acquisition Transaction is accepted pursuant to clause (ii) of the
immediately preceding sentence, Seller shall immediately upon acceptance of such
offer pay to Purchaser Four Million Dollars as liquidated damages. The parties
hereto hereby acknowledge that, upon the making of such liquidated damages
payment, this Agreement shall be deemed automatically terminated, null and void
and without further force or effect. THE PARTIES HEREBY ACKNOWLEDGE THAT THE
EXTENT OF DAMAGES TO PURCHASER OCCASIONED BY THE FAILURE OF THIS TRANSACTION TO
BE CONSUMMATED FOLLOWING DELIVERY OF A COPY OF THE COMMITMENT LETTER BY
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PURCHASER TO SELLER WOULD BE IMPOSSIBLE OR EXTREMELY DIFFICULT TO ASCERTAIN AND
THAT FOUR MILLION DOLLARS IS A FAIR AND REASONABLE ESTIMATE OF SUCH DAMAGES
UNDER THE CIRCUMSTANCES AND DOES NOT CONSTITUTE A PENALTY.
Section 6.15 Delivery of November Financial Statements and December
Financial Statements . Seller hereby agrees to deliver to Purchaser promptly
upon completion, and in any event not later than December 15, 1998 and January
15, 1999, respectively, copies of the November Financial Statements and the
December Financial Statements.
Section 6.16 Employee Bonuses.
(a) Seller agrees to pay to the Company at the Closing (i) all
amounts (the "Change-in-Control Amounts") required to be placed into escrow
pursuant to Section 6 of the Employment Agreements in view of the Change in
Control to be constituted by the consummation of the transactions contemplated
by this Agreement and (ii) an amount equal to the sum of the escrow agent fees
expressly set forth in Paragraph 18 of each of the Employee Escrow Agreements.
In addition, at the Closing, Seller shall cause the Company to (i) execute and
deliver each of the Employee Escrow Agreements and (ii) deposit into escrow in
accordance with the terms of each such agreement the applicable
Change-in-Control Amount. Following the Closing, Seller shall reimburse the
Company, promptly following receipt of copies of invoices of the Escrow Agent
(as defined in the Employee Escrow Agreements) reasonably satisfactory to
Seller, for all reasonable out-of-pocket expenses incurred by the Escrow Agent
in performing its duties under the Employee Escrow Agreements. Any amounts in
respect of such out-of-pocket expenses incurred by the Escrow Agent not paid by
Seller within ten days following receipt of such invoices shall be paid by the
Purchaser and shall be deducted from the principal amount payable under the
Promissory Note.
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(b) Following the Closing, Purchaser shall cause the Company
to honor the terms of each of the Employment Agreements.
(c) Seller agrees to pay when due any "retention" bonuses that
may become due to any Existing Employees resulting from any agreement or promise
existing prior to the Closing. Any amounts due but not paid by Seller within ten
days following the applicable due date shall be paid by Purchaser and shall be
deducted from the principal amount payable under the Promissory Note.
Section 6.17 Collection of Certain Receivables and Partial Remittance.
(a) Following the Closing, Purchaser shall cause the Company
(i) to use its reasonable best efforts consistent with its own practices at that
time to recover all amounts due under the Financing Contracts transferred to
Seller pursuant to the Assignment and (ii) to remit to Seller, within 15 days
following the end of each calendar quarter to an account to be designated by
Seller, 85% of all payments received under or arising out of such Financing
Contracts during the immediately preceding calendar quarter, whether as
contractual obligations, damages, insurance proceeds, condemnation awards or
otherwise.
(b) Following the Closing, Purchaser shall cause the Company
and the Company Subsidiaries (i) to use their reasonable best efforts consistent
with their own practices at that time to recover all amounts due under the
Securitized 90+ Contracts and (ii) to remit to Seller, within 15 days following
the end of each calendar quarter to an account to be designated by Seller, 85%
of all payments received under or arising out of the Securitized 90+ Contracts
during the immediately preceding calendar quarter, whether as contractual
obligations, damages, insurance proceeds, condemnation awards or otherwise.
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(c) Seller agrees to pay the reasonable costs and expenses of
the Company in carrying out the collection activities provided for in Sections
6.17(a) and 6.17(b).
Section 6.18 Assignment. Immediately prior to the Closing, Seller
shall (a) cause the Company to execute and deliver the Assignment to Seller and
(b) on behalf of itself, execute and deliver the Assignment to the Company.
Section 6.19 Commitment Letter; Certain Termination Rights.
(a) Purchaser agrees to use its reasonable best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable to have sufficient funds available, in
cash and pursuant to a firm commitment letter to be issued by First Union
Capital Markets, Inc. (the "Commitment Letter"), to purchase all the Shares for
the Purchase Price, to pay all amounts required pursuant to Section 6.12, and to
perform all of its obligations hereunder. Purchaser agrees to use its reasonable
best efforts to obtain the Commitment Letter, and to cause a copy thereof to be
delivered to Seller, on or before December 31, 1998 (the "Commitment Letter Due
Date").
(b) If Purchaser fails to obtain the Commitment Letter on or
before the Commitment Letter Due Date, Purchaser shall thereafter have the right
to terminate this Agreement at any time on or before the date (the "Section
6.19(b) Last Termination Date") that is two Business Days following the
Commitment Letter Due Date.
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(c) If Purchaser fails to deliver the Commitment Letter to
Seller on or before the Commitment Letter Due Date and elects not to terminate
this Agreement pursuant to Section 6.19(b) on or before the Section 6.19(b) Last
Termination Date, Seller shall thereafter have the right to terminate this
Agreement at any time on or before the date that is two Business Days following
the Section 6.19(b) Last Termination Date.
ARTICLE VII
CONDITIONS
Section 7.1 Conditions to Seller's Obligations. The obligations of
Seller to consummate the transactions contemplated hereby are subject to the
satisfaction or waiver by Seller, at or prior to the Closing, of the following
conditions:
(a) The representations and warranties of Purchaser contained
in this Agreement will be true and correct in all respects (without reference to
any materiality qualifications contained therein) as of the date made and as of
the Closing Date as if made on and as of the Closing Date (except to the extent
that any representation or warranty is made expressly as of a specific date, in
which case such representation or warranty will be true and correct as of such
specified date) unless the failure of such representations of warranties to be
true and correct as of any of such dates would not in the aggregate have a
Purchaser Material Adverse Effect;
(b) Purchaser will have performed in all material respects its
obligations under this Agreement required to be performed by it at or prior to
the Closing pursuant to the terms hereof, including without limitation, payment
of the amounts necessary under Section 6.12 hereof;
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(c) Seller will have received a certificate of the President
or the Chief Financial Officer of Purchaser as to the satisfaction of the
conditions set forth in Section 7.1(a) and (b);
(d) Any waiting period applicable to the consummation of the
transactions contemplated hereby under the HSR Act will have expired or been
terminated;
(e) There will be no order, decree or injunction of a court of
competent jurisdiction or other governmental entity that prevents the
consummation of the transactions contemplated by this Agreement;
(f) Seller will have received Purchaser's Closing Documents in
form and substance reasonably satisfactory to Seller and its counsel;
(g) Seller will have received the Consents set forth in
Exhibit 7.1(g);
(h) The Escrow Agreement will have been executed and delivered
by Purchaser to Seller;
(i) Each of the Promissory Note and the Security Agreement
will have been executed and delivered by Purchaser to Seller; and
(j) The Assignment will have been executed and delivered by
Seller and the Company.
Section 7.2 Conditions to Purchaser's Obligations. The obligations of
Purchaser to consummate the transactions contemplated hereby are subject to the
satisfaction or waiver by Purchaser, at or prior to the Closing, of the
following conditions:
(a) The representations and warranties of Seller contained in
this Agreement will be true and correct in all respects (without reference to
any materiality qualifications contained therein) as of the date made and as of
the Closing Date as if made on and as of the Closing Date (except to the extent
that any representation or warranty is made expressly
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as of a specific date, in which case such representation or warranty will be
true and correct as of such specified date) unless the failure of such
representations of warranties to be true and correct as of any of such dates
would not in the aggregate reasonably be likely to have a Company Material
Adverse Effect;
(b) Seller will have performed in all material respects each
of its obligations under this Agreement required to be performed by it at or
prior to the Closing pursuant to the terms hereof;
(c) Purchaser will have received a certificate of the
President of Seller as to the satisfaction of the conditions set forth in
section 7.2(a), (b), and (g);
(d) Any waiting period applicable to the consummation of the
transactions contemplated hereby under the HSR Act will have expired or been
terminated;
(e) There will be no order, decree or injunction of a court of
competent jurisdiction or other governmental entity that prevents the
consummation of the transactions contemplated by this Agreement;
(f) Purchaser will have received Seller's Closing Documents in
form and substance reasonably satisfactory to Purchaser and its counsel;
(g) No Company Material Adverse Effect will have occurred
since the date hereof;
(h) Purchaser will have received the Consents set forth in
Exhibit 7.1(g);
(i) The Escrow Agreement will have been executed and delivered
by Seller to Purchaser;
(j) Purchaser will have received an opinion of Counsel from
Skadden, Arps, Slate, Meagher & Flom LLP, dated as of the Closing Date, in
substantially the form attached as Exhibit 7.2(j);
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(k) Except as otherwise requested by Purchaser, Purchaser
shall have received the written resignation, effective as of the Closing Date,
of each of the directors and officers of the Company and the Company
Subsidiaries;
(l) Purchaser will have received the November Financial
Statements and the December Financial Statements pursuant to Section 6.15;
(m) The Company will have deposited the Change-in-Control
Amounts into escrow in accordance with the Employee Escrow Agreements;
(n) Seller will have paid to the Company in cash amounts
sufficient to pay, to the extent waivers have not been received in respect
thereof, excess interest accrued at default rates, late payment fees and Company
Lender expenses, if any, due on the indebtedness of the Company to the Company
Lenders outstanding as of the Closing Date;
(o) The Assignment will have been executed and delivered by
Seller and the Company; and
(p) Purchaser will have received a certificate of an officer
of Seller in substantially the form of Exhibit 7.2(p).
ARTICLE VIII
DOCUMENTS TO BE DELIVERED AT THE CLOSING
Section 8.1 Documents to Be Delivered by Seller. At the Closing,
Seller shall deliver, or cause to be delivered, to Purchaser the following
("Seller's Closing Documents"):
(a) stock certificates representing the Shares, duly endorsed
in blank or accompanied by stock transfer powers and with all requisite stock
transfer tax stamps attached;
(b) the certificate referred to in Section 7.2(c);
(c) the Escrow Agreement; and
(d) the Security Agreement.
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Section 8.2 Documents to Be Delivered by Purchaser . At the Closing,
Purchaser shall deliver to Seller the following ("Purchaser's Closing
Documents"):
(a) evidence of payment of the Purchase Price in accordance
with Section 2.2;
(b) the certificate referred to in Section 7.1(c);
(c) the Escrow Agreement;
(d) the Promissory Note; and
(e) the Security Agreement.
ARTICLE IX
TERMINATION
Section 9.1 Termination. Notwithstanding anything herein to the
contrary, this Agreement may be terminated at any time prior to the Closing:
(a) by mutual written consent of Purchaser and Seller;
(b) by Purchaser, on the one hand, or Seller, on the other
hand, if the Closing will not have occurred on or before February 28, 1999.
(c) by Purchaser, on the one hand, or Seller, on the other
hand, if any court of competent jurisdiction or other Governmental Entity will
have issued an order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the transactions contemplated hereby and such
order, decree, ruling or other action will have become final and nonappealable;
(d) by Purchaser, if (i) there has been a violation or breach
by Seller of any agreement, representation, warranty or covenant of Seller
contained in this Agreement (including the Seller Disclosure Letter), which
violation or breach would have a Company Material Adverse Effect and which
violation or breach is not curable or, if curable, is not cured within 30 days
after written notice of such violation or breach is given by Purchaser or Seller
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and such violation or breach has not been waived by
Purchaser or (ii) there has been any Company Material
Adverse Effect;
(e) by Seller, if there has been a violation or breach by
Purchaser of any agreement, representation, warranty or covenant of Purchaser
contained in this Agreement, which violation or breach would have a Purchaser
Material Adverse Effect and which violation or breach is not curable or, if
curable, is not cured within 30 days after written notice of such violation or
breach is given by Seller to Purchaser, and such violation or breach has not
been waived by Seller;
(f) by Purchaser pursuant to Section 6.9(b);
(g) by Seller by paying the liquidated damages payment
provided for in Section 6.14(a);
(h) by Seller by paying the liquidated damages payment
provided for in Section 6.14(b);
(i) by Purchaser pursuant to Section 6.19 (b); or
(j) by Seller pursuant to Section 6.19(c).
Section 9.2 Effect of Termination. In the event of the termination of
this Agreement as provided in Section 9.1, written notice thereof shall
forthwith be given to the other party or parties specifying the Section of this
Agreement pursuant to which such termination is made, and upon any such
permitted termination this Agreement shall forthwith terminate and become null
and void, without liability on the part of Purchaser or Seller except (a) as set
forth in Sections 6.2(b) and 11.1, which provisions shall not be affected by
such termination, and (b) as set forth in Section 6.14(b). Nothing contained in
this Section 9.2 shall relieve any party from liability for any material and
willful breach of this Agreement prior to such termination; provided, however,
that (a) Seller shall have no liability (except with respect to the liquidated
damages payment provided for in Section 6.14(a) or Section 6.14(b), as the case
may be) for any such breach that does not result in a Company Material Adverse
Effect and (b) Purchaser shall have no liability for any such breach that does
not result in a Purchaser Material Adverse Effect.
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ARTICLE X
SURVIVAL OF OBLIGATIONS; INDEMNIFICATION; REMEDIES
Section 10.1 Indemnification by Seller.
(a) Except as otherwise set forth herein, Seller shall
indemnify, defend and hold harmless Purchaser and the Company, and each of their
respective representatives, employees, officers, directors, stockholders,
controlling persons and Affiliates (collectively, the "Purchaser Indemnified
Persons"), for, and shall pay to the Purchaser Indemnified Persons the amount
of, any loss, liability, claim, damage (including incidental and consequential
damages), expense (including interest, penalties, costs of investigation and
defense and the reasonable fees and expenses of attorneys and other
professionals and experts) or diminution of value, whether or not involving a
third-party claim (collectively, "Damages"), directly or indirectly, arising
from or in connection with (i) any breach by Seller of any covenant,
representation, warranty, agreement or obligation of Seller contained in this
Agreement, (ii) any contingent liabilities disclosed by Seller to Purchaser
pursuant to Section 6.9 after the date hereof that do not materially or
adversely affect the benefits to be obtained by Purchaser under this Agreement,
(iii) any claim by any Person that the transactions contemplated by this
Agreement may be a fraudulent transfer, or (iv) any claims in respect of
Change-in-Control Amounts arising out of Section 6 of the Employment Agreements.
(b) Without duplication and subject to the terms and
limitations set forth in this Section 10.1(b), Seller shall indemnify, defend
and hold harmless the Company for,
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and shall pay to the Company or any Company Subsidiary the amount of any Damages
actually incurred by the Company or such Company Subsidiary following the
Closing relating to any amounts actually paid by the Company to Barclays Bank
PLC ("Barclays") on or before January 31, 1999 in respect of a"swap breakage
amount" (such amounts, the "Special Contingent Liability").
Section 10.2 Indemnification by Parent and Purchaser. Parent and
Purchaser shall, jointly and severally, indemnify, defend and hold harmless
Seller, the Company and each Company Subsidiary, and each of their respective
representatives, employees, officers, directors, stockholders, controlling
persons and Affiliates (collectively, the "Seller Indemnified Persons"), for,
and shall pay to the Seller Indemnified Persons the amount of any Damages,
directly or indirectly, arising from, attributable to or in connection with any
breach by Purchaser of any covenant, representation, warranty, agreement or
obligation of Purchaser contained in this Agreement; provided, however, that the
representations and warranties of Purchaser set forth in Section 5.1 shall not
survive the Closing.
Section 10.3 Certain Other Indemnity Matters. Notwithstanding anything
to the contrary contained in this Agreement, if the Closing occurs, (i) no claim
for indemnification may be asserted by a Purchaser Indemnified Person against
Seller under this Article X if any fact, event or circumstance giving rise to
such claim was discovered by or known to Purchaser on or before the Closing
Date, and not known to Seller, the Company or any Company Subsidiary, and (ii)
no claim for indemnification may be asserted by any Purchaser Indemnified Person
with respect to any breach by Seller of any representation or warranty set forth
in this Agreement or in the Seller Disclosure Letter if such breach or
information regarding such breach will have been disclosed in writing at or
prior to the Closing; provided, however, that nothing in this Section 10.3 shall
limit or otherwise affect Purchaser's right to be indemnified by Seller with
respect to the Special Contingent Liability in accordance with the terms of
Section 10.1(b). For purposes of this Section, "known to Purchaser" shall mean
all matters actually known by any of Daniel Cohen, Abraham Bernstein, Freddie
Kotek, Crit DeMent, David English or Michael Riesenbach.
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Section 10.4 Time Limitations.
(a) If the Closing occurs, Seller shall have no liability
under Section 10.1(a), other than with respect to the representations and
warranties in Sections 4.2, 4.9 and 4.14 as provided below, unless on or before
the date that is 14 months following the Closing Date, Purchaser notifies Seller
of a claim specifying the factual basis of that claim in reasonable detail to
the extent then known by Purchaser. A claim with respect to representations and
warranties in Section 4.2 may be made at any time without any time limitation. A
claim with respect to the representations and warranties in Section 4.9 may be
made at any time prior to the third anniversary of the Closing Date. A claim
with respect to the representations and warranties in Section 4.14 may be made
within the time limits set forth in Section 6.10(k).
(b) If the Closing occurs, neither Parent nor Purchaser shall
have any liability under Section 10.2 unless on or before the date that is 14
months following the Closing Date, Seller notifies Purchaser of a claim
specifying the factual basis of that claim in reasonable detail to the extent
then known by Seller.
Section 10.5 Limitations on Amount.
(a) Seller shall have no liability (for indemnification or
otherwise) with respect to the matters described in Section 10.1(a), other than
those representations and warranties in Sections 4.9, 4.14 and 4.17, until the
total of all Damages with respect to such matters exceeds $500,000, and then
Seller shall be responsible to the extent and by the
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amount that the aggregate amount of all Damages incurred as a result of such
breaches exceeds $500,000; provided, however, Seller shall have no liability for
and to the extent that the aggregate amount of all Damages exceeds the Purchase
Price.
(b) Neither Parent nor Purchaser shall have any liability (for
indemnification or otherwise) with respect to the matters described in Section
10.2, other than with respect to claims arising under Section 6.17, the
Promissory Note or the Escrow Agreement, until the total of all Damages with
respect to such matters exceeds $500,000, and then Parent and Purchaser shall be
responsible to the extent and by the amount that the aggregate amount of all
Damages incurred as a result of such breaches exceeds $500,000; provided,
however, other than with respect to claims arising under Section 6.17, the
Promissory Note or the Escrow Agreement, neither Parent nor Purchaser shall have
any liability for and to the extent that the aggregate amount of all Damages
exceeds $7,000,000.
Section 10.6 Procedure for Indemnification; Third Party Claims.
(a) Promptly after receipt by an indemnified party under
Section 10.1 or 10.2 of written notice (a "Notice of Claim") of the commencement
of any action, suit or proceeding against it, or written threat thereof, such
indemnified party shall, if a claim is to be made against an indemnifying party
under either of said Sections, as applicable, give notice to the indemnifying
party of the commencement of such action, suit or proceeding. The indemnified
party shall furnish to the indemnifying party in reasonable detail such
information as the indemnified party may have with respect to such
indemnification claims (including copies of any summons, complaint or other
pleading that may have been served on it and any written claim, demand, invoice,
billing or other document evidencing or assenting the same). Subject to the
limitations set forth in this Section 10.6(a), no failure or delay by the
indemnified party in the performance of the foregoing shall reduce or otherwise
affect the obligation of
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the indemnifying party to indemnify and hold the indemnified party harmless,
except to the extent that such failure or delay will have adversely affected the
indemnifying party's ability to defend against, settle or satisfy any action,
suit or proceeding against it, damage, loss, claim or demand for which the
indemnified party is entitled to indemnification hereunder.
(b) If the claim or demand set forth in the Notice of Claim
given by the indemnified party is a claim or demand asserted by a third party,
the indemnifying party shall have 30 days after the Date of Notice of Claim to
notify the indemnified party in writing of its election to defend such
third-party claim or demand on behalf of the indemnified party. If the
indemnifying party elects to defend such third-party claim or demand, the
indemnified party shall make available to the indemnifying party and its agents
and representatives all records and other materials that are reasonably required
in the defense of such third-party claim or demand and shall otherwise cooperate
with, and assist the indemnifying party in the defense of, such third-party
claim or demand, and so long as the indemnifying party is defending such
third-party claim in good faith, the indemnified party shall not pay, settle or
compromise such third-party claim or demand. If the indemnifying party elects to
defend such third-party claim or demand, the indemnifying party shall have the
right to control the defense of such third-party claim or demand, at the
indemnifying party's own expense. If the indemnifying party does not elect to
defend such third-party claim or demand or does not defend such third-party
claim or demand in good faith, the indemnified party shall have the right, in
addition to any other right or remedy it may have hereunder, to defend such
third-party claim or demand at the indemnifying party's expense.
(c) In the event any indemnified party shall have a claim
under Section 10.1 or 10.2 against any indemnifying party that does not involve
a third party claim, the indemnified party shall deliver a notice with
reasonable promptness to the indemnifying party. The
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failure by any indemnified party to give an indemnity notice shall not impair
such party's rights hereunder except to the extent that an indemnifying party
demonstrates that is has been materially prejudiced thereby. If the indemnifying
party notifies the indemnified party that it does not dispute the claim
described in such notice or fails to notify the indemnified party within 30
calendar days whether the indemnifying party disputes the claim described in
such indemnity notice, the amount specified in the notice will be conclusively
deemed a liability of the indemnifying party under Section 10.1 or 10.2 and the
indemnifying party shall pay or agree to release from escrow, as the case may
be, the amount of such loss to the indemnified party on demand. If the
indemnifying party has timely disputed its liability with respect to such claim,
the indemnifying party and the indemnified party will proceed in good faith to
negotiate a resolution of such dispute, and if not resolved through negotiation
within 30 calendar days of timely response by the indemnifying party, such
dispute shall be resolved by litigation in a court of competent jurisdiction.
(d) The term "Date of Notice of Claim" shall mean the date the
Notice of Claim is effective pursuant to Section 11.3 of this Agreement.
(e) To the extent this Section 10.6 is inconsistent with
Section 6.10(e)(iii), (f), or (g), Section 6.10 shall govern matters related to
Taxes.
Section 10.7 Security for Indemnification. Seller shall deposit the
sum of $5,000,000 in escrow pursuant to the Escrow Agreement for the purpose of
providing security for the satisfaction of the obligation to make payment
hereunder (a) in respect of the Special Contingent Liability and (b) of Damages.
After termination of the Escrow Account (as defined in the Escrow Agreement),
the principal amount payable under the Promissory Note shall be reduced to the
extent of any Damages subject to indemnification hereunder and attributable to
breaches of Sections 4.2, 4.9 or 4.14.
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ARTICLE XI
MISCELLANEOUS
Section 11.1 Fees and Expenses. Except as otherwise expressly set forth
in this Agreement, all costs and expenses incurred in connection with this
Agreement and the consummation of the transactions contemplated hereby shall be
paid by the party incurring such expenses, and the Company shall not pay any of
the costs of this Agreement or the transactions contemplated hereby incurred on
behalf of Seller (including the fees and expenses of Seller's attorneys, tax and
accounting advisors and investment bankers). Without limiting the foregoing,
Seller shall pay all costs and expenses related to obtaining the Consents listed
on Exhibit 7.1(g), including any unusual costs or charges expressly payable
pursuant to any of the agreements to which such Consents relate that are
directly attributable to the consummation of the transactions contemplated
hereby.
Section 11.2 Amendments. This Agreement can be amended, supplemented or
modified only by a written instrument signed by each of the parties hereto
making specific reference to this Agreement.
Section 11.3 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given upon (a) transmitter's
confirmation of a receipt of a facsimile transmission, (b) confirmed delivery by
a standard overnight carrier or when delivered by hand or (c) the expiration of
five Business Days after the day when mailed in the United States by certified
or registered mail, postage prepaid, addressed at the following addresses (or at
such other address for a party as may be specified by like notice) (a) if to
Seller, to:
Japan Leasing (U.S.A.), Inc.
1251 Avenue of the Americas, 48th Fl.
New York, New York 10020
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Attn: Mr. Jun Ogihara
Facsimile: (212) 403-3150
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
525 University Avenue, Suite 220
Palo Alto, California 94301
Attn: Kenton J. King, Esq.
Facsimile: (650) 470-4570
(b) if to Purchaser before December 21, 1998, to:
Fidelity Leasing, Inc.
7 E. Skippack Pike
Ambler, Pennsylvania 19002
Facsimile: (215) 619-2830
Attn: Abraham Bernstein
if to Purchaser on or after December 21, 1998, to:
Fidelity Leasing, Inc.
1255 Wrights Lane
West Chester, Pennsylvania 19380
Facsimile: (888) 682-0600
Attn: Abraham Bernstein
in either case, with a copy to:
Ledgewood Law Firm, P.C.
1521 Locust Street - 8th Floor
Philadelphia, Pennsylvania 19102
Facsimile: (215) 735-2513
Attn: Richard J. Abt, Esquire
Section 11.4 Interpretation. When a reference is made in this
Agreement to Sections, such reference shall be to a Section of this Agreement
unless otherwise indicated. Whenever the words "include", "includes" or
"including" are used in this Agreement they shall be deemed to be followed by
the words "without limitation". The phrase "made available" when used in this
Agreement shall mean that the information referred to has been made available by
the party to whom such information is to be made available.
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Section 11.5 Headings. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 11.6 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
shall be considered one and the same agreement.
Section 11.7 Entire Agreement. This Agreement, together with the
Confidentiality Agreement, constitutes the entire agreement, and supersedes all
other prior or contemporaneous negotiations, commitments, agreements and
understandings (whether written or oral) between the parties with respect to the
subject matter hereof.
Section 11.8 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions of
this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
Section 11.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without giving
effect to the principles of conflicts of law thereof.
Section 11.10 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by either of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other party, except that Purchaser may assign its rights
to purchase the Shares to any of its Affiliates; provided, however, that
Purchaser shall remain liable for all its obligations hereunder regardless of
any such assignment. Subject to the preceding sentence, this Agreement shall be
binding upon, inure to the benefit of and be enforceable by, the parties and
their respective successors and assigns, and except to the extent necessary to
enforce the provisions of Section 6.16, the provisions of this Agreement are not
intended to confer upon any Person other than the parties hereto any rights or
remedies hereunder.
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Section 11.11 Specific Performance; Submission to Jurisdiction. Each
of the parties hereto acknowledges and agrees that in the event of any breach of
this Agreement, each nonbreaching party would be irreparably and immediately
harmed and could not be made whole by monetary damages. It is accordingly agreed
that the parties hereto (a) shall waive, in any action for specific performance,
the defense of adequacy of a remedy at law and (b) shall be entitled (without
having to post a bond or other security), in addition to any other remedy to
which they may be entitled at law or in equity, to compel specific performance
of this Agreement in any action instituted in any state or federal district
court sitting in Wilmington, Delaware. Each of the parties hereto consents to
submit itself to the personal jurisdiction of any state or federal court located
in Wilmington, Delaware and irrevocably agrees that it will not bring any action
or proceeding relating to this Agreement in any court other than a state or
federal court located within Wilmington, Delaware. Each of the parties hereto
furthermore consents to service of process upon it in the manner set forth in
Section 11.3 and accepts for itself and in connection with its respective
properties, generally and unconditionally, the exclusive jurisdiction of the
aforesaid courts and waives any defense of forum non conveniens, and irrevocably
agrees to be bound by any judgment rendered thereby in connection with this
Agreement.
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Section 11.12 Waiver. Any term or condition of this Agreement may be
waived at any time by the party that is entitled to the benefit thereof, but no
such waiver shall be effective unless set forth in a written instrument duly
executed by or on behalf of the party waiving such term or condition. No waiver
by any party hereto of any term or condition of this Agreement, in any one or
more instances, shall be deemed to be or construed as a waiver of the same or
any other term or condition of this Agreement on any future occasion. All
remedies, whether under this Agreement or afforded by law or otherwise, shall be
cumulative and not alternative.
Section 11.13 Time of Essence. Each of the parties hereto agrees that,
with regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.
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IN WITNESS WHEREOF, Purchaser and Seller have caused this Agreement to
be signed by their respective officers thereunto duly authorized as of the date
first above written.
FIDELITY LEASING, INC.
By:
Name:
Title:
JAPAN LEASING (U.S.A.), INC.
By:
Name:
Title:
THE UNDERSIGNED ACKNOWLEDGES AND AGREES that it is bound by and subject
to the provisions of, and otherwise a party to, Article X.
RESOURCE AMERICA, INC.
By:
Name:
Title:
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AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT
This Amendment No. 1 to Stock Purchase Agreement ("Amendment No. 1") is
made as of December 31, 1998 by and between Fidelity Leasing, Inc., a
Pennsylvania corporation ("Purchaser"), and Japan Leasing (U.S.A.), Inc., a
Delaware corporation ("Seller"), in connection with that certain Stock Purchase
Agreement, dated as of December 15, 1998, by and between Purchaser and Seller
(the "Stock Purchase Agreement").
RECITALS
WHEREAS, Purchaser, Seller and, for the limited purposes set forth on the
signature page of the Stock Purchase Agreement, Resource America, Inc., a
Delaware corporation, constitute all of the parties to the Stock Purchase
Agreement; and
WHEREAS, Section 11.2 of the Stock Purchase Agreement provides that the
Stock Purchase Agreement can be amended, supplemented or modified only by a
written instrument signed by each of the parties thereto making specific
reference thereto; and
WHEREAS, the parties to the Stock Purchase Agreement desire to amend in
accordance with this written instrument certain terms of the Stock Purchase
Agreement; and
WHEREAS, each of the parties hereto has authorized the execution of this
Amendment No. 1.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and agreements set forth herein and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
1. Definitions. Capitalized terms used and not otherwise defined herein shall
have the respective meanings assigned to such terms in the Stock Purchase
Agreement.
2. Amendment of Section 6.19. The last sentence of section 6.19(a) of the Stock
Purchase Agreement is hereby amended to read in its entirety as follows:
"Purchaser agrees to use its reasonable best efforts to obtain the
Commitment Letter, and to cause a copy thereof to be delivered to
Seller, on or before January 8, 1999 (the "Commitment Letter Due
Date")."
3. Effect on Stock Purchase Agreement. Except as set forth in this Amendment No.
1, all terms and provisions of the Stock Purchase Agreement shall remain in full
force and effect in accordance with the terms thereof.
4. Counterparts. This Amendment No. 1 may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to
be executed and delivered by their duly authorized representatives as of the day
and year first above written.
FIDELITY LEASING, INC.
By:
Name:
Title:
JAPAN LEASING (U.S.A.), INC.
By:
Name:
Title:
THE UNDERSIGNED ACKNOWLEDGES AND AGREES that it is bound by and subject to
the provisions of, and otherwise a party to, Article X of the Stock Purchase
Agreement, as amended by this Amendment No. 1.
RESOURCE AMERICA, INC.
By:
Name:
Title:
<PAGE>
AMENDMENT NO. 2 TO STOCK PURCHASE AGREEMENT
This Amendment No. 2 to Stock Purchase Agreement ("Amendment No. 2") is
made as of January 12, 1999 by and between Fidelity Leasing, Inc., a
Pennsylvania corporation ("Purchaser"), and Japan Leasing (U.S.A.), Inc., a
Delaware corporation ("Seller"), in connection with that certain Stock Purchase
Agreement, dated as of December 15, 1998, by and between Purchaser and Seller
(the "Stock Purchase Agreement").
RECITALS
WHEREAS, Purchaser, Seller and, for the limited purposes set forth on the
signature page of the Stock Purchase Agreement, Resource America, Inc., a
Delaware corporation, constitute all of the parties to the Stock Purchase
Agreement; and
WHEREAS, Section 11.2 of the Stock Purchase Agreement provides that the
Stock Purchase Agreement can be amended, supplemented or modified only by a
written instrument signed by each of the parties thereto making specific
reference thereto; and
WHEREAS, the parties to the Stock Purchase Agreement have previously
amended the Stock Purchase Agreement pursuant to that certain Amendment No. 1 to
Stock Purchase Agreement, dated as of December 31, 1998 ("Amendment No. 1"); and
WHEREAS, the parties to the Stock Purchase Agreement desire to amend in
accordance with this written instrument certain terms of the Stock Purchase
Agreement; and
WHEREAS, each of the parties hereto has authorized the execution of this
Amendment No. 2.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and agreements set forth herein and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
1. Definitions. Capitalized terms used and not otherwise defined herein shall
have the respective meanings assigned to such terms in the Stock Purchase
Agreement.
<PAGE>
2. Amendment of Section 6.12. The last sentence of section 6.12(a) of the
Stock Purchase Agreement is hereby amended to read in its entirety as follows:
"Seller shall use its reasonable best efforts to deliver, or cause to be
delivered, to Purchaser not less than two Business Days prior to the
Closing Date copies of payoff letters and waivers of payment of any
interest at default rates, late payment fees and Company Lender expenses
from each of the Company Lenders."
3. Deletion of Section 6.19(b). Section 6.19(b) of the Stock Purchase
Agreement is hereby deleted in its entirety, it being understood that Purchaser
shall have no rights or obligations thereunder whatsoever.
4. Deletion of Section 6.19(c). Section 6.19(c) of the Stock Purchase
Agreement is hereby deleted in its entirety, it being understood that Seller
shall have no rights or obligations thereunder whatsoever.
5. Amendment of Section 7.2. Section 7.2 of the Stock Purchase Agreement is
hereby amended by (i) deleting the word "and" appearing at the end of Section
7.2(o), (ii) replacing the period at the end of Section 7.2(p) with a semi-colon
followed by the word "and", and (iii) adding the following subsection to the end
of such section:
(q) Purchaser will have received a copy of each of the payoff letters
described in Section 6.12(a) reasonably in advance of the Closing to permit
Purchaser to deliver payment instructions necessary to the perfomance by
Purchaser of its payment obligations under Section 6.12(a)."
6. Effect on Stock Purchase Agreement. Except as set forth in this
Amendment No. 2, all terms and provisions of the Stock Purchase Agreement, as
previously amended by Amendment No. 1, shall remain in full force and effect in
accordance with the terms thereof.
7. Counterparts. This Amendment No. 2 may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to
be executed and delivered by their duly authorized representatives as of the day
and year first above written.
FIDELITY LEASING, INC.
By:
Name:
Title:
JAPAN LEASING (U.S.A.), INC.
By:
Name:
Title:
THE UNDERSIGNED ACKNOWLEDGES AND AGREES that it is bound by
and subject to the provisions of, and otherwise a party to, Article X of the
Stock Purchase Agreement, as amended by Amendment No. 1 and this Amendment No.
2.
RESOURCE AMERICA, INC.
By:
Name:
Title:
<PAGE>
AMENDMENT NO. 3 TO STOCK PURCHASE AGREEMENT
This Amendment No. 3 to Stock Purchase Agreement ("Amendment No. 3") is
made as of February 2, 1999 by and between Fidelity Leasing, Inc., a
Pennsylvania corporation ("Purchaser"), and Japan Leasing (U.S.A.), Inc., a
Delaware corporation ("Seller"), in connection with that certain Stock Purchase
Agreement, dated as of December 15, 1998, by and between Purchaser and Seller
(the "Stock Purchase Agreement").
RECITALS
WHEREAS, Purchaser, Seller and, for the limited purposes set forth on the
signature page of the Stock Purchase Agreement, Resource America, Inc., a
Delaware corporation, constitute all of the parties to the Stock Purchase
Agreement; and
WHEREAS, Section 11.2 of the Stock Purchase Agreement provides that the
Stock Purchase Agreement can be amended, supplemented or modified only by a
written instrument signed by each of the parties thereto making specific
reference thereto; and
WHEREAS, the parties to the Stock Purchase Agreement have previously
amended the Stock Purchase Agreement pursuant to that certain Amendment No. 1 to
Stock Purchase Agreement, dated as of December 31, 1998 ("Amendment No. 1"), and
that certain Amendment No. 2 to Stock Purchase Agreement, dated as of January
12, 1999 ("Amendment No. 2"); and
WHEREAS, the parties to the Stock Purchase Agreement desire to amend in
accordance with this written instrument certain terms of the Stock Purchase
Agreement; and
WHEREAS, each of the parties hereto has authorized the execution of this
Amendment No. 3.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and agreements set forth herein and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
1. Definitions. Capitalized terms used and not otherwise defined herein
shall have the respective meanings assigned to such terms in the Stock Purchase
Agreement.
<PAGE>
2. Additional Defined Terms. Section 1.1 of the Stock Purchase Agreement is
hereby amended by adding the following definitions to the end of such section:
"Insurance Proceeds" means proceeds paid pursuant to any Insurance
Policy and amounts (exclusive of rebated premiums or amounts used to
restore or repair the Equipment) paid by any insurer under any other
insurance policy related to the Equipment.
"Obligor" means each obligor under an Unsecuritized Financing Contract
and its permitted assigns.
"Equipment" means any new or used equipment, together with all
accessions thereto and replacement parts, accessories and repairs with
respect thereto, which is the subject of an Unsecuritized Financing
Contract.
"Uniform Commercial Code" or "UCC" means, with respect to a particular
jurisdiction, the Uniform Commercial Code, as in effect from time to time
in such jurisdiction, or any successor statute thereto.
"Principal Balance" means, with respect to any Unsecuritized Financing
Contract on any day, (i) the unamortized portion of the purchase price paid
by the Company for the related Equipment, and amounts paid by the Company
in respect of taxes and origination costs and fees, as of the Closing Date.
"Unsecuritized Financing Contract Payment" means, with respect to each
Unsecuritized Financing Contract, the scheduled monthly payment for the
Equipment leased to or otherwise financed by the Obligor under such
Unsecuritized Financing Contract.
"Defaulted Unsecuritized Financing Contract" means, an Unsecuritized
Financing Contract (i) as to which Seller has, in accordance with its
customary servicing procedures, prior to the Closing Date, written off any
amount to be paid thereunder as uncollectible or placed into the pending
writeoff or workout category or (ii) as to which any payment remains unpaid
for 181 days or more from the original due date for such payment or (iii)
rejected by or on behalf of the related Obligor in a bankruptcy proceeding.
<PAGE>
"Unsecuritized Financing Contract Assets" means the Unsecuritized
Financing Contracts (exclusive of any Administrative Fees and all amounts
due or becoming due under such Unsecuritized Financing Contract prior to
the Closing Date), together with (i) a perfected security interest, if any,
in the Equipment; (ii) amounts representing Security Deposit Offsets
applied to unpaid Unsecuritized Financing Contract Payments due after the
Closing Date; (iii) any guaranty relating to a Unsecuritized Financing
Contract; (iv) each Insurance Policy, if any, covering Equipment, including
all rights to any Insurance Proceeds received on or after the Closing Date;
and (v) all proceeds of the foregoing.
"Administrative Fees" mean, with respect to any Unsecuritized Financing
Contract, any late, prepayment, extension, insurance, property tax or
administrative fees or similar charges paid by the Obligor pursuant to the
terms of such Unsecuritized Financing Contract.
"Security Deposit Offset" shall mean the application by the Company to
one or more Unsecuritized Financing Contract Payments under a Defaulted
Unsecuritized Financing Contract of the amount required to be deposited
with the Company by the Obligor as security for payment of amounts due
under such Unsecuritized Financing Contract.
"Insurance Policies" means all theft and physical damage and all other
insurance policies covering the Equipment.
3. Amendment of Section 3.1. Section 3.1 of the Stock Purchase Agreement is
hereby amended to read in its entirety as follows:
"Section 3.1 Closing . The sale and transfer of the Shares by Seller to
Purchaser shall take place at the offices of Ledgewood Law Firm,
Philadelphia, Pennsylvania at 10:00 a.m., local time, on February 4, 1999
or, if the conditions to close set forth in Article VII have not been
satisfied or waived by such date, two Business Days following the
satisfaction or waiver of all conditions to close set forth in Article VII,
unless another date or place is agreed to in writing by the parties hereto.
Notwithstanding the foregoing sentence, for all purposes of this Agreement
other than the foregoing sentence, the "Closing" shall be deemed to have
occurred as of 11:59 p.m. on January 31, 1999 and such date shall be deemed
to be the "Closing Date"."
<PAGE>
4. Amendment of Section 4.5. The third sentence of Section 4.5 of the Stock
Purchase Agreement is hereby amended to read in its entirety as follows:
"The Unaudited Financial Statements and the October Financial Statements
fairly present, and the November Financial Statements and the December
Financial Statements shall fairly present, in all material respects the
financial position, results of operations and cash flows of the Company and
the Company Subsidiaries for the periods specified therein, all in
conformity with GAAP (subject to normal year-end audit adjustments that
will not have or reflect a Company Material Adverse Effect) and except as
otherwise noted therein."
5. Amendment of Article IV. Article IV of the Stock Purchase Agreement is
hereby amended by adding the following section to the end of such article:
"Section 4.28 Unsecuritized Financing Contracts. The Seller hereby makes
the following representations and warranties as to each Financing Contract other
than (i) the Financing Contracts to be transferred by the Company to Seller
pursuant to the Assignment and (ii) Financing Contracts of any of the Company
Subsidiaries, (each such Financing Contract, an "Unsecuritized Financing
Contract"). Such representations and warranties shall be deemed to be made for
each Unsecuritized Financing Contract as of the Closing unless otherwise
specified, but shall survive the Closing (and the transfer of such Unsecuritized
Financing Contracts by Purchaser to a special purpose entity or a trustee for
securitization) for the period specified in Section 10.4(a) hereof.
(a) The Company is the legal and beneficial owner of all right, title and
interest in and to the Unsecuritized Financing Contracts and the Unsecuritized
Financing Contract Assets, including the rights to the Unsecuritized Financing
Contract Payments and the Insurance Proceeds with respect to the Unsecuritized
Financing Contracts, free from any Lien of any Person (except for (i) any Lien
which will have been waived or released by any Person on or prior to the Closing
Date, (ii) the rights of Obligors to Insurance Proceeds on account of
reimbursements for equipment repairs and (iii) rights of certain Obligors to the
residual value, if any, of the related Equipment).
<PAGE>
(b) The Company is the owner of each item of Equipment that is subject to
any Unsecuritized Financing Contract that is not a finance lease and the Company
has a perfected security interest in, or is the owner of, each item of Equipment
that is the subject of any other Unsecuritized Financing Contract, with a Lien
or ownership that is prior to the interest of any other Person; provided,
however, that, (i) the Company's Lien or ownership may not be prior to a Lien
which will have been waived or released by any Person on or prior to the Closing
Date or the rights of the Obligors with regard to the Equipment under the
Unsecuritized Financing Contracts and any liens arising from action of Obligors
and (ii) the Company will have filed UCC financing statements covering the
related Equipment only in connection with transactions in which the Principal
Balance of the Unsecuritized Financing Contract is greater than $25,000.
(c) The Company (i) has in its possession the original copy of the
Unsecuritized Financing Contract that constitutes "chattel paper" under the
Uniform Commercial Code and (ii) has in its possession, with respect to each
other Unsecuritized Financing Contract, a copy of the master contract, certified
by the seller or other transferor of the Unsecuritized Financing Contract to the
Company, and an original executed copy of the relevant contract schedule or
assignment agreement, and (iii) has provided Purchaser with access to original
copies of all the Unsecuritized Financing Contracts, including any amendments
thereto and any documents related thereto, and those copies will have been true
and complete copies of the Unsecuritized Financing Contracts and such amendments
and related documents, and no provision of any Unsecuritized Financing Contract
will have been amended, modified or waived other than by documents included in
the original copies to which Purchaser has been given access.
(d) Neither the Company nor, to the Knowledge of the Company, any Obligor
has done or failed to do anything (other than Unsecuritized Financing Contract
Payment delinquencies of 60 days or less as of December 31, 1998) which would or
might permit any Obligor or the Company to terminate any Unsecuritized Financing
Contract or suspend or reduce any payments or obligations due or to become due
thereunder by reason of default by the other party to such Unsecuritized
Financing Contract, except for amounts which are not material. Neither the
rights and interests of the Company in any Unsecuritized Financing Contract nor
the obligations of the Obligor under any Unsecuritized Financing Contract are
subject to any defense, offset, counterclaim, claim or right of rescission, and
none of the foregoing have been asserted or alleged against the Company as to
any Unsecuritized Financing Contract.
<PAGE>
(e) The Unsecuritized Financing Contract is a legal, valid and binding
obligation of the Obligor under such Unsecuritized Financing Contract and of the
Company, enforceable against each of them in accordance with its terms, except
as such enforceability may be affected by the Bankruptcy Exception.
(f) The Company has granted Purchaser full access to its books and records,
which contain a complete and correct statement of the Unsecuritized Financing
Contract Payments payable by the Obligor under each Unsecuritized Financing
Contract and with respect to the related Equipment, separately setting forth
such amounts with respect to each Unsecuritized Financing Contract for each
month for the number of months of anticipated Unsecuritized Financing Contract
Payments under such Unsecuritized Financing Contract.
(g) The Unsecuritized Financing Contract complied at the time it was
originated or made, and at the Closing Date will comply, in all material
respects with all requirements of applicable federal, state and local law and
regulations thereunder, including usury laws, the Federal Truth-in-Lending Act,
the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the
Federal Trade Commission Act, the Magnuson-Moss Warranty Act, the Federal
Reserve Board's Regulations B and S and other equal credit opportunity and
disclosure laws, in each case to the extent applicable to non-consumer
transactions.
(h) As of the Closing Date, each Unsecuritized Financing Contract (i) has
not been terminated, is not a Defaulted Unsecuritized Financing Contract and is
not more than 60 days past due as of the date that is two Business Days prior to
the Closing Date as to any amount required to be paid thereunder, (ii) is a
direct financing lease, if the Unsecuritized Financing Contract is a lease,
(iii) relates to an item of Equipment that is located in the United States is
not in repossession by the creditor or subject to procedures for obtaining
repossession by the creditor or possession by any other Person, (iv) relates to
an Obligor that (A) is a natural person residing in the United States or a
corporation, limited liability company or limited liability partnership
organized under the laws of the United States or any state thereof, (B) is not
the United States or a state or any agency or instrumentality thereof and (C)
has not been disapproved by the Company (based, in the Company's reasonable
judgment, upon the creditworthiness of such Obligor), (v) constitutes "chattel
paper" within the meaning of Section 9-105 of the UCC as in effect in the state
of New York and there is only one original executed copy of each Unsecuritized
Financing Contract, (vi) is denominated in United States dollars and is payable
in the United States in United States dollars, (vii) is not a "consumer lease"
as defined in Section 2A-103(l)(e) of the UCC, and (viii) has been determined by
the Company to satisfy all applicable approval requirements of the Company
including the obligations of the Obligor to maintain casualty insurance or to
self insure and to maintain the Equipment in good working order.
<PAGE>
(i) The Obligor under the Unsecuritized Financing Contract is, to the
Knowledge of the Seller, not the subject of a bankruptcy or insolvency
proceeding.
(j) No facts exist which would give rise to any right of rescission,
setoff, counterclaim or defense, nor have any been asserted, or to the best of
Seller's knowledge after due inquiry, threatened, with respect to the
Unsecuritized Financing Contract.
(k) The Unsecuritized Financing Contract has not been sold, transferred,
assigned or pledged by the Company to any Person.
(l) The Unsecuritized Financing Contract does not require the prior written
consent of the Obligor for, or contain any other restrictions on, the transfer
or assignment of the Unsecuritized Financing Contract.
(m) The Unsecuritized Financing Contract provides that the Obligor's
obligations under the Unsecuritized Financing Contract including, without
limitation, the obligation to make Unsecuritized Financing Contract Payments,
are absolute and unconditional and shall continue without any claim, defense,
set-off, counterclaim, reduction, or abatement of any kind whatsoever and
regardless of any inability of the Obligor to use the Equipment or any part
thereof because of any reason whatsoever including damage to or destruction
thereof.
(n) The Unsecuritized Financing Contract provides that the Obligor shall
maintain the Equipment in good operating condition, repair and appearance, and
protect it from deterioration other than normal wear and tear.
(o) The Unsecuritized Financing Contract was not previously transferred to
or owned by Purchaser.
(p) If the Unsecuritized Financing Contract is a lease which was not
originated by the Company but was acquired by the Company in a purchase
transaction then such Unsecuritized Financing Contract (i) constitutes a
"finance lease" under generally accepted accounting principles, (ii) does not by
its terms permit, on or after the Closing Date, the creditor (or any transferee)
to require the predecessor owner or other transferor to repurchase such
Unsecuritized Financing Contract or otherwise provide credit support for
payments due under the Unsecuritized Financing Contract.
<PAGE>
(q) The Company has no actual or contingent liability under Title IV of
ERISA or Section 4980B of the Code with respect to any employee pension benefit
plan or employee welfare benefit plan sponsored by any entity that, together
with the Company, would be treated as a "single employer" for purposes of
Section 4001(b) of ERISA or Section 414(b) or (c) of the Code."
6. Amendment of Section 7.2. Section 7.2 of the Stock Purchase Agreement is
hereby amended by (i) deleting the word "and" appearing at the end of Section
7.2(p), (ii) replacing the period at the end of Section 7.2(q) with a
semi-colon, and (iii) adding the following two subsections to the end of such
section:
"(r) Purchaser will have received an opinion of counsel from Minerva
Attorneys-at-Law, dated as of the Closing Date, in substantially the form
attached as Exhibit 7.2(r); and
(s) Purchaser will have received an opinion of counsel from Reiko
Kasano, Attorney at Law, dated as of the Closing Date, in substantially the
form attached as Exhibit 7.2(s)."
7. Amendment of Exhibit 6.12(b). Exhibit 6.12(b) to the Stock Purchase
Agreement is hereby amended to read in its entirety as set forth as Exhibit
6.12(b) hereto, and any and all references to "Exhibit 6.12(b)" in the Stock
Purchase Agreement (including all Exhibits and Schedules thereto) shall
hereafter be deemed to refer to Exhibit 6.12(b) hereto.
8. Amendment of Exhibit 7.1(i). Exhibit 7.1(i) to the Stock Purchase
Agreement is hereby amended to read in its entirety as set forth as Exhibit
7.1(i) hereto, and any and all references to "Exhibit 7.1(i)" in the Stock
Purchase Agreement (including all Exhibits and Schedules thereto) shall
hereafter be deemed to refer to Exhibit 7.1(i) hereto.
9. Amendment of Exhibit 7.2(j). Exhibit 7.2(j) to the Stock Purchase
Agreement is hereby amended to read in its entirety as set forth as Exhibit
7.2(j) hereto, and any and all references to "Exhibit 7.2(j)" in the Stock
Purchase Agreement (including all Exhibits and Schedules thereto) shall
hereafter be deemed to refer to Exhibit 7.2(j) hereto.
10. Addition of Exhibit 7.2(r). The Stock Purchase Agreement is hereby
amended by adding thereto Exhibit 7.2(r) hereto.
<PAGE>
11. Addition of Exhibit 7.2(s). The Stock Purchase Agreement is hereby
amended by adding thereto Exhibit 7.2(s) hereto.
12. Addition to the Seller Disclosure Letter. The Seller Disclosure Letter
is hereby amended by adding thereto Exhibit 4.28 hereto; provided, however, that
such addition shall not constitute a supplement or amendment of the Seller
Disclosure Letter for purposes of Section 6.9(b) of the Stock Purchase
Agreement.
13. Effect on Stock Purchase Agreement. Except as set forth in this
Amendment No. 3, all terms and provisions of the Stock Purchase Agreement, as
previously amended by Amendment No. 1 and Amendment No. 2, shall remain in full
force and effect in accordance with the terms thereof.
14. Counterparts. This Amendment No. 3 may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 3 to
be executed and delivered by their duly authorized representatives as of the day
and year first above written.
FIDELITY LEASING, INC.
By:
Name:
Title:
JAPAN LEASING (U.S.A.), INC.
By:
Name:
Title:
THE UNDERSIGNED ACKNOWLEDGES AND AGREES that it is bound by and subject to
the provisions of, and otherwise a party to, Article X of the Stock Purchase
Agreement, as amended by Amendment No. 1, Amendment No. 2 and this Amendment No.
3.
RESOURCE AMERICA, INC.
By:
Name:
Title:
<PAGE>
AMENDMENT NO. 4 TO STOCK PURCHASE AGREEMENT
This Amendment No. 4 to the Stock Purchase Agreement
("Amendment No. 4") is made as of February 3, 1999 by and between Fidelity
Leasing, Inc., a Pennsylvania corporation ("Purchaser"), and Japan Leasing
(U.S.A.), Inc., a Delaware corporation ("Seller"), in connection with that
certain Stock Purchase Agreement, dated as of December 15, 1998, by and between
Purchaser and Seller (as previously amended, the "Stock Purchase Agreement").
RECITALS
WHEREAS, Purchaser, Seller and, for the limited purposes set
forth on the signature page of the Stock Purchase Agreement, Resource America,
Inc., a Delaware corporation, constitute all of the parties to the Stock
Purchase Agreement; and
WHEREAS, Section 11.2 of the Stock Purchase Agreement provides
that the Stock Purchase Agreement can be amended, supplemented or modified only
by a written instrument signed by each of the parties thereto making specific
reference thereto; and
WHEREAS, the parties to the Stock Purchase Agreement have
previously amended the Stock Purchase Agreement pursuant to that certain
Amendment No. 1 to Stock Purchase Agreement, dated as of December 31, 1998
("Amendment No. 1"), that certain Amendment No. 2 to Stock Purchase Agreement,
dated as of January 12, 1999 ("Amendment No. 2"), and that certain Amendment No.
3 to Stock Purchase Agreement, dated as of February 2, 1999 ("Amendment No. 3");
and
WHEREAS, the parties to the Stock Purchase Agreement desire to
amend in accordance with this written instrument certain terms of the Stock
Purchase Agreement; and
WHEREAS, each of the parties hereto has authorized the
execution of this Amendment No. 4.
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual covenants and agreements set forth herein and intending to be legally
bound hereby, the parties hereto hereby agree as follows:
1. Definitions. Capitalized terms used and not otherwise
defined herein shall have the respective meanings assigned to such terms in the
Stock Purchase Agreement.
<PAGE>
2. Amendment of Section 2.3(a). The first sentence of Section
2.3(a) of the Stock Purchase Agreement is hereby amended by replacing the
expression "60 days" where it appears therein with the expression "90 days".
3. Amendment of Article II. Article II of the Stock Purchase
Agreement is hereby amended by adding to the end thereof the following sections:
"Section 2.4. Withdrawal from Escrow. On the Closing Date
Seller and Buyer shall give the Escrow Agent joint
instructions directing the Escrow Agent to pay out of escrow
the amount of $4,043,059.00 in respect of the Unsecuritized
Financing Contracts set forth on Schedule 2.4 (the "Schedule
2.4 Contracts").
"Section 2.5 Restoration of Escrow and the Promissory Note.
(a) To the extent an executed original of any Schedule 2.4
Contract is located by Purchaser or the Company on or before
the last Business Day of the calendar month that is the
fourteenth month after the month in which the Closing occurs
(the "Release Date"), Purchaser shall, on or before the third
Business Day in the calendar month immediately following the
calender month in which such contract is located (each such
date a "Restoration Date"), remit to the bank account (the
"Escrow Account") specified in writing by the Escrow Agent for
deposit in accordance with the terms of the Escrow Agreement
an amount equal to 66.15% of the net investment value of such
contract as of the time of such remittance. At the time of
such remittance, Purchaser shall increase the principal sum of
the Promissory Note by an amount equal to the amount of such
net investment value not remitted to the Escrow Account
pursuant to the foregoing sentence.
(b) To the extent an executed original of any Schedule 2.4
Contract is located by Purchaser or the Company after the
Release Date and at such time no claim for indemnification
under Section 10.1(a) of the Stock Purchase Agreement is then
in existence, Purchaser shall, on or before each Restoration
Date, remit to the bank account (the
<PAGE>
"Seller Account") specified in writing by Seller an amount
equal to 66.15% of the net investment value of such contract
as of the time of such remittance. At the time of such
remittance, Purchaser shall increase the principal sum of the
Promissory Note by an amount equal to the amount of such net
investment value not remitted to the Seller Account pursuant
to the foregoing sentence.
(c) To the extent an executed original of any Schedule 2.4
Contract is located (a "Location") by Purchaser or the Company
after the Release Date and at such time a claim for
indemnification under Section 10.1(a) of the Stock Purchase
Agreement is then in existence, Purchaser shall, on or before
each Restoration Date, notify Seller in writing of a Location
and shall thereafter deposit an amount equal to 66.15% of the
net investment value of such contract as of the time of such
remittance into an escrow account with an escrow agent under
an escrow agreement with terms substantially identical to the
Escrow Agreement. At the time of such remittance, Purchaser
shall increase the principal sum of the Promissory Note by an
amount equal to the amount of such net investment value not
remitted to such escrow account pursuant to the foregoing
sentence.
(d) To the extent any payment is received by the Company under
a Schedule 2.4 Contract on or before the Release Date,
Purchaser shall, on or before the third Business Day in the
calendar month immediately following the calender month in
which such payment is received (the "Payment Receipt Date"),
remit to the Escrow Account for deposit in accordance with the
terms of the Escrow Agreement an amount equal to 66.15% of the
total amount of such payment. At the time of such remittance,
Purchaser shall increase the principal sum of the Promissory
Note by an amount equal to the total amount of such payment
not remitted to the Escrow Account pursuant to the foregoing
sentence.
(e) To the extent any payment is received by the Company under
a Schedule 2.4 Contract after the Release Date and at such
time no claim for indemnification under Section 10.1(a) of the
Stock Purchase Agreement is then in existence, Purchaser
shall, on or before the Payment Receipt Date, remit to the
Seller Account an amount equal to 66.15% of the total amount
of such payment. At the time of such remittance, Purchaser
shall increase the principal sum of
<PAGE>
the Promissory Note by an amount equal to the total amount of
such payment not remitted to the Seller Account pursuant to
the foregoing sentence.
(f) To the extent any payment is received (a "Payment Event")
by the Company under a Schedule 2.4 Contract after the Release
Date and at such time a claim for indemnification under
Section 10.1(a) of the Stock Purchase Agreement is then in
existence, Purchaser shall, on or before the first Payment
Receipt Date for any Schedule 2.4 contract, notify Seller in
writing of a Payment Event and shall thereafter deposit an
amount equal to 66.15% of the amount of such payment as of the
time of such remittance into an escrow account with an escrow
agent under an escrow agreement with terms substantially
identical to the Escrow Agreement. At the time of such
remittance, Purchaser shall increase the principal sum of the
Promissory Note by an amount equal to the total amount of such
payment not remitted to such escrow account pursuant to the
foregoing sentence."
4. Amendment of Section 6.12(b). The first sentence of Section
6.12(b) of the Stock Purchase Agreement is hereby amended by (i) deleting the
period appearing at the end thereof and (ii) adding the following words to the
end thereof:
"and the amount of $2,069,247.82 in respect of the Schedule
2.4 Contracts."
5. Amendment of Exhibit 6.12(b). Exhibit 6.12(b) to the Stock
Purchase Agreement is hereby amended to read in its entirety as set forth as
Exhibit 6.12(b) hereto, and any and all references to "Exhibit 6.12(b)" in the
Stock Purchase Agreement (including all Exhibits and Schedules thereto) shall
hereafter be deemed to refer to Exhibit 6.12(b) hereto.
6. Amendment of Exhibit 7.1(h). Exhibit 7.1(h) to the Stock
Purchase Agreement is hereby amended to read in its entirety as set forth as
Exhibit 7.1(h) hereto, and any and all references to "Exhibit 7.1(h)" in the
Stock Purchase Agreement (including all Exhibits and Schedules thereto) shall
hereafter be deemed to refer to Exhibit 7.1(h) hereto.
<PAGE>
7. Amendment of Exhibit 7.1(i). Exhibit 7.1(i) to the Stock
Purchase Agreement is hereby amended to read in its entirety as set forth as
Exhibit 7.1(i) hereto, and any and all references to "Exhibit 7.1(i)" in the
Stock Purchase Agreement (including all Exhibits and Schedules thereto) shall
hereafter be deemed to refer to Exhibit 7.1(i) hereto.
8. Effect on Stock Purchase Agreement. Except as set forth in
this Amendment No. 4, all terms and provisions of the Stock Purchase Agreement,
as previously amended by Amendment No. 1, Amendment No. 2 and Amendment No. 3,
shall remain in full force and effect in accordance with the terms thereof.
9. Counterparts. This Amendment No. 4 may be executed in two
or more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 4 to be executed and delivered by their duly authorized
representatives as of the day and year first above written.
FIDELITY LEASING, INC.
By:
Name:
Title:
JAPAN LEASING (U.S.A.), INC.
By:
Name:
Title:
THE UNDERSIGNED ACKNOWLEDGES AND AGREES that it is bound by
and subject to the provisions of, and otherwise a party to, Article X of the
Stock Purchase Agreement, as amended by Amendment No. 1, Amendment No. 2,
Amendment No. 3 and this Amendment No. 4.
RESOURCE AMERICA, INC.
By:
Name:
Title:
<PAGE>
EXHIBIT 6.12(b)
PROMISSORY NOTE
---------------
$6,672,741.58 (plus the Amounts listed February 4, 1999
on Schedule I hereto, as such
schedule is amended from time to time prior to
the Maturity Date)
FOR VALUE RECEIVED, and intending to be legally bound,
Fidelity Leasing, Inc., a Pennsylvania corporation ("Maker"), promises to pay to
Japan Leasing (U.S.A.), Inc., a Delaware corporation ("Payee"), in lawful money
of the United States of America, on or prior to February 3, 2004 (the "Maturity
Date"), the principal sum of six million six hundred seventy-two thousand seven
hundred forty-one dollars and fifty-eight cents ($6,672,741.58) plus the amounts
listed on Schedule I hereto, as such schedule is amended from time to time prior
to the Maturity Date with such amendments serving to increase the principal
amount of this Note from time to time (all such amounts, collectively, the
"Principal Amount"), which sum shall be payable quarterly in twenty-one
successive installments, (i) the first eight of which shall be in an amount such
that equal quarterly payments of interest and principal would amortize the
entire unpaid principal balance of this Note, at the time of payment of each
such installment, over the number of quarterly payments obtained by subtracting
the number of installments previously paid from the number twenty-eight (28)
(such result, the "Notional Quarterly Payments"), at the Initial Interest Rate
(as defined below), (ii) the next twelve of which shall each be in an amount
such that equal quarterly payments of interest and principal would amortize the
Principal Amount outstanding at the time of each such installment, over the
Notional Quarterly Payments, at the Repayment Incentive Interest Rate (as
defined below), such quarterly payments commencing with April 30, 1999, and
(iii) the last of which shall be in an amount equal to the unpaid Principal
Amount and shall be payable on the Maturity Date. The interest rate applicable
to each quarterly payment shall be an annual rate equal to the Treasury notes
(five year) interest rate as reported by the Federal Reserve Board on a
weekly-average basis and as published in the Wall Street Journal on the date of
this Note, plus (i) two-hundred and fifty basis points for each of the first
eight payments (the "Initial Interest Rate"), and (ii) four-hundred basis points
for each remaining payment (the "Repayment Incentive Interest Rate"), each such
installment of principal and each such payment of interest to be payable in
immediately available funds by wire transfer to such bank accounts as may be
specified in writing by Payee to Maker and otherwise as provided below.
<PAGE>
This Note has been executed and delivered pursuant to and in
accordance with the terms and conditions of the Stock Purchase Agreement, dated
as of December 15, 1998 (as may have been amended, supplemented or otherwise
modified from time to time, the "Agreement"), by and among Payee and Maker.
1. Payments.
1.1 Interest. Interest shall be calculated on the basis of a year
of 365 days and charged for the actual number of days elapsed through and
including each relevant date of payment with respect to each portion of the
Principal Amount. In the event that, and for so long as, any Event of Default
(as hereinafter defined) shall have occurred and be continuing, the outstanding
principal amount of this Note and, to the extent permitted by law, overdue
interest in respect of this Note, shall bear interest at a rate per annum equal
to 2% above the then applicable interest rate provided above.
1.2 Manner of Payment. All payments of principal and interest on
this Note shall be made by wire transfer of immediately available funds to The
Chase Manhattan Bank, NA, New York, New York, ABA No. 021 000 021, A/C Japan
Leasing (U.S.A.), Inc., Acct. No. 904 732 347, Contact: Chiaki Kojima. If any
payment of principal or interest on this Note is due on a day which is not a
Business Day, such payment shall be due on the next succeeding Business Day, and
such extension of time shall be included in the period of time used for purposes
of calculating the amount of interest payable under this Note. "Business Day"
means any day other than a Saturday, Sunday or legal holiday in the State of
Delaware.
1.3 Prepayment. Maker may, without premium or penalty, at any time
and from time to time, prepay all or any portion of the outstanding principal
balance due under this Note, provided that each such prepayment is accompanied
by accrued interest on the amount of principal prepaid, calculated as of the
date of such prepayment.
1.4 Security. This Note is secured by the Collateral as defined
below.
1.5 Obligations Absolute. The obligations of Maker hereunder shall
be unconditional and irrevocable, and shall be performed in accordance with the
terms of this Note. Without limiting the generality of the foregoing, payment
hereunder shall be made by Maker notwithstanding:
(a) any lack of validity or enforceability of this Note
or the Agreement; or
(b) the existence of any claim, set-off, defense or
other right which Maker may have at any time against Payee, whether in
connection with the Agreement or the transactions contemplated therein, except
for claims arising under Sections 2.3, 4.2, 4.9, 4.14 or 6.16 of the Agreement.
<PAGE>
2. Defaults.
2.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an event of default hereunder ("Event of
Default"):
(a) If Maker shall fail to make any payment of principal
or interest hereunder within ten (10) days after becoming due.
(b) Any representation of Maker in the Agreement or this
Note shall have been untrue in any material respect when made.
(c) Any other agreement of Maker shall not be complied
with within 30 days after receipt of notice from Payee of such failure of
compliance.
(d) If, pursuant to or within the meaning of the United
States Bankruptcy Code or any other federal or state law relating to insolvency
or relief of debtors (a "Bankruptcy Law"), Maker shall (i) commence a voluntary
case or proceeding; (ii) consent to the entry of an order for relief against
Maker, in an involuntary case; (iii) consent to the appointment of a trustee,
receiver, assignee, liquidator or similar official; (iv) make an assignment for
the benefit of Maker's creditors; or (v) admit in writing Maker's inability to
pay Maker's debts as they become due;
(e) If a court of competent jurisdiction enters an order
or decree under any Bankruptcy Law that (i) is for relief against Maker in an
involuntary case, (ii) appoints a trustee, receiver, assignee, liquidator or
similar official for Maker or substantially all of Maker's properties or (iii)
orders the liquidation of Maker, and in each case the order or decree is not
dismissed within 60 days.
2.2 Notice by Maker. Maker shall notify Payee in writing promptly
of the occurrence of any Event of Default of which Maker receives notice.
2.3 Remedies. Upon the occurrence of an Event of Default specified
in items (a), (d) and (e) under Section 2.1 hereof, the principal of this Note,
together with all unpaid interest and all other amounts payable hereunder, shall
become due and payable forthwith, without presentment, demand, notice, protest
or other requirement of any kind, all of which are expressly waived by Maker.
Upon the occurrence of an Event of Default specified in item (b) or (c) under
Section 2.1 hereof (unless all Events of Default have been cured or waived by
Payee), Payee may, at its option, by written notice to Maker, declare the entire
unpaid principal balance of this Note, together with all accrued interest
thereon, immediately due and payable regardless of any prior forbearance. In
either such case, subject to Section 4 hereof, Payee may exercise any and all
rights and remedies
<PAGE>
available to it under applicable law, including, without limitation, the right
to collect from Maker all sums due under this Note. Maker shall pay all
reasonable costs and expenses of collection incurred by or on behalf of Payee as
a result of an Event of Default, including, without limitation, reasonable
attorneys' fees.
3. Representations, Warranties and Agreements of Maker.
3.1 Organization and Qualification. Maker (i) is a corporation
duly organized, validly existing and in good standing under the laws of the
state of its incorporation, (ii) has the power and authority to own its
properties and assets and to transact the businesses in which it presently is,
or proposes to be, engaged and (iii) is duly qualified and is authorized to do
business and is in good standing in each jurisdiction where it presently is, or
proposes to be, engaged in business.
3.2 Authority. Maker has the requisite corporate power and
authority to execute, deliver and perform this Note. All corporate action
necessary for the execution, delivery and performance of this Note has been
taken.
3.3 Enforceability. This Note is the legal, valid and binding
obligation of Maker, enforceable in accordance with its terms.
3.4 No Conflict. The execution, delivery and performance of this
Note by Maker are not in contravention of any requirement of law or any
indenture, contract, lease, agreement, instrument or other commitment to which
it is a party or by which it or any of its properties are bound and will not,
except as contemplated herein, result in the imposition of any Liens (as defined
in Section 4.8) upon any of its properties.
3.5 Consents and Filings. No consent, authorization, delivery and
performance of this Note, or the continuing operations of Maker, except those
that have been obtained or made.
3.6 Government Regulation. Maker is not subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, the Investment Company Act of 1940, or any other
requirement of law that limits its ability to incur indebtedness or its ability
to consummate the transactions contemplated in this Note.
3.7 No Judgments or Litigation. Except as disclosed in the
Agreement, no judgments, orders, writs or decrees are outstanding against Maker
nor is there now pending or, to the best of Maker's knowledge after diligent
inquiry, threatened, any litigation, contested claim, investigation,
arbitration, or governmental proceeding by or against Maker.
<PAGE>
3.8 No Defaults. Maker is not in default under any term of any
indenture, contract, lease, agreement, instrument or other commitment to which
it is a party or by which it is bound. Maker knows of no dispute regarding any
such indenture, contract, lease, agreement, instrument or other commitment.
3.9 Corporate Existence. Maker shall (i) maintain its corporate
existence, (ii) maintain in full force and effect all licenses, bonds,
franchises, leases, trademarks and qualifications to do business, and all
patents, contracts and other rights necessary or advisable to the profitable
conduct of its business, (iii) continue in, and limit its operations to, the
same general lines of business as presently conducted by it and (iv) comply with
all requirements of law.
3.10. Guarantee. Maker shall deliver, prior to the execution
of this Note or concurrently herewith, the Guarantee (as defined below) whereby
the Guarantor (as defined below) as parent of Maker shall execute the Guarantee
in favor of Payee, guaranteeing payment of the outstanding principal, accrued
interest and all costs, fees and expenses arising hereunder.
3.11 Further Assurances. Maker shall take all such further
actions and execute all such further documents and instruments as Payee may at
any time reasonably determine to be necessary or desirable to further carry out
and consummate the transactions contemplated by this Note, or to cause the
execution, delivery and performance of this Note to be duly authorized.
Subordination to Senior Obligations.
4. Subordination.
4.1 (a) Agreement to Subordinate. Payee agrees, for itself
and each subsequent holder of this Note or the indebtedness evidenced hereby
(collectively, the "Debt"), that the Debt is expressly "subordinate and junior
in right of payment" (as that phrase is defined in clause (b) below) to all
Senior Obligations (as defined in Section 4.8). Payee by accepting this Note
acknowledges and agrees that these subordination provisions set forth in this
Article 4 are, and are intended to be, an inducement and a consideration to each
holder of any Senior Obligation, whether such Senior Obligation was created or
acquired before or after the issuance of this Note, to acquire and continue to
hold, or to continue to hold, such Senior Obligation and such holder of Senior
Obligations shall be deemed conclusively to have relied on such subordination
provisions in acquiring and continuing to hold, or continuing to hold, such
Senior Obligations.
<PAGE>
(b) "Subordinate and junior in right of payment" means
that:
(i) no part of the Debt shall have any claim to
the assets of Maker on a parity with or prior to the claim of the Senior
Obligations;
(ii) unless and until the Senior Obligations have
been paid in full and any commitment to lend in respect thereof has been
terminated, without the express prior written consent of each holder of Senior
Obligations, Payee will not take, demand (including by means of any legal
action) or receive from Maker, and Maker will not make, give or permit, directly
or indirectly, by set-off, redemption, purchase or in any other manner, any
payment of or security for (except for such security granted herein) the whole
or any part of the Debt; provided, however, that (x) at any time, except when a
default in the performance or observance of any term or condition relating to
any Senior Obligation has occurred and is continuing or would result therefrom,
Maker may make, and Payee may receive, scheduled payments or mandatory
repayments in accordance with Section 2.3 of this Note on account of principal
of and interest on the Debt in accordance with the terms hereof and (y) upon the
acceleration of the maturity of any Senior Obligations, Payee may accelerate the
scheduled maturities of the Debt if and to the extent permitted hereby at such
time but such acceleration shall not give Payee any right to take, demand
(including by means of any legal action) or receive from Maker, or Maker the
right to make, give or permit, directly or indirectly, by set-off, redemption,
purchase or in any other manner, any payment of or security for the whole or any
part of the Debt unless and until the Senior Obligations have been paid in full;
and
(iii) without limitation on any other provision of
this Section 4, the security interest of the Payee on the Collateral will be
junior in priority to any interest of any holder of Senior Obligations therein
as defined in the Security Agreement.
(c) The expressions "prior payment in full", "payment
in full", "paid in full" and any other similar terms or phrases when used herein
with respect to the Senior Obligations shall mean the payment in full in cash,
in immediately available funds, of all of the Senior Obligations.
4.2 Additional Provisions Concerning Subordination.
(a) Payee and Maker agree that upon any payment or
distribution of the assets of Maker upon a total or partial liquidation or a
total or partial dissolution of Maker or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to Maker or its
property:
<PAGE>
(i) all Senior Obligations shall be paid in full
before any payment or distribution is made with respect to the Debt; and
(ii) any payment or distribution of assets of Maker,
whether in cash, property or securities, to which Payee would be entitled except
for the provisions hereof, shall be paid or delivered by Maker, or any receiver,
trustee in bankruptcy, liquidating trustee, disbursing agent or other person or
entity making such payment or distribution, directly to the holders of the
Senior Obligations or their representative, ratably in accordance with the
amounts thereof, to the extent necessary to pay in full all Senior Obligations,
before any payment or distribution shall be made to Payee.
(b) If any payment or distribution from the assets of
Maker, whether consisting of money, property or securities, be collected or
received by Payee in respect of the Debt, except payments of principal or
interest permitted to be made at the time of payment as provided in Section
4.1(b) (ii)(x) above, Payee forthwith shall deliver the same to the holders of
the Senior Obligations or their representative, ratably in accordance with the
amounts thereof, if required, to be applied to the payment or prepayment of the
Senior Obligations until the Senior Obligations are paid in full. Until so
delivered, such payment or distribution shall be held in trust by Payee as the
property of such holders of the Senior Obligations, segregated from other funds
and property held by Payee.
4.3 Subrogation. Subject to the payment in full of the Senior
Obligations, Payee shall be subrogated to the rights of the holders of the
Senior Obligations to receive payments or distributions of assets of Maker in
respect of the Senior Obligations until the Senior Obligations shall be paid in
full.
4.4 Consent of Payee.
(a) Payee consents that, without the necessity of any
reservation of rights against Payee, and without notice to or further assent by
Payee:
(i) any demand for payment of any Senior Obligations
made by any holder of Senior Obligations may be rescinded in whole or in part by
or on behalf of such holder, and any Senior Obligation may be continued, and the
Senior Obligations, or the liability of Maker or any guarantor or any other
party upon or for any part thereof, or any collateral security or guarantee
therefor or right of offset with respect thereto, or any obligation or liability
of Maker or any other party under any agreement, may, from time to time, in
whole or in part, be renewed, extended, modified, accelerated, compromised,
waived, surrendered, or released by or on behalf of any holder of Senior
Obligations; and
<PAGE>
(ii) the terms and conditions of any Senior
Obligation may be amended, increased, modified, supplemented or terminated, in
whole or in part, as the holders thereof may deem advisable from time to time,
and any collateral security at any time held for the payment of any of the
Senior Obligations may be sold, exchanged, waived, surrendered or released, in
each case all without notice to or further assent by Payee, which will remain
bound under this Agreement, and all without impairing, abridging, releasing of
affecting the subordination provided for herein.
(b) Payee waives any and all notice of the creation,
renewal, extension, increase or accrual of any of the Senior Obligations and
notice of or proof of reliance by the holders thereof upon this Note. The Senior
Obligations, and any of them, shall be deemed conclusively to have been created,
contracted or incurred in reliance upon this Agreement, and all dealings between
Maker and the holders of the Senior Obligations shall be deemed to have been
consummated in reliance upon this Agreement. Payee acknowledges and agrees that
the holders of the Senior Obligations have relied upon the subordination
provided for herein in entering into any agreement with respect to the Senior
Obligations. Payee waives notice of or proof of reliance on this Agreement and
protest, demand for payment and notice of default.
4.5 Senior Obligations Unconditional. All rights and interest of the
holders of the Senior Obligations hereunder, and all agreements and obligations
of Payee and Maker hereunder, shall remain in full force and effect irrespective
of:
(a) any lack of validity or enforceability of any
document, instrument or agreement relating to any Senior Obligation;
(b) any change in the time, manner or place of payment of,
or in any other term of, all or any of the Senior Obligations, or any amendment
or waiver or other modification, whether by course of conduct or otherwise, of
the terms of any Senior Obligations;
(c) any exchange, release or nonperfection of any security
interest in any collateral, or any release, amendment, waiver or other
modification, whether in writing or by course of conduct or otherwise, of all or
any of the Senior Obligations or any guarantee thereof; or
(d) any other circumstances which otherwise might
constitute a defense available to, or a discharge of, Maker in respect of the
Senior Obligations or this Note.
<PAGE>
4.6 Further Assurances. Payee and Maker at their own expense and at
any time from time to time, upon the written request of the holders of any
Senior Obligations or their representative, will promptly and duly execute and
deliver such further instruments and documents and take such further actions as
such holders of the Senior Obligations or their representative reasonably may
request for the purposes of obtaining or preserving the full benefits hereof and
of the rights and powers herein granted.
4.7 Powers Coupled With An Interest. All powers, authorizations and
agencies contained in this Article 4 are coupled with an interest and are
irrevocable until the Senior Obligations are paid in full and all commitments in
respect thereof are terminated.
4.8 Certain Terms Defined.
(a) "Senior Obligations" shall mean the collective
reference to the unpaid principal of and interest on all Indebtedness of Maker
(including, without limitation, interest accruing at the then applicable rate
after the maturity of any Indebtedness and interest accruing at the then
applicable rate after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating to
Maker, whether or not a claim for post-filing or post-petition interest is
allowed in such proceeding), whether direct or indirect, absolute or contingent,
due or to become due, or now existing or hereafter incurred, which may arise
under, out of, or in connection with, such Indebtedness of Maker, whether on
account of principal, interest, reimbursement obligations, fees, indemnities,
costs, expenses or otherwise.
(b) "Indebtedness" shall mean (a) all indebtedness of
Maker for borrowed money or for the deferred purchase price of property or
services (other than current trade liabilities incurred in the ordinary course
of business and payable in accordance with customary practices), (b) any other
indebtedness of Maker which is evidenced by a note, bond, debenture or similar
instrument, (c) all obligations of Maker under capitalized leases, (d) all
obligations of Maker in respect of acceptances issued or created for the account
of Maker, (e) all liabilities secured by any Lien on any property owned by Maker
even though Maker has not assumed or otherwise become liable for the payment
thereof and (f) all obligations of Maker in respect of interest rate or currency
exchange hedging agreements or arrangements including swaps.
(c) "Lien" shall mean any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other), charge
or other security interest or any preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement and any capitalized lease having substantially the same economic
effect as any of the foregoing).
<PAGE>
(d) "Collateral" shall mean all property and interests in
property now owned or hereafter acquired in or upon which a Lien has been or is
purported or intended to be have been granted to the Payee under the Security
Agreement.
(e) "Security Agreement" shall mean the security agreement
executed by the Maker, Payee and Debtor (as defined in the Security Agreement)
dated as of the date hereof (as amended, modified or supplemented from time to
time).
(g) "Guarantor" shall mean Resource America, Inc., a
Delaware corporation, and parent of Maker.
(f) "Guarantee" shall mean the Guarantee dated as of the
date hereof, executed by the Guarantor for the benefit of the Payee, and
attached hereto as Exhibit A.
5. Miscellaneous.
5.1 Waiver. The rights and remedies of Payee under this Note shall be
cumulative and not alternative. No waiver by Payee of any right or remedy under
this Note shall be effective unless in a writing signed by Payee. No failure to
exercise, delay in exercising, or single or partial exercise of any right or
remedy by Payee, and no course of dealing between Maker and Payee, shall
constitute a waiver of, or shall preclude any other or further exercise of the
same right or remedy. Maker hereby waives presentment, demand, protest and
notice of dishonor and protest.
5.2 Notices. Any notice required or permitted to be given hereunder
shall be given in accordance with Section 11.3 of the Agreement.
5.3 Severability. If any provision in this Note is construed to be
invalid, illegal or unenforceable, then the remaining provisions shall not in
any way be affected thereby and shall be enforced without regard thereto.
5.4 Governing Law; Waiver of Trial by Jury. THIS NOTE SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
DELAWARE AS APPLIED TO CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF
DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. MAKER HEREBY
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE FEDERAL AND
DELAWARE STATE COURTS LOCATED IN THE CITY OF WILMINGTON IN CONNECTION WITH ANY
SUIT, ACTION OR PROCEEDING RELATED TO THIS NOTE OR ANY OF THE MATTERS
CONTEMPLATED HEREBY, IRREVOCABLY WAIVES ANY DEFENSE OF LACK OF PERSONAL
JURISDICTION AND IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUIT,
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT. MAKER
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER
APPLICABLE LAW, ANY
<PAGE>
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. MAKER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF
ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING
OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO MAKER AT
ITS NOTICE ADDRESS SET FORTH IN SECTION 11.3 OF THE AGREEMENT. NOTHING HEREIN
SHALL AFFECT THE RIGHT OF PAYEE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE AGAINST MAKER IN ANY OTHER
JURISDICTION.
THE RIGHT TO TRIAL BY JURY IS HEREBY WAIVED BY MAKER AND PAYEE.
5.5 Parties in Interest. This Note shall bind Maker and its
successors and assigns. This Note may be assigned or transferred by Payee
without the consent of Maker.
5.6 Section Headings. The section and subsection headings in this
Note are for convenience of reference only, do not constitute a part of this
Note, and shall not affect its interpretation.
5.7 References. All words used in this Note shall be construed to be
of such number and gender as the context requires or permits. Unless a
particular context clearly provides otherwise, the words "hereof" and
"hereunder" and similar references refer to this Note in its entirety and not to
any specific section or subsection hereof.
<PAGE>
IN WITNESS WHEREOF, Maker has executed this Note as of the
date first stated above.
FIDELITY LEASING, INC.,
a Pennsylvania corporation
By:__________________________________
<PAGE>
EXHIBIT A
---------
GUARANTEE
THIS GUARANTEE (this "Guarantee"), dated as of February 4,
1999, is executed by Resource America, Inc., a Delaware corporation (the
"Guarantor"), for the benefit of Japan Leasing (U.S.A.), Inc., a Delaware
corporation (the "Lender") under the Promissory Note (as defined below).
Capitalized terms used but not otherwise defined herein shall have the meanings
provided for such terms in the Promissory Note.
RECITALS:
---------
WHEREAS, it is a condition to the effectiveness of that
certain Promissory Note (as amended, supplemented or otherwise modified from
time to time, the "Promissory Note"), dated as of February 4, 1999, executed by
Fidelity Leasing, Inc., a Pennsylvania corporation (the "Borrower"), in favor of
the Lender that the Guarantor execute and deliver this Guarantee; and
WHEREAS, it is in the best interests of the Guarantor to
execute this Guarantee inasmuch as the Guarantor will derive substantial
benefits from the transactions contemplated by the Promissory Note.
NOW, THEREFORE, in consideration of the foregoing and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Guarantor hereby agrees as follows:
1. The Guarantor hereby irrevocably and unconditionally guarantees:
(a) the full and prompt payment when due (whether
at maturity, by optional or mandatory prepayment, upon acceleration or
otherwise) of the principal and interest payable on the Promissory Note
in accordance with the terms, conditions and covenants contained
therein;
(b) the payment of all other obligations and
indebtedness (including, without limitation, indemnities, fees and
interest thereon and all obligations which, but for the automatic stay
under Section 362(a) of the Bankruptcy Code and the operation of
Sections 502(b) and 506(b) of the Bankruptcy Code, 11 U.S.C. ss.502(b)
and ss.506 (b), would become due) of the Borrower now existing or
hereafter incurred under, arising out of, or in connection with the
Promissory Note;
(c) the due performance and compliance by the
Borrower with all of the terms, conditions and agreements contained in
the Promissory Note;
<PAGE>
GUARANTEE
(d) the payment of all sums advanced by the Lender
under or pursuant to the Promissory Note, with interest thereon from
the due date thereof, until paid, at the rate specified in the
Promissory Note; and
(e) all renewals, extensions, amendments and
changes of, or substitutions or replacements for, all or any part of
the foregoing (all such principal, premiums, interest, obligations,
indebtedness, performance, compliance and payments, collectively, the
"Guaranteed Obligations").
All payments by the Guarantor under this Guarantee shall be made
on the same basis as payments by the Borrower under the Promissory Note.
This guarantee is a primary obligation of the Guarantor and is
a guarantee of payment, and not merely of collection.
2. The Lender may, at any time and from time to time, without
the consent of, or notice to, the Guarantor, without incurring responsibility to
the Guarantor and without impairing or releasing the obligations of the
Guarantor hereunder, upon or without any terms or conditions and in whole or in
part:
(a) change the manner, place or terms of payment of, and/or
change or extend the time of payment of, renew or alter, any of the
Guaranteed Obligations, any security therefor, or any liability
incurred in respect thereof, and the guarantee herein made shall apply
to the Guaranteed Obligations as so changed, extended, renewed or
altered;
(b) sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order any property by
whomsoever at any time pledged or mortgaged to secure, or howsoever
securing, the Guaranteed Obligations or any liabilities (including any
of those hereunder) incurred in respect thereof or hereof, and/or any
offset thereagainst;
(c) exercise or refrain from exercising any rights against the
Borrower, any other guarantor or others, or otherwise act or refrain
from acting;
(d) settle or compromise any of the Guaranteed Obligations, any
security therefor or any liability (including any of those hereunder)
incurred in respect thereof or hereof, and may subordinate the payment
of all or any part thereof to the payment of any liability (whether due
or not) of the Borrower to creditors of the Borrower other than the
Lender and the Guarantor;
<PAGE>
GUARANTEE
(e) apply any sums by whomsoever paid or howsoever realized to
any liability or liabilities of the Borrower to the Lender regardless
of what liabilities or liabilities of the Borrower remain unpaid;
(f) consent to or waive any breach of, or any act, omission or
default under, the Promissory Note, or otherwise amend, modify or
supplement the Promissory Note; or
(g) act or fail to act in any manner referred to in this
Guarantee which may deprive the Guarantor of its right to subrogation
against the Borrower to recover full indemnity for any payments made
pursuant to this Guarantee.
3. The liability of the Guarantor hereunder is exclusive and
independent of any security for or other guarantee of the indebtedness of the
Borrower whether executed by such Guarantor, any other guarantor or by any other
Person, and the liability of the Guarantor hereunder shall not be affected or
impaired by any circumstance or occurrence whatsoever, including, without
limitation: (a) any direction as to the application of payment by the Borrower
or any other Person; (b) any other continuing or other guarantee, undertaking or
maximum liability of the Guarantor or of any other Person as to the indebtedness
of the Borrower; (c) any payment on or in reduction of any such other guarantee
or undertaking (it being understood that the payment obligations under the
Promissary Note may be reduced by any such payment under any such other
guarantee or undertaking); (d) any dissolution, termination or increase,
decrease or change in personnel by the Borrower; (e) any payment made to the
Lender in respect of the Guaranteed Obligations which the Lender repays the
Borrower or the Guarantor pursuant to court order in any bankruptcy,
reorganization, arrangement, moratorium or other debtor relief proceeding, and
the Guarantor waives any right to the deferral or modification of its
obligations hereunder by reason of any such proceeding; (f) any action or
inaction by the Lender as contemplated by Section 2 hereof; or (g) any
invalidity, irregularity or unenforceability of all or part of the Guaranteed
Obligations or any security therefor. Notwithstanding the foregoing, the
Guarantor agrees that this Guarantee shall continue to be effective or be
reinstated, as the case may be, if at any time any payment (in whole or in part)
of any of the Guaranteed Obligations is rescinded or must otherwise be restored
by the Lender, upon the insolvency, bankruptcy or reorganization of the Borrower
or otherwise, as though such payment had not been made.
4. The obligations of the Guarantor hereunder are independent
of the obligations of any other guarantor or the Borrower, and a separate action
or actions may be brought and prosecuted against the Guarantor whether or not
action is brought against any other guarantor or the Borrower, and whether or
not any other guarantor or the Borrower be joined in any such action or actions.
<PAGE>
GUARANTEE
5. In order to induce the Lender to make the loan pursuant to
the Promissory Note, the Guarantor makes the following representations,
warranties and agreements:
5.1 The Guarantor (a) is a duly organized and validly existing
corporation in good standing under the laws of the state of Delaware, (b) has
the corporate power and authority to own its property and assets and to transact
the business in which it is engaged and (c) is duly qualified as a foreign
corporation and in good standing in each jurisdiction where the ownership,
leasing or operation of property or the conduct of its business requires such
qualification, except where failure to so qualify would not reasonably be
expected to have a material adverse effect on the performance, business,
properties, assets, nature of assets or condition (financial or otherwise) of
the Guarantor.
5.2 The Guarantor has the corporate power to execute, deliver
and perform the terms and provisions of this Guarantee and has taken all
necessary corporate action to authorize the execution, delivery and performance
by it of this Guarantee. The Guarantor has duly executed and delivered this
Guarantee, and this Guarantee constitutes the legal, valid and binding
obligation of the Guarantor enforceable in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally and by general equitable
principles (regardless of whether the issue of enforceability is considered in a
proceeding in equity or at law).
5.3 Neither the execution, delivery or performance by the
Guarantor of this Guarantee, nor compliance by it with the terms and provisions
hereof, (a) will contravene any provision of any law, statute, rule or
regulation or any order, writ, injunction or decree of any court or governmental
instrumentality, (b) will conflict or be inconsistent with or result in any
breach of any of the terms, covenants, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of (or the
obligation to create or impose) any Lien upon any of the property or assets of
the Guarantor pursuant to the terms of any material indenture, mortgage, deed of
trust, credit agreement, loan agreement or any other agreement, contract or
instrument to which the Guarantor is a party or by which it or any of its
property or assets is bound or to which it may be subject or (c) will violate
any provision of the Certificate of Incorporation or By-Laws of the Guarantor.
5.4 No order, consent, approval, license, authorization or
validation of, or filing, recording or registration with, or exemption by, any
governmental or public body or authority, or any subdivision thereof (except as
have been obtained or made prior to the date hereof), is required to authorize,
or is required in connection with, the execution, delivery and performance of
this Guarantee or the legality, validity, binding effect or enforceability of
this Guarantee.
<PAGE>
GUARANTEE
5.5 There are no actions, suits or proceedings pending or, to
the best knowledge of the Guarantor, threatened, except as disclosed in
Guarantor's Form 10-K for the year ended September 30, 1998, that are reasonably
likely to have a material adverse effect on the Guarantor's performance
hereunder.
5.6 The Guarantor is in compliance with all applicable statutes,
regulations and orders of, and all applicable restrictions imposed by, all
governmental bodies, domestic or foreign, in respect of the conduct of its
business and the ownership of its property (including applicable statutes,
regulations, orders and restrictions relating to environmental standards and
controls) except where such noncompliance could not reasonably be expected to
have a material adverse effect on the performance, business, properties, assets,
nature of assets or condition (financial or otherwise) of the Guarantor.
5.7 The Guarantor is not an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
5.8 The Guarantor is not a "holding company," or a "subsidiary
company" of a "holding company," or an "affiliate" of a "holding company" or of
a "subsidiary company" of a "holding company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
6. The Guarantor covenants and agrees that on and after the
date hereof and until the termination of this Guarantee:
6.1 Except as otherwise permitted under the Promissory Note, it
will maintain its existence and rights as a corporation in full force and effect
so long as this Guarantee is outstanding, and will perform all of its
obligations under the terms of each indenture, mortgage, deed of trust, credit
agreement, loan agreement or any other agreement, contract or instrument by
which it is bound.
6.2 It will, at any time and from time to time, upon the request
of the Lender and at the Guarantor's expense, promptly and duly execute and
deliver or cause to be executed and delivered any and all further instruments
and documents and take such further action as the Lender may reasonably request
to effect the purposes of this Guarantee.
7. This Guarantee is a continuing one and all liabilities to
which it applies or may apply under the terms hereof shall be conclusively
presumed to have been created in reliance hereon. No failure or delay on the
part of the Lender in exercising any right, power or privilege hereunder and no
course of dealing between the Guarantor and the Lender shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further
<PAGE>
GUARANTEE
exercise thereof or the exercise of any other right, power or privilege. The
rights, powers and remedies herein expressly provided are cumulative and not
exclusive of any rights, powers or remedies which the Lender would otherwise
have. No notice to or demand on the Guarantor in any case shall entitle the
Guarantor to any other further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the Lender to any other or
further action in any circumstances without notice or demand.
8. This Guarantee shall be binding upon the Guarantor and its
successors and assigns and shall inure to the benefit of the Lender and its
successors and assigns.
9. This Guarantee will terminate upon the payment in full of
the principal, interest, fees, indemnities then due and payable, costs, expenses
and other amounts payable under the Promissory Note, without respect to any
termination of the Promissory Note. Neither this Guarantee nor any provision
hereof may be changed, waived, discharged or terminated except by a writing
signed by the Guarantor and the Lender. In the case of any waiver, the
Guarantor, the Borrower and the Lender shall be restored to their former
position and rights hereunder and under the Promissory Note, and any Event of
Default waived shall be deemed to be cured and not continuing, but no such
waiver shall extend to any subsequent or other Event of Default, or impair any
right consequent thereon.
10. The Guarantor acknowledges that an executed (or conformed)
copy of the Promissory Note has been made available to its principal executive
officers and such officers are familiar with the contents thereof.
11. All notices and other communications hereunder shall be made
at the addresses, in the manner and with the effect provided in Section 5.2 of
the Promissory Note, provided that, for this purpose, the address of the
Guarantor shall be in care of the Borrower or as otherwise specified in writing
by the Guarantor to the Lender.
12. If claim is ever made upon the Lender for repayment or
recovery of any amount or amounts received in payment or on account of any of
the Guaranteed Obligations and any of the aforesaid payees repays all or part of
said amount by reason of (a) any judgment, decree or order of any court or
administrative body having jurisdiction over such payee or any of its property
or (b) any settlement or compromise of any such claim effected by such payee
with any such claimant (including the Borrower), then and in such event the
Guarantor agrees that any such judgment, decree, order, settlement or compromise
shall be binding upon it, notwithstanding any revocation hereof or the
cancellation of the Promissory Note or other instrument evidencing any liability
of the Borrower, and the Guarantor shall be
<PAGE>
GUARANTEE
and remain liable to the aforesaid payees hereunder for the amount so repaid or
recovered to the same extent as if such amount had never originally been
received by any such payee.
13. Any acknowledgment or new promise, whether by payment of
principal or interest or otherwise and whether by the Borrower or others
(including the Guarantor), with respect to any of the Guaranteed Obligations
shall, if the statute of limitations in favor of the Guarantor against the
Lender shall have commenced to run, toll the running of such statute of
limitations, and if the period of such statute of limitations shall have
expired, prevent the operation of such statute of limitations.
14. This Guarantee and the rights and obligations of the Lender
and the Guarantor hereunder shall be construed in accordance with and governed
by the law of the State of Delaware.
14.1 Any legal action or proceeding with respect to this
Guarantee may be brought in any federal or state court located in the city of
Wilmington, Delaware, and, by execution and delivery of this Agreement, the
Guarantor hereby irrevocably accepts for itself and in respect of its property,
generally and unconditionally, the jurisdiction of the aforesaid courts.
14.2 The Guarantor further irrevocably consents to the service of
process out of any of the aforementioned courts in any such action or proceeding
by the mailing of copies thereof by registered or certified mail, postage
prepaid, to the Guarantor at its address set forth opposite its signature below,
such service to become effective 5 days after such mailing. Nothing herein shall
affect the right of the Lender to serve process in any other manner permitted by
law or to commence legal proceedings or otherwise proceed against the Guarantor
in any other jurisdiction.
14.3 The Guarantor hereby irrevocably waives any objection it may
now or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Guarantee brought in the
courts referred to above and hereby further irrevocably waives and agrees not to
plead or claim in any such court that any such action or proceeding brought in
any such court has been brought in an inconvenient forum.
15. The Guarantor hereby:
(a) waives any right to require the Lender to proceed against
the Borrower, any other guarantor or any other party, proceed against or
exhaust any security held from the Borrower, any other guarantor or any
other party or pursue any other remedy in the Lender's power whatsoever;
<PAGE>
GUARANTEE
(b) waives any defense based on or arising out of any defense of
the Borrower, any other guarantor or any other party other than payment
in full of the Guaranteed Obligations, including, without limitation,
any defense based on or arising out of the disability of the Borrower,
any other guarantor or any other party, the absence of any other party
in any proceeding or the unenforceability of the Guaranteed Obligations
or any part thereof from any cause, or the cessation from any cause of
the liability of the Borrower other than payment in full of the
Guaranteed Obligations;
(c) agrees that the Lender may, at its election, foreclose on
any security held by it by one or more judicial or nonjudicial sales,
whether or not every aspect of any such sale is commercially reasonable
(to the extent such sale is permitted by applicable law), or exercise
any other right or remedy the Lender may have against the Borrower or
any other party, or any security, without affecting or impairing in any
way the liability of the Guarantor hereunder, and waives any defense
arising out of any such election by the Lender, even though such
election operates to impair or extinguish any right of reimbursement or
subrogation or other right or remedy of the Guarantor against the
Borrower or any other party or any security;
(d) waives all presentments, demands for performance, protests
and notices, including, without limitation, notices of nonperformance,
notices of protest, notices of dishonor, notices of acceptance of this
Guarantee, and notices of the existence, creation or incurring of new
or additional indebtedness;
(e) assumes all responsibility for being and keeping itself
informed of the financial condition and assets of the Borrower, and of
all other circumstances bearing upon the risk of non-payment of the
Guaranteed Obligations and the nature, scope and extent of the risks
the Guarantor assumes and incurs hereunder, and agrees that the Lender
shall have no duty to advise the Guarantor of information known to it
regarding such circumstances or risks;
(f) so long as any of the Guaranteed Obligations remain unpaid,
the Guarantor hereby agrees that it will not claim and hereby
irrevocably waives for such period all rights of subrogation it may at
any time otherwise have as a result of this Guarantee (whether
contractual, under Section 509 of the United States Bankruptcy Code, or
otherwise) to the claims of the Lender against the Borrower or any
other guarantor of the Guaranteed Obligations (collectively, the "Other
Parties") and all contractual, statutory or common law rights of
reimbursement, contribution or indemnity from any Other Party it may at
any time otherwise have as a result of this Guarantee;
<PAGE>
GUARANTEE
(g) waives any right to enforce any other remedy that the Lender
now has or may hereafter have against any Other Party, any endorser or
any other guarantor of all or any part of the Guaranteed Obligations
and any benefit of, and any right to participate in, any security or
collateral given to or for the benefit of the Lender to secure payment
of Guaranteed Obligations; and
(h) waives all claims (as such term is defined in the United
States Bankruptcy Code) it may at any time otherwise have against the
Borrower arising from any transaction whatsoever, including, without
limitation, its right to assert or enforce any such claims.
The Guarantor warrants and agrees that each of the waivers set forth in this
Guarantee is made with full knowledge of its significance and consequences and
that if any of such waivers are determined to be contrary to any applicable law
or public policy, such waivers shall be effective only to the maximum extent
permitted by law.
<PAGE>
GUARANTEE
IN WITNESS WHEREOF, the Guarantor has caused this Guarantee to
be executed and delivered as of the date first above written.
RESOURCE AMERICA, INC.
By:____________________________
Name:
Title:
<PAGE>
Exhibit 7.1(h)
ESCROW AGREEMENT
----------------
THIS ESCROW AGREEMENT (this "Agreement") is dated this 4th day of
February, 1999, by and among Fidelity Leasing, Inc., a Pennsylvania corporation
("Buyer"), Japan Leasing (U.S.A.), Inc., a Delaware corporation ("Seller"), and
Wilmington Trust Company, a Delaware banking corporation ("Escrow Agent").
WHEREAS, pursuant to a Stock Purchase Agreement (the "Purchase
Agreement") dated December 15, 1998 by and between Buyer and Seller, Seller has
agreed to deposit in escrow a total of $5,000,000 for the purpose of providing
security for the satisfaction of the obligation to make payment (a) in respect
of the Special Contingent Liabilities and (b) of Damages;
WHEREAS, the parties hereto have designated the Escrow Agent to act as
escrow agent under this Agreement; and
WHEREAS, a copy of the Purchase Agreement has been delivered to the
Escrow Agent and the Escrow Agent is willing to become the Escrow Agent in
connection therewith pursuant to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties hereto agree as follows:
1. Definitions. Capitalized terms used but not otherwise defined herein shall
have the respective meanings ascribed to them in the Purchase Agreement.
2. Appointment of Escrow Agent. The Escrow Agent is hereby appointed by the
other parties hereto to act as escrow agent hereunder. The Escrow Agent hereby
accepts such appointment and agrees to hold and administer the Escrow Fund (as
defined below) in accordance with the terms and subject to the conditions set
forth herein.
3. Establishment of Escrow Fund and Deposit of Cash. Upon the execution of
this Escrow Agreement, Seller shall deliver to the Escrow Agent funds in the
amount of $5,000,000 and, upon prior notice from Buyer to the Escrow Agent Buyer
may deliver to the Escrow Agent additional funds at any time prior Release Date
(all of such funds, collectively, the "Escrow Fund"). The Escrow Fund shall be
held by the Escrow Agent in accordance with the terms and conditions hereinafter
set forth.
<PAGE>
4. Escrow and Indemnification. Upon the terms and subject to the conditions of
this Agreement, the Escrow Fund shall secure the indemnification obligations of
Seller pursuant to Sections 10.1(a) and 10.1(b) of the Purchase Agreement.
5. Investment of Escrow Fund. The Escrow Agent shall, as soon as reasonably
practical after it receives the Escrow Fund from Seller, and from time to time
during the term hereof, invest the Escrow Fund, including any interest generated
thereby and other distributions or earnings paid in respect thereof, in the U.S.
Government Portfolio of the Rodney Square Fund, a registered money market mutual
fund the investment advisor of which is an affiliate of the Escrow Agent and the
fees of such interment advisor paid by the Fund are addition to the fees of the
Escrow Agent hereunder. Escrow Agent may also invest the Escrow Fund in bank
money market accounts, bank short-term certificates of deposit, short-term
United States Government securities, or other interest-bearing accounts and
funds as the Escrow Agent shall select giving due regard to the protection and
preservation of principal, provided that any such certificates of deposit and
short-term securities shall have a maturity not more than 30 days after
purchase. The Escrow Agent shall hold the Escrow Fund in escrow upon the terms
and subject to the conditions of this Agreement. The Escrow Agent shall not be
responsible for any loss suffered from any investment except loss resulting from
its gross negligence or willful misconduct.
6. Interest, Etc.
(a) All interest, distributions and other earnings generated
by or paid in respect of the Escrow Fund shall be added to the Escrow Fund after
setting aside reserves sufficient for the payment of any Federal income taxes
imposed thereon and the parties hereto agree that such interest, distributions
or other earnings shall constitute additional security for the indemnification
obligations referred to in Paragraph 4.
(b) The parties hereto agree that (i) the Escrow Fund
established by this Agreement shall be treated for Federal income tax purposes
as a trust, all of which is deemed to be owned by Seller, under subpart E of
Part I of subchapter J of the Code, and (ii) Seller shall report for Federal,
state and local income tax purposes all income or other tax items derived from
the investment of or otherwise with respect to the Escrow Fund. Prior to the
filing by Seller of any income tax return that includes income reportable
pursuant to the preceding sentence, the Escrow Agent shall pay to Seller an
amount equal to 45% of such income promptly after delivery of a request and
instructions for payment to the Escrow Agent.
7. Payments from the Escrow Fund. Payment shall be made from the Escrow Fund
promptly upon Escrow Agent's receipt of, and in accordance with, written
instructions signed jointly by Buyer and Seller and delivered in accordance with
Paragraph 19. In order to be
<PAGE>
effectively given, any such written instructions shall refer to the particular
Section of the Purchase Agreement pursuant to which Seller is indemnifying Buyer
out of the Escrow Fund. Upon delivery of such written instructions to the Escrow
Agent, payment may be made to Buyer, Seller or any third party designated by
them therein.
8. Release to Seller from Escrow. On the last Business Day of the calendar
month that is the fourteenth month after the month in which the Closing occurs
(the "Release Date"), the Escrow Agent shall disburse to Seller all remaining
amounts, including all interest, distributions and other earnings, held in the
Escrow Fund; provided, however, that if the Escrow Agent shall have received,
prior to the Release Date, a notice from Purchaser of any claim against the
Escrow Fund that it may have under Section 10.1(a) of the Purchase Agreement,
then the Escrow Agent shall continue to hold the amount of such claim in the
Escrow Fund until such claim is finally resolved; and provided, further, that in
the event any such claim by Purchaser is determined by the party resolving such
claim to have been frivolous, then Purchaser shall be required to pay to Seller
interest on any amount held in the Escrow Fund in respect of such frivolous
claim, from and after the Release Date to the date such amount is released to
Seller, at a rate of 12.5% per annum. The Escrow Agent shall pay any and all
amounts to due to Seller in accordance with written instructions delivered to
the Escrow Agent by Seller in accordance with Paragraph 19.
9. Termination of Escrow. This Agreement shall terminate upon the later of (i)
the release by the Escrow Agent of all amounts contained in the Escrow Fund in
accordance with this Agreement, and (ii) the Release Date; provided, however,
that the provisions of Paragraphs and 10(g) and 20 shall survive such
termination or the resignation or removal of the Escrow Agent pursuant to
Paragraph 11(a).
10. Responsibilities and Liabilities of Escrow Agent. The acceptance by the
Escrow Agent of its duties hereunder is subject to the following terms and
conditions, which the parties hereto hereby agree shall govern and control with
respect to the Escrow Agent's rights, duties, liabilities and immunities.
(a) The Escrow Agent shall not have any duty or obligation hereunder other
than to take such specific actions as are required of it from time to time under
the provisions hereof.
(b) The Escrow Agent shall be protected in acting upon any written notice,
request, waiver, consent, receipt or other paper or document furnished to it
pursuant to and in accordance with the provisions of this Escrow Agreement, not
only as to its due execution and the validity and effectiveness of its
provisions, but also as to the truth and acceptability of any information
therein contained which it in good faith believes to be genuine and what it
<PAGE>
purports to be. The Escrow Agent shall not be under any duty to accept or to act
upon any notice, request or other paper or document given, made or furnished
which is not given, made or furnished pursuant to or in accordance with the
provisions of this Escrow Agreement.
(c) The Escrow Agent shall not be liable for any error of judgment, or for
any act done or steps taken or omitted by it in good faith, or for any mistake
of fact or law, or for anything which it may do or refrain from doing in
connection herewith, except its own gross negligence or willful misconduct,
following a final order by a court of competent jurisdiction.
(d) The Escrow Agent may consult with, and obtain advice from legal counsel
in the event of any question regarding its rights, duties, liabilities and
immunities hereunder, and it shall incur no liability and shall be fully
protected in acting or refusing to act in good faith in accordance with the
opinion and instructions of such counsel.
(e) The Escrow Agent shall not be bound by any notice of a claim, or demand
with respect thereto, or any waiver, modification, amendment, termination or
rescission of this Escrow Agreement, unless received by it in writing in
accordance with the provisions of this Escrow Agreement, and, if its duties
herein are affected thereby, unless it shall have given its prior written
consent thereto.
(f) Should any controversy arise between Buyer, Seller and/or the Escrow
Agent with respect to this Agreement or any rights to delivery or payment of the
Escrow Fund or any portion thereof, the Escrow Agent shall have the right to
institute a bill of interpleader or other appropriate legal action in any court
of competent jurisdiction to determine the rights of the parties. The cost of
such services shall be deemed an expense of the Escrow Agent hereunder.
(g) The Escrow Agent shall be entitled to be indemnified, held harmless and
defended, jointly and severally by Buyer and Seller, from and against any and
all losses, claims, liabilities and expenses, including the reasonable fees of
its counsel, which it may suffer or incur hereunder or in connection herewith,
except such as shall result from its gross negligence or willful misconduct, as
found in a final order by a court of competent jurisdiction. If any such losses,
claims, liabilities or expenses result from any acts or omissions of Buyer or
Seller, the Escrow Agent shall have the right to recover such losses, claims,
liabilities and expenses from Buyer or Seller, as the case may be. The Escrow
Agent shall have a first lien on the Escrow Fund to secure its rights under this
subparagraph 10(g).
11. Successor Escrow Agent.
<PAGE>
(a) In the event the Escrow Agent becomes unavailable or
unwilling to continue in its appointed capacity hereunder, the Escrow Agent may
resign and be discharged from its duties or obligations hereunder by giving
notice of resignation to each of the parties hereto, specifying a date not less
than 60 days following such notice date when such resignation will take effect;
provided, however, that such resignation shall in no event take effect before
the successor to the Escrow Agent will have been appointed pursuant to this
Paragraph 11. Buyer and Seller shall mutually agree upon the appointment of a
successor to the Escrow Agent. The Escrow Agent shall promptly transfer the
Escrow Fund to such designated successor.
(b) Any corporation into which the Escrow Agent in its
individual capacity may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Escrow Agent in its individual capacity will be a
party, or any corporation to which substantially all of the corporate trust
business of the Escrow Agent in its individual capacity may be transferred,
shall be the Escrow Agent under this Agreement without further act.
12. Assignment and Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, representatives, successors and assigns.
13. Amendments. This Agreement may be amended or modified at any time or from
time to time in a writing executed by all of the parties hereto; provided,
however, that in the event the Escrow Agent does not agree to an amendment
otherwise agreed by each of Buyer and Seller, the Escrow Agent shall resign and
a successor escrow agent shall be appointed in accordance with Paragraph 11(a).
14. Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which shall constitute one
and the same instrument.
15. Entire Agreement. This Agreement and the Purchase Agreement together
constitute the entire understanding and agreement of the parties hereto with
respect to the subject matter hereof and supersede all prior agreements and
understandings, written or oral, between the parties hereto with respect to the
subject matter hereof.
16. Waivers. No waiver by any party hereto of any condition or of any breach
of any provision of this Agreement shall be effective unless in writing and
signed by a duly authorized representative of the party or parties granting such
waiver. No waiver by any party of any such condition or breach in any one
instance shall be deemed to be a further or continuing waiver of such condition
or breach or a waiver of any other condition or breach of any other provision
contained herein.
<PAGE>
17. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware without giving effect to the
principles of conflicts of law thereof.
18. Consent to Jurisdiction. With respect to any dispute arising under this
Agreement relating to (i) the delivery, ownership or right of possession of the
Fund or any portion thereof, (ii) the facts forming the basis of any
determination by the Escrow Agent hereunder, (iii) the duties of the Escrow
Agent hereunder or (iv) any other question arising hereunder, each of the
parties hereto consents to submit itself to the personal jurisdiction of any
state or federal court located in Wilmington, Delaware and irrevocably agrees
that it will not bring any action or proceeding relating to this Agreement in
any court other than a state or federal court located within Wilmington,
Delaware. Each of the parties hereto furthermore consents to service of process
upon it in the manner set forth in Paragraph 19 and accepts for itself and in
connection with its respective properties, generally and unconditionally, the
exclusive jurisdiction of the aforesaid courts and waives any defense of forum
non conveniens, and irrevocably agrees to be bound by any judgment rendered
thereby in connection with this Agreement.
19. Notices. All notices, requests, demands, notice of claims and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when delivered by hand with receipt or upon
receipt when mailed by certified mail, return receipt requested, postage
prepaid, properly addressed as follows, or to such other persons or addresses as
may be specified in a notice given in accordance herewith:
If to the Escrow Agent:
Wilmington Trust Company
1100 North Market Street
Wilmington, DE 19890
Facsimile: 302-651-8882
Attention: Richard M. Sutton, Corporate Trust Administration
If to Buyer:
Fidelity Leasing, Inc.
7 E. Skippack Pike
Ambler, Pennsylvania 19002
<PAGE>
Facsimile: 215-619-2830
Attention: Abraham Bernstein
If to Seller:
Japan Leasing (U.S.A.), Inc.
1251 Avenue of the Americas, 48th Floor
New York, New York 10020
Facsimile: 212-403-3150
Attention: Mr. Jun Ogihara
20. Escrow Agent Compensation. Escrow Agent shall be entitled to compensation
equal to (i) the sum of Five Thousand Eight Hundred Dollars ($5,800) (the
"Initial Fee") and an additional Four Hundred Sixteen Dollars ($416) per month
(the "Monthly Fee") for each month, if any, that it continues to act as Escrow
Agent hereunder after the Release Date ( the"Escrow Agent Fee") and (ii)
reimbursement for all reasonable out-of-pocket expenses incurred in performing
its duties under this Agreement, which fee and expenses shall be paid equally by
Buyer and Seller. The Initial Fee shall be payable at Closing and the Monthly
Fee shall be billed and due promptly upon receipt of an invoice. To the extent
not paid, the Escrow Agent shall be entitled to deduct amounts due from the
Escrow Fund.
21. The Escrow Agent may have other account relationships with the parties
hereto, none of which shall disqualify the Escrow Agent from serving hereunder.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed on the day and year first above written.
WILMINGTON TRUST COMPANY, Escrow Agent
By: _____________________________
Name:
Title:
FIDELITY LEASING, INC., Buyer
By: ______________________________
Name:
Title:
JAPAN LEASING (U.S.A.), INC., Seller
By: ______________________________
Name:
Title:
<PAGE>
Exhibit 7.1(i)
SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of February 4, 1999 (as the same may from
time to time be amended, restated, supplemented or otherwise modified, this
"Security Agreement"), is entered into among Fidelity Leasing, Inc., a
Pennsylvania corporation (the "Borrower"), JLA Credit Corporation, a Delaware
Corporation (the "Debtor"), and Japan Leasing (U.S.A.), Inc., a Delaware
corporation (together with its successors and permitted assigns, the "Secured
Party").
W I T N E S S E T H:
A. Borrower has concurrently with the execution of this Security Agreement,
delivered to the Secured Party a Promissory Note dated as of the date hereof (as
amended, restated, supplemented or otherwise modified, the "Promissory Note").
B. The Debtor has and will have derived substantial direct and indirect
benefit from the Promissory Note and loans made to the Borrower thereunder.
C. It is a condition precedent to the acceptance by the Secured Party of
the Promissory Note that the Debtor execute and deliver this Security Agreement.
D. To provide assurance for the payment of the obligations of Borrower
under the Promissory Note, the Debtor hereby provides to the Secured Party a
security interest in certain tangible property now owned or hereafter acquired
by the Debtor, as more fully described herein.
NOW, THEREFORE, in consideration of the premises, the agreements contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and in order to induce the Secured Party to
accept the Promissory Note, the Debtor hereby jointly and severally agrees with
the Secured Party as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. Capitalized terms used but not otherwise defined herein
shall have the respective meanings ascribed to such terms in the Promissory
Note.
"Account Debtor" shall mean the person who is obligated on a Receivable.
<PAGE>
"Accounts" shall mean "accounts" as such term is defined in Section 9-106
of the UCC.
"Chattel Paper" shall mean "chattel paper" (as such term is defined in
Section 9-105(1)(b) of the UCC) related to the Collateral.
"Collateral" shall have the meaning assigned to it in Article II hereof.
"Collateral Records" shall mean books, records, computer software, computer
printouts, customer lists, blueprints, technical specifications, manuals, and
similar items which relate to any Collateral.
"Documents" shall mean "documents" as such term is defined in Section
9-105(1)(f) of the UCC.
"Indebtedness" shall mean (a) all indebtedness of the Debtor, for borrowed
money or for the deferred purchase price of property or services (other than
current trade liabilities incurred in the ordinary course of business and
payable in accordance with customary practices), (b) any other indebtedness of
the Debtor, which is evidenced by a note, bond, debenture or similar instrument,
(c) all obligations of the Debtor, under capitalized leases, (d) all obligations
of the Debtor, in respect of acceptances issued or created for the account of
the Debtor, (e) all liabilities secured by any Lien on any property owned by the
Debtor, even though the Debtor has not assumed or otherwise become liable for
the payment thereof, and (f) all obligations of the Debtor, in respect of
interest rate or currency exchange hedging agreements or arrangements, including
swaps.
"Instruments" shall mean "instruments" (as such term is defined in Section
9-105(1)(i) of the UCC) related to the Collateral.
"Knowledge" shall mean, with respect to any Person, the current actual
knowledge of a natural person or the officers or similar agents of any Person
that is a corporation.
"Lease Contract" shall mean each of the lease contracts (as may be amended,
supplemented or otherwise modified from time to time), listed in the schedule
attached hereto as Schedule I, between the Debtor and its customers.
"Material Adverse Effect" means, relative to any occurrence of whatever
nature (including any adverse determination in any litigation, arbitration or
governmental investigation or proceeding), a materially adverse effect on:
(a) the financial condition, operations or prospects of the Debtor
taken as a whole; or
<PAGE>
(b) the ability of the Debtor to timely and fully perform any of its
respective material payment obligations or other material obligations under this
Security Agreement or any other credit document to which it is a party.
"Money" shall mean "money" as such term is defined in Section 1-201(24) of
the UCC.
"Permitted Lien" shall mean Liens which secure Senior Obligations.
"Person" shall mean and include any natural person, partnership, joint
venture, firm, corporation, association, trust or other enterprise or any
government or political subdivision or agency, department or instrumentality
thereof.
"Proceeds" shall mean "proceeds" as such term is defined in Section
9-306(1) of the UCC.
"Receivables" shall mean, with respect to the Collateral, all rights to
payment for goods sold or leased or services rendered, whether or not earned by
performance and all rights in respect of the Account Debtor, including, without
limitation, all such rights in which the Debtor has any right, title or interest
by reason of the purchase thereof by the Debtor and including, without
limitation, all such rights constituting or evidenced by any Account, Chattel
Paper, Instrument, note, contract (including any lease or rental agreement or
sales contract with respect to property or any secured or unsecured loan with
respect to which the Debtor is a lessor, seller, lender, the Secured Party, note
holder or obligee), invoice, purchase order, draft, acceptance, intercompany
account, security agreement, or other evidence of indebtedness or security,
together with (a) any collateral assigned, hypothecated or held to secure any of
the foregoing and the rights under any security agreement granting a security
interest in such collateral, (b) all goods, the sale of which gave rise to any
of the foregoing, including, without limitation, all rights in any returned or
repossessed goods and unpaid seller's rights, (c) all guarantees, endorsements
and indemnifications on, or of, any of the foregoing, and (d) all powers of
attorney for the execution of any evidence of indebtedness or security or other
writing in connection therewith.
"Receivables Records" shall mean (a) all original copies of all documents,
instruments or other writings evidencing the Receivables, (b) all books,
correspondence, credit or other files, records, ledger sheets or cards,
invoices, and other papers relating to Receivables, including, without
limitation, all tapes, cards, computer tapes, computer discs, computer runs,
record keeping systems and other papers and documents relating to the
Receivables, whether in the possession or under the control of the Debtor or any
computer bureau or agent from time to time acting for the Debtor or otherwise,
(c) all evidences of the filing of financing statements and the registration of
other instruments in connection therewith and amendments, supplements or other
modifications thereto, notices to other creditors or secured parties, and
certificates, acknowledgments, or other writings, including, without limitation,
lien search reports, from filing or other registration officers, (d) all credit
information, reports and memoranda relating thereto, and (e) all other written
information related in any way to the foregoing or any Receivable.
<PAGE>
"Secured Obligations" shall mean all obligations, liabilities and
indebtedness of every nature of the Borrower or the Debtor from time to time
owing to the Secured Party now existing or hereafter incurred, arising under or
in connection with the Promissory Note or this Security Agreement.
"Senior Obligations" shall mean all Senior Obligations as defined in
Section 4.8 of the Note, all Indebtedness incurred by the Debtor, and all
ownership interests in the Collateral (through trusts or otherwise) the proceeds
of which are used (i) to fund, or to refinance, the acquisition of assets which
are subject to leases or conditional sales agreements in favor of the Debtor, or
(ii) for the working capital needs of the Debtor.
"UCC" shall mean the Uniform Commercial Code as in effect from time to time
in the State of California.
ARTICLE II
GRANT OF SECURITY INTERESTS
2.1 Grant of Security Interests. As security for the prompt and complete
payment and performance in full of all the Secured Obligations, the Debtor
hereby grants to the Secured Party a security interest in, and continuing lien
on, all of the Debtor's right, title and interest in the Lease Contract, and the
following with respect thereto (excluding any permits, licenses or leased assets
obtained in the ordinary course of business in which a Lien thereon may not be
attached or an interest therein may not be transferred by law or the terms
thereof), in each case, whether now owned or existing or hereafter acquired or
arising, and wherever located (all of which being hereinafter collectively
called the "Collateral"):
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Collateral Records;
(iv) all Documents;
(v) all Money;
(vi) all Receivables;
(vii) all Receivables Records; and
<PAGE>
(viii) all accessions and additions to any or all of the foregoing, all
substitutions and replacements for any or all of the foregoing and all Proceeds
or products of any or all of the foregoing.
2.2 Subordination.
(a) Agreement to Subordinate. The Secured Party hereby covenants and agrees
that its rights with respect to the Collateral are expressly "subordinate and
junior in priority and in right of payment" as defined below to all Senior
Obligations, including without limitation with respect to the rights of any
holder of Senior Obligations in or to any collateral securing such obligations.
The Secured Party acknowledges and agrees that these subordination provisions
set forth herein are intended to be an inducement and a consideration to each
holder of any Senior Obligation, whether such Senior Obligation was created or
acquired, or whether the lien and security interest in any collateral securing
such obligations was created or perfected, before or after the execution of this
Security Agreement, to continue to hold, or to acquire and continue to hold,
such Senior Obligation and such holder of Senior Obligations shall be deemed
conclusively to have relied on such subordination provisions in continuing to
hold, or acquiring and continuing to hold, such Senior Obligations.
(b) "Subordinate and junior in priority and in right of payment" means
that:
(i) the Secured Party shall not have, by reason of its rights in the
Collateral, any claim to the assets of the Debtor, including without limitation
the Collateral, on parity with or prior to the claim of the Senior Obligations,
including without limitation any claim with respect to collateral securing such
obligations; and
(ii) unless and until the Senior Obligations have been paid in full and
any commitment to lend in respect thereof has been terminated, without the
express prior written consent of each holder of Senior Obligations, the Secured
Party will not exercise its rights under the Security Agreement to foreclose or
realize upon any of the Collateral.
(c) The expressions "prior payment in full", "payment in full", "paid in
full" and any other similar terms or phrases when used herein with respect to
the Senior Obligations shall mean the payment in full in cash, in immediately
available funds, of all of the Senior Obligations.
2.3 Additional Provisions concerning Subordination.
(a) The Secured Party and the Debtor agree that upon any payment or
distribution of the assets of the Debtor upon a total or partial liquidation or
a total or partial dissolution of the Debtor or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Debtor or its
property:
<PAGE>
(i) without limitation on Section 2.2(b)(ii), all Senior Obligations
shall be paid in full before any payment or distribution is made to, or any
foreclosure or realization upon the Collateral is effected by, the Secured Party
by reason of its rights under this Security Agreement; and
(ii) any payment or distribution of assets of the Debtor, whether in
cash, property or securities, to which the Secured Party would be entitled
except for the provisions hereof, shall be paid or delivered by the Debtor, or
any receiver, trustee in bankruptcy, liquidating trustee, disbursing agent or
other person or entity making such payment or distribution, directly to the
holders of the Senior Obligations or their representative, ratably in accordance
with the amounts thereof, to the extent necessary to pay in full all Senior
Obligations, before any payment or distribution shall be made to the Secured
Party.
(b) If any payment or distribution from the assets of the Debtor, whether
consisting of money, property or securities, be collected or received by the
Secured Party in respect of its rights under this Security Agreement, the
Secured Party forthwith shall deliver the same to the holders of the Senior
Obligations or their representative, ratably in accordance with the amounts
thereof, if required, to be applied to the payment or prepayment of the Senior
Obligations until the Senior Obligations are paid in full. Until so delivered,
such payment or distribution shall be held in trust by the Secured Party as the
property of such holders of the Senior Obligations, segregated from other funds
and property held by the Secured Party.
2.4 Consent of the Secured Party.
(a) The Secured Party consents that, without the necessity of any
reservation of rights against the Secured Party, and without notice to or
further assent by the Secured Party:
(i) any demand for payment of any Senior Obligations made by any holder
of Senior Obligations may be rescinded in whole or in part by or on behalf of
such holder, and any Senior Obligation may be continued, and the Senior
Obligations, or the liability of the Debtor or any guarantor or any other party
upon or for any part thereof, or any collateral security or guarantee therefor
or right of offset with respect thereto, or any obligation or liability of the
Debtor or any other party under any agreement, may, from time to time, in whole
or in part, be renewed, extended, modified, accelerated, compromised, waived,
surrendered or released by or on behalf of any holder of Senior Obligations; and
(ii) the terms and conditions of any Senior Obligation may be amended,
increased, modified, supplemented or terminated, in whole or in part, as the
holders thereof may deem advisable from time to time, and any Collateral may be
sold, exchanged, waived, surrendered or released, in each case all without
notice to or further assent by the Secured Party, and all without impairing,
abridging, releasing of affecting the subordination provided for herein.
<PAGE>
(b) The Secured Party waives any and all notice of (i) the creation,
renewal, extension, increase or accrual of any of the Senior Obligations and
notice of or proof of reliance by the holders thereof. The Secured Party
acknowledges and agrees that the holders of the Senior Obligations have relied
upon the subordination provided for herein in entering into any agreement with
respect to the Senior Obligations. The Secured Party waives notice of or proof
of reliance on this Agreement and protest, demand for payment and notice of
default.
2.5 Senior Obligations Unconditional. All rights and interest hereunder of
the holders of Senior Obligations, and all agreements and obligations of the
Secured Party and the Debtor hereunder, shall remain in full force and effect
irrespective of:
(a) any lack of validity or enforceability of any document, instrument or
agreement relating to any Senior Obligation;
(b) any change in the time, manner or place of payment of, or in any other
term of, all or any of the Senior Obligations, or any amendment or waiver or
other modification, whether by course of conduct or otherwise, of the terms of
any Senior Obligations;
(c) any exchange, release or nonperfection of any security interest in the
Collateral, or any release, amendment, waiver or other modification, whether in
writing or by course of conduct or otherwise, of all or any of the Senior
Obligations or any guarantee thereof; or
(d) any other circumstances which otherwise might constitute a defense
available to, or a discharge of, the Debtor in respect of the Senior Obligations
or this Agreement.
2.6 Further Assurances. The Secured Party and the Debtor at their own
expense and at any time from time to time, upon the written request of the
holders of any Senior Obligations or their representatives, will promptly and
duly execute and deliver such further instruments and documents and take such
further actions as such holders of Senior Obligations or their representatives
reasonably may request for the purposes of obtaining or preserving the full
benefits hereof and of the rights and powers herein granted.
2.7 Powers Coupled With An Interest. All powers, authorizations and
agencies contained in this section are coupled with an interest and are
irrevocable until the Senior Obligations are paid in full and all commitments in
respect thereof are terminated.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Debtor hereby represents and warrants to the Secured Party, which
representations and warranties shall survive execution and delivery of this
Security Agreement, as follows:
<PAGE>
3.1 Validity, Perfection and Priority. Upon the proper filing in the
locations identified in Schedule II hereto of UCC-1 Financing Statements naming
the Debtor as debtor and the Secured Party as the Secured Party and identifying
the Collateral, the security interests in the Collateral granted to the Secured
Party hereunder will constitute valid and continuing perfected security
interests in the Collateral to the extent a security interest can be perfected
in such Collateral by filing of a UCC-1 Financing Statement in such locations,
subject to Permitted Liens.
3.2 No Liens; Other Financing Statements. (a) To the best of Debtor's
knowledge, except for the Lien granted to the Secured Party hereunder and
Permitted Liens, the Debtor own or otherwise has rights in and as to all
Collateral, whether now existing or hereafter acquired, will continue to own or
otherwise have rights in each item of the Collateral free and clear of any and
all Liens, rights or claims of all other Persons other than Permitted Liens, and
the Debtor will defend the Collateral against all other claims and demands of
all Persons at any time claiming the same or any interest therein adverse to the
Secured Party.
(b) To the best of the Debtor's knowledge, no financing statement or
other evidence of Lien covering or purporting to cover any of the Collateral is
on file in any public office other than financing statements filed or to be
filed in connection with the security interests granted to the Secured Party
hereunder or in connection with Permitted Liens.
3.3 Chief Executive Office. The chief executive offices of the Debtor is
located at the address set forth on Annex A hereto.
3.4 Receivables.
(a) To the best of the Debtor's knowledge, no Receivables which are
evidenced by Chattel Paper require the consent of the Account Debtor in respect
thereof in connection with assignment hereunder and no other Receivable purports
to prohibit assignment or require the consent of the Account Debtor thereunder
in connection with assignment.
(b) To the best of the Debtor's knowledge, no Receivables are evidenced
by any Instrument which has not been delivered to the Secured Party.
The representations and warranties contained in this Section shall be
deemed to be repeated by the Debtors as of the time when each Receivable arises.
3.5 Fair Labor Standards Act. Any goods and services now or hereafter
produced by the Debtor and included in the Collateral have been and will be
produced in compliance with the requirements of the Fair Labor Standards Act, as
amended.
<PAGE>
ARTICLE IV
COVENANTS
The Debtor covenants and agrees with the Secured Party that from and after
the date of this Security Agreement:
4.1 Further Assurances. The Debtor will, from time to time at the expense
of the Debtor, promptly execute, deliver, file and record all further
instruments, endorsements and other documents, and take such further action as
the Secured Party may reasonably request in obtaining the full benefits of this
Security Agreement and of the rights, remedies and powers herein granted,
including, without limitation, the following:
(i) the filing of any financing statements, in form acceptable to the
Secured Party under the Uniform Commercial Code in effect in any jurisdiction
with respect to the liens and security interests granted hereby. The Debtor also
hereby authorizes the Secured Party to file any such financing statement without
the signatures of the Debtor to the extent permitted by applicable law. A
photocopy or other reproduction of this Security Agreement shall be sufficient
as a financing statement and may be filed in lieu of the original to the extent
permitted by applicable law. The Debtor will pay or reimburse the Secured Party
for all filing fees and related expenses;
(ii) upon request of the Secured Party, cause the Secured Party to be
listed as the lienholder on the certificate of title or ownership covering any
Collateral covered by such a certificate of title or ownership and to promptly
deliver evidence thereof to the Secured Party;
(iii) furnish to the Secured Party from time to time statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as the Secured Party may reasonably
request, all in reasonable detail and in form satisfactory to the Secured Party.
4.2 Change of Name; Identity; Corporate Structure; Chief Executive Office.
The Debtor will not change its names, identities, corporate structures or the
locations of its chief executive offices without (i) giving the Secured Party at
least thirty (30) days' prior written notice clearly describing such new names,
identities, corporate structures or new locations and providing such other
information in connection therewith as the Secured Party may reasonably request,
and (ii) taking all action satisfactory to the Secured Party as the Secured
Party may reasonably request to maintain the security interest of the Secured
Party in the Collateral intended to be granted hereby at all times fully
perfected with the same or better priority and in full force and effect.
4.3 Maintain Records. The Debtor will keep and maintain at its own cost and
expense satisfactory and complete records of the Collateral. The Debtor will
permit the Secured Party to review such records at such times and locations as
the Secured Party may reasonably request.
<PAGE>
4.4 Payment of Obligations. The Debtor will pay when due all taxes,
assessments and governmental charges or levies imposed upon the Collateral, as
well as all material claims of any kind (including, without limitation, claims
for labor, materials, supplies and services) against or with respect to the
Collateral (other than Permitted Liens), except where (a) the validity or amount
thereof is being contested in good faith by appropriate proceedings, (b) the
Debtor has set aside on its books adequate reserves with respect thereto in
accordance with GAAP and (c) the failure to make payment pending such contest
could not reasonably be expected to result in a Material Adverse Effect.
4.5 Performance by the Secured Party of the Debtor's Obligations;
Reimbursement. If the Debtor fails to perform or comply with any of its
undertakings contained herein and such failure to perform or comply results in
an Event of Default, or an Event of Default otherwise exists, the Secured Party,
upon prior written notice to the Debtor, may, but is not obligated to, perform
or comply or cause performance or compliance therewith and the expenses of the
Secured Party incurred in connection with such performance or compliance,
together with interest thereon at a rate per annum equal to the default rate
referred to in the Promissory Note, shall be payable by the Debtor to the
Secured Party on demand and such reimbursement obligation shall be secured
hereby.
4.6 Delivery of Instruments. Unless the Debtor shall have delivered the
same in connection with Permitted Liens, if any Instrument shall at any time
comprise any portion of the Collateral, the Debtor shall within 10 days notify
the Secured Party thereof and, upon request, promptly deliver such Instrument to
the Secured Party appropriately indorsed or assigned or to the order of the
Secured Party or in such other manner as shall be reasonably satisfactory to the
Secured Party.
4.7 Delivery of Chattel Paper. Unless the Debtor shall have delivered the
same in connection with Permitted Liens, if Chattel Paper shall at any time
comprise any portion of the Collateral, the Debtor shall within 10 days notify
the Secured Party thereof and, upon request, promptly deliver such Chattel Paper
to the Secured Party.
4.8 Receivables. (a) Other than (i) in the ordinary course of business as
generally conducted by them over a period of time and (ii) while no Default or
Event of Default shall have occurred and be continuing, the Debtor shall not (w)
grant any extension or renewal of the time of payment of any material
Receivable, (x) compromise or settle any dispute, claim or legal proceeding with
respect to any material Receivable for less than the total unpaid balance
thereof, (y) release, wholly or partially, any Person liable for the payment
thereof, or (z) allow any material credit or discount thereon.
<PAGE>
(b) The Debtor shall use its reasonable efforts (including, without
limitation, prompt and diligent exercise of each material right they may have
under any Receivable) to cause to be collected from each Account Debtor, as and
when due (including, without limitation, amounts which are delinquent, such
amounts to be collected in accordance with the Debtor's past practices and
ordinary course of business and generally accepted lawful collection procedures)
any and all amounts owing under or on account of any Receivable. The reasonable
costs of collection, whether incurred by the Debtor or the Secured Party shall
be borne by the Debtor and if incurred by the Secured Party shall be reimbursed,
together with interest thereon at a rate equal to the Default Rate, to the
Secured Party upon demand, and such reimbursement obligation shall be secured
hereby.
ARTICLE V.
POWER OF ATTORNEY
5.1 Attorney-in-Fact. The Debtor hereby irrevocably appoints the Secured
Party as the Debtor's attorney-in-fact, with full authority in the place and
stead of the Debtor and in the name of the Debtor or otherwise, from time to
time, during the continuation of an Event of Default, in the Secured Party's
reasonable discretion to take any action and to execute any instrument,
including but not limited to financing and continuation statements, which the
Secured Party may deem necessary or advisable, subject to the terms and
conditions of this Security Agreement, to accomplish the purposes of this
Security Agreement, including, without limitation, (a) to receive, endorse and
collect all instruments made payable to the Debtor representing any distribution
in respect of the Collateral or any part thereof and to give full discharge for
the same, and (b) to ask, demand, collect, sue for, recover, compound, receive
and give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral, and to file any claims or take any action or
institute any proceedings which the Secured Party may deem necessary or
desirable for the collection of any of the Collateral or to enforce the rights
of the Secured Party with respect to any of the Collateral. Secured Party hereby
acknowledges and agrees that the Power of Attorney granted herein is and shall
be subject to Section 2.2 (b)(ii) of this Agreement.
5.2 Ratification. The Debtor hereby ratifies all that said attorneys shall
lawfully do or cause to be done by virtue hereof. The power of attorney granted
pursuant to Section 5.1 is a power coupled with an interest and shall be
irrevocable.
<PAGE>
ARTICLE VI
REMEDIES; RIGHTS UPON DEFAULT
6.1 Rights and Remedies Generally. If an Event of Default shall occur and
be continuing, then and in every such case, the Secured Party shall have all the
rights of a the Secured Party under the UCC or the Uniform Commercial Code in
any applicable jurisdiction, shall have all rights now or hereafter existing
under all other applicable laws, and, subject to any mandatory requirements of
applicable law then in effect, shall have all the rights set forth in this
Security Agreement and all the rights set forth with respect to the Collateral
or this Security Agreement in any other agreement between the parties, provided
that the exercise of such rights shall be subject to Section 2.2(b)(ii) of this
Agreement. Such rights shall include, without limitation, the right to:
(a) recover the reasonable fees and expenses incurred by the Secured
Party in the enforcement of the Secured Obligations and this Security Agreement,
including reasonable fees, expenses and disbursements of agents and counsel to
the Secured Party;
(b) personally, or by agents or attorneys, immediately take possession
of the Collateral or any part thereof, from the Debtor or any other Person who
then has possession of any part thereof with or without notice or process of
law, and for that purpose may enter upon the Debtor's premises where any of the
Collateral is located and remove the same and use in connection with such
removal any and all services, supplies, aids and other facilities of the Debtor;
(c) sell, assign or otherwise liquidate, or direct the Debtor to sell,
assign or otherwise liquidate, any or all of the Collateral or any part thereof,
and take possession of the proceeds of any such sale or liquidation;
(d) use, manage, operate and control the Collateral and the Debtor's
businesses and properties to preserve the Collateral or its value, including,
without limitation, the rights to take possession of all of the Debtor's
premises and property, to exclude any third parties, whether or not claiming
under the Debtor, from such premises and property, to make repairs,
replacements, alterations, additions and improvements to the Collateral, and to
dispose of all or any portion of the Collateral in the ordinary course of the
Debtor's business; and
(e) instruct the obligor or obligors on any agreement, instrument or
other obligation constituting the Collateral to make any payment required by the
terms of such instrument, agreement or obligation directly to the Secured Party.
Notwithstanding the foregoing, the terms of the UCC or any other applicable law,
no such instruction or notice shall be given prior to an Event of Default under
Section 2.1 of the Promissory Note, notice thereof, and seven (7) days advance
notice to the Debtor of the proposed delivery of such instruction or notice.
<PAGE>
6.2 Assembly of Collateral. If an Event of Default shall occur and be
continuing, upon ten (10) days' notice to the Debtor, the Debtor shall, at its
own expense, assemble the Collateral (or from time to time any portion thereof)
and make it available to the Secured Party at any place or places designated by
the Secured Party.
6.3 Disposition of Collateral. The Secured Party shall give the Debtor
reasonable notice of the time and place of any public sale of the Collateral or
any part thereof or of the time after which any private sale or any other
intended disposition thereof is to be made. The Debtor agrees that the
requirements of reasonable notice to them shall be met if such notice is mailed,
postage prepaid to the addresses specified in Section 5.2 of the Promissory Note
(or such other addresses that the Debtor may provide to the Secured Party in
writing) at least ten (10) days before the time of any public sale or after
which any private sale may be made.
6.4 Recourse. The Debtor shall remain jointly and severally liable for any
deficiency if the proceeds of any sale or other disposition of the Collateral
are insufficient to satisfy the Secured Obligations. The Debtor shall also be
jointly and severally liable for all expenses of the Secured Party incurred in
connection with collecting such deficiency, including, without limitation, the
reasonable fees and disbursements of any attorneys employed by the Secured Party
to collect such deficiency.
6.5 Expenses; Attorneys Fees. The Debtor shall reimburse the Secured Party
for all its expenses in connection with the exercise of its rights hereunder,
including, without limitation, all reasonable attorneys' fees and legal expenses
incurred by the Secured Party. All such expenses shall be secured hereby.
6.6 Limitation on Duties Regarding Preservation of Collateral. (a) the
Secured Party's sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under Section 9-207 of the UCC
or otherwise, shall be to deal with it in the same manner as the Secured Party
deals with similar property for its own account.
(b) The Secured Party shall have no obligation to take any steps to
preserve rights against prior parties to any Collateral.
(c) Neither the Secured Party nor any of its directors, officers,
employees or agents shall be liable for failure to demand, collect or realize
upon all or any part of the Collateral or for any delay in doing so or shall be
under any obligation to sell or otherwise dispose of any Collateral upon the
request of the Debtor or otherwise.
<PAGE>
ARTICLE VII
SPECIAL PROVISIONS REGARDING RECEIVABLES
7.1 The Debtor Remains Liable under Receivables. Anything herein to the
contrary notwithstanding (including without limitation the grant of any rights
to the Secured Party), the Debtor shall remain liable under each of the
Receivables to observe and perform all the conditions and obligations to be
observed and performed by it thereunder, all in accordance with the terms of any
agreement giving rise to each such Receivable. The Secured Party shall not have
any obligation or liability under any Receivable (or any agreement giving rise
thereto) or by reason of or arising out of this Security Agreement or the
receipt by the Secured Party of any payment relating to such Receivable pursuant
hereto, nor shall the Secured Party be obligated in any manner to perform any of
the obligations of the Debtor under or pursuant to any Receivable (or any
agreement giving rise thereto), to make any payment, to make any inquiry as to
the nature or the sufficiency of any payment received by it or as to the
sufficiency of any performance by any party under any Receivable (or any
agreement giving rise thereto), to present or file any claim, to take any action
to enforce any performance or to collect the payment of any amounts which may
have been assigned to it or to which it may be entitled at any time or times.
7.2 Notice to Account Debtor. Subject to the prior rights of any holder of
Senior Obligations, at any time while an Event of Default shall have occurred
and be continuing, (a) the Secured Party may, and upon request of the Secured
Party, the Debtor shall, notify each Account Debtor that the Accounts have been
assigned to the Secured Party and that payments in respect thereof shall be made
directly to the Secured Party and (b) the Secured Party may in its own name or
in the name of others communicate with each Account Debtor and parties to verify
with them to its satisfaction the existence, amount and terms of any
Receivables.
ARTICLE VIII
MISCELLANEOUS
8.1 Indemnity. The Debtor agrees to indemnify, reimburse and hold the
Secured Party and its officers, directors, employees, representatives and agents
("Indemnitees") harmless from any and all liabilities, obligations, losses,
damages, penalties, claims, actions, judgments, suits, costs or expenses or
disbursements (including reasonable attorneys' fees and expenses) for whatsoever
kind or nature (other than those relating to or arising out of willful
misconduct or grossly negligent acts or omissions of the Secured Party or its
agents or employees) which may be imposed on, asserted against or incurred by
any of the Indemnitees in any way relating to or arising out of this Security
Agreement or the transactions contemplated hereby or the exercise of rights or
remedies hereunder. The obligations of the Debtor under this Section shall be
secured hereby and shall survive payment and performance or discharge of the
Secured Obligations and the termination of this Security Agreement.
<PAGE>
8.2 Governing Law. THIS SECURITY AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED
BY THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO THE PRINCIPLES OF
CONFLICTS OF LAW THEREOF.
8.3 Notices. Except as otherwise expressly provided herein, all notices,
requests and demands to or upon the respective parties hereto to be effective
shall be governed by the provisions of Section 5.2 of the Promissory Note.
8.4 Successors and Assigns. This Security Agreement shall be binding upon
and inure to the benefit of the Debtor, the Secured Party, all future holders of
the Secured Obligations and their respective successors; provided, however, that
the Debtor may not assign or transfer any of its rights or obligations under
this Security Agreement without the prior written consent of the Secured Party.
8.5 Waivers and Amendments. None of the terms or provisions of this
Security Agreement may be waived, amended, supplemented or otherwise modified
except by a written instrument executed by the party against whom enforcement is
sought.
8.6 No Waiver; Remedies Cumulative. No failure or delay on the part of the
Secured Party in exercising any right, power or privilege hereunder, and no
course of dealing between the Debtor and the Secured Party, shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. A waiver by the Secured Party
of any right or remedy hereunder on any one occasion shall not be construed as a
bar to any right or remedy which the Secured Party would otherwise have on any
future occasion. The rights and remedies herein expressly provided are
cumulative and may be exercised singly or concurrently and as often and in such
order as the Secured Party deems expedient and are not exclusive of any rights
or remedies which the Secured Party would otherwise have whether by security
agreement or now or hereafter existing under applicable law. No notice to or
demand on the Debtor in any case shall entitle the Debtor to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of the Secured Party to any other or future action in any
circumstances without notice or demand.
8.7 Termination; Release. This Security Agreement shall terminate upon the
date upon which the Secured Obligations have been indefeasibly paid and
performed in full and the Promissory Note has terminated. Upon termination of
this Security Agreement, the Secured Party, at the request and sole expense of
the Debtor, shall execute and deliver to the Debtor the proper instruments,
agreements, statements and acknowledgments (including UCC termination
statements) acknowledging the termination of this Security Agreement, and shall
duly assign, transfer and deliver to the Debtor, without recourse,
representation or warranty of any kind whatsoever, such of the Collateral as may
be in possession of the Secured Party and has not theretofore been disposed of,
applied or released.
<PAGE>
8.8 Headings Descriptive. The headings of the several Sections and
subsections of this Security Agreement are inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Security Agreement.
8.9 Severability. In case any provision in or obligation under this
Security Agreement or the Secured Obligations shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.
8.10 Borrower's Assurance of Performance of Secured Obligations. The
Borrower hereby covenants that it shall, or shall cause the Debtor to, perform
all Secured Obligations hereunder in accordance with their terms.
[Remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the Debtor and the Secured Party have caused this
Security Agreement to be duly executed and delivered as of the date first above
written.
Fidelity Leasing, Inc., as Borrower
By: __________________________________
Name:
Title:
<PAGE>
JLA Credit Corporation, as Debtor
By: __________________________________
Name:
Title:
<PAGE>
Japan Leasing (U.S.A.), Inc., as the Secured Party
By: __________________________________
Name:
Title:
<PAGE>
SCHEDULE II
to Security Agreement
UCC-1 FILING JURISDICTIONS
--------------------------
A. JLA Credit Corporation
1. California Secretary of State
