UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 OR 15(d) of the Securities Exchange Act of 1934
|
Date
of Report (Date of earliest event reported) December
8, 2009 (December 4, 2009)
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| ANCHOR FUNDING SERVICES, INC. | |
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(Exact
name of registrant as specified in its
charter)
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Delaware
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0-52589
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20-5456087
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(State
or other jurisdiction
of
incorporation
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(Commission
File
Number)
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(IRS
Employer
Identification
No.)
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|||||||||||
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10801
Johnston Road, Suite 210
Charlotte,
NC
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28226
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(Address
of principal executive offices)
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(Zip
Code)
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|||
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Registrant's
telephone number, including area code
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(866)
789-3863
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(Former
name or former address, if changed since last
report)
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Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
£ Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
£ Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
£
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b)
£
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR 240.13e-4(c))
Item 1.01. Entry into
Material Definitive Agreement.
On
December 4, 2009, Anchor Funding Services, Inc. (the “Company”), entered into an
Asset Purchase Agreement (the “Asset Purchase Agreement”) with Brookridge
Funding, LLC (“Seller”) providing for the acquisition of certain assets and
accounts of Seller’s purchase order finance business (the “Acquired
Business”). The closing of the acquisition took place on December 7,
2009. In connection with the transaction, the Company and Seller’s
principals invested $1.5 million in Brookridge Funding Services, LLC, the
Company’s newly formed 80% owned subsidiary which will operate the Acquired
Business (“Brookridge”). The purchase price for the Acquired Business
was $2.4 million (the Acquired Business’s outstanding client account balances at
closing), plus an earn-out payment based the Acquired Business’s operating
income of up to $800,000.
In
connection with closing, Brookridge entered into a credit agreement (the “Credit
Agreement”) with MGM Funding, LLC, a limited liability owned and controlled by
the Company’s Co-Chairmen, Morry F. Rubin and George Rubin, and an investor
(“Lender”), pursuant to which Lender will provide a $3.7 million senior credit
facility to Brookridge. Morry F. Rubin is the managing member of MGM.
Loans under the Credit Agreement are secured by all of Brookridge’s assets and
will bear interest at a 20% annual rate. The Credit Agreement contains standard
representations, covenants and events of default for facilities of this
type. Occurrence of an event of default allows the Lender to
accelerate the payment of the loans and/or terminate the commitments to lend, in
addition to other legal remedies, including foreclosing on
collateral.
Copies of the Asset Purchase Agreement
and the Credit Agreement are filed with this report as Exhibits 10.1 and 10.2,
respectively, and are hereby incorporated herein by reference. The
foregoing description of the of the Asset Purchase Agreement and the
Credit Agreement and the transactions contemplated therein does not purport to
be complete and is qualified in its entirety by reference to the full text of
such agreements. A copy of the news releases announcing the
transaction and material agreements are filed with this report as Exhibits 99.1,
99.2 and 99.3 and are hereby incorporated herein by reference.
Item
2.01. Completion of Acquisition of Assets
Incorporated by reference in Item 1.01
described above.
Item
3.02. Unregistered Sale of Equity Securities
On December 7, 2009, Morry F. Rubin and
George Rubin, Co-Chairmen of the Company and an investor, each agreed to invest
$166,668 into Anchor in exchange for 166,668 shares of Common Stock and 10-year
warrants to purchase 666,672 shares of the Company’s Common Stock at an exercise
price of $1.00 per share, for a total of approximately $500,000.
Item
7.01. Regulation FD Disclosure.
On
December 8, 2009, the Company issued three press releases regarding (i) the
completion of the acquisition of certain assets of Brookridge Funding, LLC, (ii)
a $3.7 million senior credit facility to fund the acquisition of assets of
Brookridge and (iii) Anchor’s Co-Chairman and an investor making a $500,000
investment in Anchor. Copies of the press releases are attached as exhibits
hereto.
Item 9.01 Financial
Statements and Exhibits.
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(a)
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Financial
Statements of Businesses Acquired**
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(b)
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Pro Form Financial Information** |
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(c)
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Shell
companies - Not applicable.
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(d)
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Exhibits.
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Exhibit
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Description |
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10.1
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Asset
Purchase Agreement between the Company and Brookridge Funding,
LLC.*
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10.2
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Senior
Credit Facility between the Company and MGM Funding
LLC.*
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99.1
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Press
Release dated December 8, 2009 regarding the completion of the acquisition
of certain assets of Brookridge Funding,
LLC.*
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99.2
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Press
Release dated December 8, 2009 regarding a $3.7 million senior credit
facility to fund the acquisition of assets of
Brookridge.*
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99.3
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Press
Release dated December 8, 2009 regarding Anchor’s Co-Chairman and an
investor making a $500,000 investment in
Anchor.*
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______________________
* Filed
herewith
** To
be filed by amendment within 71 days of the due date of this Form
8-K.
SIGNATURE
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.
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ANCHOR
FUNDING SERVICES, INC.,
a
Delaware corporation
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|||
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Date:
December 8, 2009
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By:
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/s/ Brad Bernstein | |
| Brad Bernstein, President and Chief Financial Officer | |||
Exhibit
10.1
Asset Purchase Agreement between the
Company and Brookridge Funding, LLC
ASSET
PURCHASE AGREEMENT
among
BROOKRIDGE
FUNDING SERVICES, LLC
and
BROOKRIDGE
FUNDING, LLC,
and
ANCHOR
FUNDING SERVICES, INC.
and
MICHAEL
P. HILTON,
JOHN
A. MCNIFF III
December
4, 2009
1
ASSET PURCHASE
AGREEMENT
This
Asset Purchase Agreement (this “Agreement”) is entered into as
of December 4, 2009, by and among Brookridge Funding Services, LLC, a North
Carolina limited liability company and wholly-owned Subsidiary of Parent (“Buyer”), Brookridge Funding,
LLC, a Delaware limited liability company (“Seller”), Anchor Funding
Services, Inc., a Delaware corporation (“Parent”), Michael P. Hilton, a
resident of the State of Connecticut (“Hilton”), and John A. McNiff
III, a resident of the State of Connecticut (“McNiff” and together with
Hilton, the “Members”
and each a “Member”).
STATEMENT
OF PURPOSE
Parent,
by and through Buyer has agreed to purchase from Seller, and Seller has agreed
to sell to Buyer, substantially all of Seller’s assets for the consideration,
including Buyer’s assumption of certain stated liabilities, and on the terms and
subject to the conditions set forth in this Agreement. Certain
defined terms are included in Exhibit A attached
hereto.
Parent
has agreed to provide the majority of the capital necessary to acquire the
assets of Seller pursuant to this Agreement and fund the initial working capital
requirements of Buyer and assume Buyer’s obligations with respect to the Cash
Purchase Price and the Contingent Purchase Price Consideration.
SALE
AND PURCHASE OF ASSETS
Sale
and Purchase of Assets
Seller
hereby sells, assigns, transfers and conveys to Buyer, and Buyer hereby
purchases, acquires and accepts from Seller, free and clear of all Encumbrances
other than Permitted Encumbrances, all of Seller’s assets of every kind and
description (other than the Excluded Assets) on the Closing Date (the “Purchased Assets”), including
the following assets of Seller (other than the Excluded Assets):
All equipment, fixtures, furniture,
office equipment, computer hardware, supplies, and other items of tangible
personal property (the “Tangible Personal Property”);
All
rights and interests in and to any Contracts other than Excluded
Contracts;
All Client Transaction Rights with
respect to the Clients (the “Acquired Clients”) identified on Schedule
0 (the “Acquired Client
Transaction Rights”);
All
Intellectual Property;
All business and financial records,
books, ledgers, files, correspondence, documents, lists, studies and reports,
including customer lists, whether written, electronically stored or otherwise
recorded (the “Books and Records”);
All
goodwill and all sales, advertising, promotional and marketing information and
materials;
All
telephone, fax and pager numbers and e-mail addresses assigned to
Seller;
All
Permits;
All
rights of Seller to causes of action, lawsuits, judgments, claims and demands of
any nature and all counterclaims, rights of setoff, rights of indemnification
and affirmative defenses to any claims that may be brought against Buyer by
third parties, except for any such rights under the Excluded Lawsuits (as
defined in sub-paragraph 0 below);
All benefits under all insurance
policies to which Seller is a party, a named insured or otherwise the
beneficiary of coverage (the “Insurance Policies”); and
2
All
other properties and assets to the extent Seller has any rights thereto or
interests therein, whether a present or future interest, an inchoate right or
otherwise and whether such properties or assets are tangible or intangible and
whether or not of a type falling within any of the categories of assets or
properties described above.
Excluded
Assets
Seller
will retain ownership of the following assets of Seller (collectively, the “Excluded
Assets”):
All
cash, cash equivalents and short-term investments;
Excluded
Clients;
Organizational
Documents, stock books, stock ledgers, minute books and Tax
Returns;
All
rights to causes of action, lawsuits, judgments, claims and demands of any
nature and all counterclaims, rights of setoff, rights of indemnification and
affirmative defenses to any claims that may be brought against Seller by third
parties, in each case to the extent that they relate to the Excluded Assets or
Excluded Liabilities;
All
rights under the Excluded Lawsuits (as defined in sub-paragraph 0 below);
All
rights under any Transaction Document;
The
note issued by Fairfield Factors to Seller a copy of which is attached to Schedule 0;
and
Assumed
Liabilities
Buyer
hereby assumes and agrees to pay, perform and discharge only the following
Liabilities of Seller (collectively, the “Assumed
Liabilities”): (i) Liabilities to be performed after the
Closing Date under the executory Contracts listed on Schedule 0 (but not
including any Excluded Contracts) (the “Assumed Contracts”), provided, however, that such
Liabilities will only be Assumed Liabilities to the extent that all benefits
under such Contracts or Permits are transferred to Buyer pursuant to this
Agreement and the existence of such Liabilities does not constitute a breach of
the representations and warranties of Seller set forth in this Agreement or in
such Contract or Permit; and (ii) Liabilities incurred by Buyer following the
Closing through its operation of the Business.
Excluded
Liabilities
The
Excluded Liabilities will remain the sole responsibility of and will be
retained, paid, performed and discharged as and when due solely by
Seller. “Excluded
Liabilities” means every Liability of Seller, other than the Assumed
Liabilities, including:
All
Liabilities under any Transaction Document;
3
All
Liabilities for Taxes (whether federal, state, local or foreign), including
Taxes incurred in respect of or measured by (i) the sales of goods or services
by Seller, (ii) the wages or other compensation paid by Seller to its employees,
(iii) the value of Seller’s property (personal as well as real property), (iv)
the income of Seller earned on or realized prior to the Closing Date, and (v)
any gain and income from the sale of the Purchased Assets and other
Transactions;
Liabilities
incurred by Seller prior to the Closing through its operation of the Business,
including any amounts due to counter-parties under the Assumed Contracts for any
period of time occurring prior to the Closing Date (including any fees due to
third-party brokers in respect of Acquired Client Transaction
Rights);
All
Liabilities under any Excluded Contracts;
All
Liabilities to indemnify any Person (including any Member) by reason of the fact
that such Person was a director, officer, employee or agent of Seller unless
indicated otherwise by the terms hereof; and
All Liabilities arising out of the
transactions or occurrences that are the subject matter of the claims set forth
in Brookridge
Funding v. Seascape Seafoods, Inc. et al. and Brookridge
Funding Corp. v. King & Prince Seafood Corp. and Paul J. Obirek (collectively, the “Excluded
Lawsuits”).
Purchase
Price
The purchase price for the Purchased
Assets (the “Purchase Price”) is (i) the Book Value of the
Acquired Client Transaction Rights on the Closing Date (the “Cash
Purchase Price”), plus (ii) the
Contingent Purchase Price Consideration, if any, plus (iii) the assumption of
the Assumed Liabilities. At or prior to the Closing Date, Parent
shall contribute the sum of One Million Two Hundred Thousand ($1,200,000)
Dollars to Buyer in order to obtain an eighty (80%) percent equity stake in
Buyer, while Hilton and McNiff or entities controlled by them shall each
contribute the sum of One Hundred Fifty Thousand ($150,000) Dollars to Buyer, in
order for each to obtain a ten (10%) percent equity stake in
Buyer.
Subject to the terms and conditions
of this Agreement, Buyer will pay the Cash Purchase Price at Closing as
follows: (i) all amounts necessary to discharge all Secured Debt to
the holders of the Secured Debt and any amounts due to Brookridge Trade Finance,
LLC in connection with the Trade Finance Assignment by wire transfer of
immediately available funds to bank accounts designated by such parties (the
“Debt Repayment Amount”)
and (ii) an amount equal to the total Cash Purchase Price less the Debt
Repayment Amount to Seller by wire transfer of immediately available funds to a
bank account designated by Seller.
To
the extent that total amounts collected by Buyer on the Purchase Orders or
Receivables related to any Acquired Client Transaction Rights set forth on Schedule 0 within 120 days
after the Closing Date is less than the Cash Purchase Price, Seller shall be
obligated to Buyer the amount of such deficit provided if Sellers fails to do so
each Member shall be obligated to pay to Buyer one-half of the amount of such
deficit; provided, that if
Buyer subsequently collects on any such Purchase Order or Receivable, any
amounts so collected shall be used to reimburse a Seller or a Member to the
extent Seller or the Member has previously made a payment to Buyer in respect
thereof.
Contingent
Purchase Price Consideration
Buyer shall pay and Seller shall
receive, the following contingent purchase price consideration: (i)
for each of the fiscal quarters ending March 31, 2010 (and for this period
including from the Closing Date through December 31, 2009), June 30, 2010,
September 30, 2010, December 31, 2010, March 31, 2011, June 30, 2011, September
30, 2011, December 31, 2011, March 31, 2012, June 30, 2012, September 30, 2012,
December 31, 2012, March 31, 2013, June 30, 2013, September 30, 2013, December
31, 2013, March 31, 2014, June 30, 2014, September 30, 2014 and December 31,
2014 (each such period, a “Measurement Period”), Buyer shall pay to Seller a dollar
amount equal to twenty (20%) percent of the amount by which Buyer’s Net
Operating Income exceeds zero for such quarter; and (ii) if Buyer’s Net
Operating Income for any four (4) consecutive Measurement Periods exceeds
$700,000 in the aggregate, Buyer shall pay to Seller an additional 20% of
Buyer’s Net Operating Income for each such Measurement Period. The
consideration referred to above in (i) and (ii) of this paragraph 0 are collectively referred to as the
“Contingent Purchase Price Consideration”).
Notwithstanding anything stated to
the contrary in this Agreement, (i) if Buyer’s Net Operating Income is negative
for any Measurement Period, Buyer’s Net Operating Income for the subsequent
quarter(s) shall be reduced by the amount by which Buyer’s Net Operating Income
was less than zero and (ii) the total Contingent Purchase Price Consideration
payable by Buyer to Seller on account of Section 00 shall not exceed $800,000 (the
“Cap”) in the
aggregate.
4
Buyer
shall pay to Seller the Contingent Purchase Price Consideration with respect to
a specific fiscal quarter set forth in Section 00, if any such Contingent Purchase Price Consideration
is owed, within 10 days after final determination of such amount in accordance
with Section 0 below by wire transfer of
immediately available funds to an account designated by Seller.
Within
15 days after the end of each Measurement Period, Buyer shall deliver to Seller
Buyer’s calculation of the Contingent Purchase Price Consideration for such
quarter together with reasonable supporting documentation. If Seller
disagrees with the calculation of Buyer’s Net Operating Income for such
Measurement Period, Seller must deliver to Buyer, within 15 days after the date
Buyer delivered the Contingent Purchase Price Consideration calculation for such
Measurement Period to Seller, a written description of each such
disagreement. If Seller does not object to the calculation of Buyer’s
Net Operating Income for such Measurement Period within such time, the
calculation of the Contingent Purchase Price Consideration for such Measurement
Period shall be final and binding upon the Parties. Buyer and Seller
will negotiate in good faith to resolve any such disagreements. If,
after a period of 30 days following the date on which such written description
is delivered, Buyer and Seller have not resolved each such disagreement, then
(i) Buyer and Seller shall continue in good faith to resolve such disagreements
or (ii) either Buyer or Seller will be entitled to cause the Parties to enter
into binding arbitration to resolve such disagreements as provided in Section 0. Within 30 days after final determination
of the calculation of the Contingent Purchase Price Consideration for such
quarter by the arbitrator, Buyer shall pay to Seller any additional amounts due
or Seller shall repay to Buyer any overpayment made, as determined in accordance
with this Section 0.
Notwithstanding
anything stated to the contrary in this Agreement, Buyer shall have no
obligation to pay any Contingent Purchase Price Consideration for any
Measurement Period if on the last day of that Measurement Period neither of the
Members shall be employed by Buyer.
In
accordance with the Operating Agreement, at the Closing Parent shall assume
Buyer’s obligations to pay the Contingent Purchase Price Consideration to Seller
in accordance with this Section 0.
Closing
The
closing of the Transactions to be performed on the Closing Date (the “Closing”) will take place at
the offices of K&L Gates LLP in Charlotte, North Carolina on the later of
(a) December 7, 2009, or (b) the second Business Day following the satisfaction
or waiver of all conditions to the obligations of the Parties to consummate the
Transactions to be performed on the Closing Date (other than conditions with
respect to actions the Parties will take at the Closing) or such other date as
Buyer and Seller may mutually determine (the “Closing
Date”). Subject to the consummation of the Closing on the
Closing Date, the sale, assignment, transfer and conveyance to Buyer of the
Purchased Assets and the assumption by Buyer of the Assumed Liabilities will be
deemed effective as of 11:59 p.m. local time on the Closing Date.
Allocation
of Purchase Price
The
Purchase Price will be allocated among the Purchased Assets as agreed upon by
Parent and Seller as soon as practicable following the Closing. Buyer
and Seller agree (a) that any such allocation is consistent with the
requirements of Code § 1060, (b) to complete and file IRS Form 8594, or a
successor form, and any amendments thereto, as and when required by applicable
Law and (c) that the Purchase Price, as finally determined hereunder, reflects
the fair market value of the Purchased Assets.
Representations
and Warranties Regarding the Members
Each
Member, as limited by Members’ Liability Cap as set forth in Article VIII below,
severally represents and warrants to Buyer as follows:
Organization
and Authority
Such
Member has full power, authority and legal capacity to execute and deliver the
Transaction Documents to which such Member is a party and to perform such
Member’s obligations thereunder. This Agreement constitutes the valid
and legally binding obligation of such Member, enforceable against such Member
in accordance with the terms of this Agreement. Upon the execution
and delivery by such Member of each Transaction Document to which such Member is
a party, such Transaction Document will constitute the valid and legally binding
obligation of such Member, enforceable against such Member in accordance with
the terms of such Transaction Document.
5
Equity
Ownership
Such
Member owns of record and beneficially the Interests set forth next to such
Member’s name on Schedule 0 free and clear
of any Encumbrance or restriction on transfer (other than any restriction under
any securities Law and Encumbrances listed on Schedule 0). Except
as set forth on Schedule 0, such Member is
not a party to (a) any option, warrant, purchase right, right of first refusal,
call, put or other Contract that could require such Member to sell, transfer or
otherwise dispose of any Interest or (b) any voting trust, proxy or other
Contract relating to the voting of any Interest.
No
Conflicts
Neither
the execution and delivery of this Agreement nor the performance of the
Transactions will, directly or indirectly, with or without notice or lapse of
time: (a) violate any Law to which such Member is subject; or (b)
violate, conflict with, result in a breach of, constitute a default under,
result in the acceleration of or give any Person the right to accelerate the
maturity or performance of, or to cancel, terminate, modify or exercise any
remedy under, any Contract to which such Member is a party or by which such
Member is bound or the performance of which is guaranteed by such
Member. Such Member is not required to notify, make any filing with,
or obtain any Consent of any Person in order to perform the
Transactions.
Litigation
There is
no Proceeding pending or, to the Knowledge of such Member, threatened or
anticipated against such Member relating to or affecting the
Transactions.
No
Brokers’ Fees
Except as
set forth on Schedule
0, such Member
has no Liability for any fee, commission or payment to any broker, finder or
agent with respect to the Transactions to be performed on or about the Closing
Date for which Buyer could be liable.
REPRESENTATIONS
AND WARRANTIES REGARDING SELLER
Seller, and Members, as limited by the
Members’ Liability Cap as set forth in Article VIII below, jointly and severally
represent and warrant to Buyer as follows:
Organization,
Qualification and Corporate Power
Schedule 0 sets forth
Seller’s jurisdiction of organization, the other jurisdictions in which it is
qualified to do business, and its managers and officers. Seller is a
limited liability company duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization. Seller has
delivered to Buyer correct and complete copies of the Organizational Documents
of Seller.
Capitalization
All of
the Interests of Seller have been duly authorized and are validly issued and
outstanding, are owned by the Members, are not subject to capital call by
Seller, and constitute all of the issued and outstanding limited liability
company membership interests or other equity securities of
Seller. Seller does not have any Subsidiaries. Seller does
not control directly or indirectly or have any direct or indirect equity
interest in any Person.
Authority
Seller
has full limited liability company power and authority to execute and deliver
this Agreement and to perform its obligations hereunder. The
execution, delivery and performance by Seller of this Agreement have been
approved by the Members. At Closing, the execution and delivery by
Seller of each Transaction Document to which Seller is a party and the
performance by Seller of the Transactions will have been duly authorized by all
requisite limited liability action on its part. This Agreement
constitutes the valid and legally binding obligation of Seller, enforceable
against Seller in accordance with the terms of this Agreement.
No
Conflicts
Except as
set forth on Schedule
0, neither the
execution and delivery of this Agreement nor the performance of the Transactions
will, directly or indirectly, with or without notice or lapse of
time: (a) violate any Law to which Seller or any Purchased Asset is
subject; (b) violate any Permit held by Seller or give any Governmental Body the
right to terminate, revoke, suspend or modify any Permit held by Seller; (c)
violate any Organizational Document of Seller; (d) violate, conflict with,
result in a breach of, constitute a default under, result in the acceleration of
or give any Person the right to accelerate the maturity or performance of, or to
cancel, terminate, modify or exercise any remedy under, any Contract to which
Seller is a party or by which Seller is bound or to which any Purchased Asset is
subject or under which Seller has any rights or the performance of which is
guaranteed by Seller; (e) cause Buyer to have any Liability for any Tax; (f)
result in the imposition of any Encumbrance upon any Purchased
Asset. Except as set forth on Schedule 0, Seller is not
required to notify, make any filing with, or obtain any Consent of any Person in
order to perform the Transactions.
6
Financial
Statements
Attached to Schedule
0 are the following financial
statements (collectively, the “Financial Statements”): (i) audited balance
sheet of Seller as of December 31, 2008, and statements of income, changes in
members’ capital, and cash flow for the fiscal year then ended, together with
the notes thereto and the reports thereon of Reynolds & Rowella, LLP,
independent certified public accountants; (ii) unaudited balance sheets of
Seller as of December 31 for each of the years 2005 to 2007, and statements of
income for each of the fiscal years then ended; and (iii) an unaudited balance
sheet (the “Interim Balance Sheet”) of Seller as of September 30, 2009,
and statements of income for the nine-month period then ended. The
Financial Statements have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby, and present fairly the
financial condition of Seller as of and for their respective dates; provided, however, that the financial statements
described in clauses (ii) and (iii) above lack notes (which, if presented, would
not differ materially from the notes accompanying the Balance Sheet) and the
interim financial statements described in clause (iii) above are subject to
normal, recurring year-end adjustments (which will not be, individually or in
the aggregate, materially adverse).
The
Books and Records (i) are complete and correct in all material respects and
all transactions to which Seller is or has been a party are accurately reflected
therein in all material respects on an accrual basis, (ii) reflect all
losses incurred by Seller in respect of the Acquired Clients during the periods
covered thereby, (iii) have been maintained in accordance with customary
and sound business practices in Seller’s industry, (iv) form the basis for
the Financial Statements and (v) reflect in all material respects the assets,
liabilities, financial position, results of operations and cash flows of Seller
on an accrual basis.
Absence
of Certain Changes
Except as
set forth on Schedule
0, since the
Balance Sheet Date:
Seller
has not sold, leased, transferred or assigned any asset, other than for fair
consideration in the ordinary course of business;
Seller
has not experienced any damage, destruction or loss (whether or not covered by
insurance) to its property or assets in excess of $10,000;
other than Funding Agreements entered
into in the ordinary course of business, Seller has not entered into any
Contract (or series of related Contracts) involving the payment or receipt of
more than $10,000 or that cannot be terminated without penalty on less than six
months notice, and no Person has accelerated, terminated, modified or canceled
any Contract (or series of related Contracts) involving more than $10,000
to which Seller is a party or
by which Seller or any of its assets are bound;
no
Encumbrance (other than any Permitted Encumbrance) has been imposed upon any
asset of Seller;
Seller has not made any capital
expenditure (or series of related capital expenditures) involving more than
$10,000 or made any
capital investment in, any loan to, or any acquisition of the securities or
assets of, any other Person (or series of related capital investments, loans or
acquisitions) involving more than $10,000;
Seller has not issued, created,
incurred or assumed any Indebtedness (or series of related Indebtedness)
involving more than $10,000 in the aggregate or delayed or
postponed the payment of accounts payable or other Liabilities beyond the
original due date;
7
Seller
has not canceled, compromised, waived or released any right or claim (or series
of related rights or claims) or any Indebtedness (or series of related
Indebtedness) owed to it, in any case involving more than $10,000;
Seller
has not (i) conducted the Business outside the ordinary course of business
consistent with past practices, (ii) entered into any employment Contract or
modified the terms of any existing employment Contract, (iii) granted any
increase in the base compensation of any of its directors, officers or, except
in the ordinary course of business, employees, or (iv) adopted, amended,
modified or terminated any Employee Benefit Plan or other Contract for the
benefit of any of its managers, officers or employees;
there
has not been any Proceeding commenced nor, to the Knowledge of Seller,
threatened or anticipated relating to or affecting Seller, the Business or any
asset owned or used by Seller;
there
has not been (i) any loss of any material customer, distribution channel, or the
receipt of any notice that such a loss may be pending, (ii) any occurrence,
event or incident related to Seller outside of the ordinary course of business
or (iii) any material adverse change in the Business, operations, properties,
prospects, assets, Liabilities or condition (financial or otherwise) of Seller
and no event has occurred or circumstance exists that may result in any such
material adverse change; and
Seller
has not agreed or committed to any of the foregoing.
No
Undisclosed Liabilities
Except as
set forth on Schedule
0, Seller has no
Liability (and no basis exists for any Liability), except for (a) Liabilities
under executory Contracts that are either listed on Schedule 0 or are not
required to be listed thereon, excluding Liabilities for any breach of any
executory Contract, (b) Liabilities to the extent reflected or reserved against
on the Interim Balance Sheet and (c) current Liabilities incurred in the
ordinary course of business since the Interim Balance Sheet Date (none of which
results from, arises out of, relates to, is in the nature of, or was caused by
any breach of Contract, breach of warranty, tort, infringement or violation of
Law). Schedule 0 sets forth the
names of the holders of the Secured Debt and the amount of Secured Debt owed to
each such holder as of the Closing Date.
Title
to and Sufficiency of Assets
Except as
set forth on Schedule
0, Seller has
good and marketable title to, or a valid leasehold interest in, the Purchased
Assets, free and clear of any Encumbrances except Permitted
Encumbrances. The Purchased Assets include all tangible and
intangible property and assets (except for the Excluded Assets) necessary for
the continued conduct of the Business after Closing in the same manner as
conducted prior to Closing. The transfer of the Purchased Assets
hereunder will convey to Buyer good, valid and indefeasible title to the
Purchased Assets, free and clear of any Encumbrances except Permitted
Encumbrances.
Tangible
Personal Property
Schedule 0 lists each item
of Tangible Personal Property that has a net book value in excess of $500 and
its net book value.
Acquired
Client Transaction Rights
Bona Fide
Accounts. Schedule 00 lists each
Acquired Client and, gross funds employed thereon, applicable client reserves
and the amount of each related Purchase Order and Receivable and the aging
thereof. The amounts set forth on Schedule 00 represent bona
fide amounts due thereunder from Account Debtors and for which the applicable
Clients are contingently liable. To Seller’s Knowledge, the Purchase
Orders and Receivables set forth on Schedule 00 are collectible
in accordance with their terms and there is no contest, claim or right to
set-off under any Contract with any obligor relating to the amount or validity
of such Purchase Order or Receivable.
Excluded Clients.
Schedule 00 lists each
Excluded Client and all amounts due to Seller thereunder as of the Closing
Date.
8
Good Title; No Existing
Encumbrances.
Seller
has good title to the Acquired Client Transaction Rights. The
Acquired Client Transaction Rights are free and clear of all Encumbrances
thereon other than any Permitted Encumbrances, and no financing statement
covering any Acquired Client Transaction Rights is on file in any public office
against Seller or to its Knowledge any Client, other than any evidencing
Permitted Encumbrances and other than any evidencing Seller’s interest therein
as purchaser thereof under a Client Agreement.
(d) Right to Assign; No Further
Encumbrances. Seller has the full right, power and authority
to sell and assign the Acquired Client Transaction Rights and hereafter will not
pledge, hypothecate, grant a security interest in, sell, assign, transfer, or
otherwise dispose of the Acquired Client Transaction Rights, or any interest
therein, other than to Buyer in accordance with the terms and conditions of this
Agreement.
(e) Documentation. Seller
represents and warrants that it has heretofore delivered to Buyer, or made
available to Buyer for review, true and correct copies of all of its Client
Documentation and all of such Client Documentation is in full force and effect
on the date hereof. Seller further represents and warrants that it
has filed appropriate financing statements in all appropriate jurisdictions with
respect to the Acquired Client Transaction Rights against all Account Debtors
and that Seller has a first priority lien on Acquired Client Transaction Rights
existing on the date hereof.
Real
Property
Seller
owns no real property. Schedule 0 lists all of
the real property and interests therein leased, subleased or otherwise occupied
or used by Seller (with all easements and other rights appurtenant to such
property, the “Real
Property”). For each item of Real Property, Schedule 0 also lists the
lease term, the lease rate, and the lease pursuant to which Seller holds a
possessory interest in the Real Property and all amendments, renewals or
extensions thereto (each, a “Lease”). The Real
Property complies with all Laws, including zoning requirements, and Seller has
not received any notifications from any Governmental Body or insurance company
recommending improvements to the Real Property or any other actions relative to
the Real Property.
Contracts.
Schedule
0 lists the following Contracts to
which Seller is a party or by which Seller is bound or to which any asset of
Seller is subject or under which Seller has any rights or the performance of
which is guaranteed by Seller (collectively, with the Leases, Licenses and
Insurance Policies, the “Material Contracts”): (i) each Client
Agreement; (ii)
each other Contract (or
series of related Contracts) that involves delivery or receipt of products or
services of an amount or value in excess of $25,000, that was not entered into
in the ordinary course of business or that involves expenditures or receipts in
excess of $25,000; (iii)
each lease, rental or
occupancy agreement, license, installment and conditional sale agreement, and
other Contract affecting the ownership of, leasing of, title to, use of, or any
leasehold or other interest in, any real or personal property; (iv) each licensing agreement or other
Contract with respect to Intellectual Property, including any agreement with any
current or former employee, consultant, or contractor regarding the
appropriation or the non-disclosure of any Intellectual Property; (v) each collective bargaining agreement
and other Contract to or with any labor union or other employee representative
of a group of employees; (vi) each joint venture, partnership or
Contract involving a sharing of profits, losses, costs or Liabilities with any
other Person; (vii)
each Contract containing
any covenant that purports to restrict the business activity of Seller or limit
the freedom of Seller to engage in any line of business or to compete with any
Person; (viii)
each Contract providing
for payments to or by any Person based on sales, purchases or profits, other
than direct payments for goods, including each Broker Agreement; (ix) each Contract for Indebtedness;
(x) each employment or consulting
Contract; and (xi) each Participation Agreement.
Seller
has delivered to Buyer a correct and complete copy of each written Material
Contract. Each Material Contract, with respect to Seller, is legal,
valid, binding, enforceable, in full force and effect and will continue to be so
on identical terms following the Closing Date. Each Material
Contract, with respect to the other parties to such Material Contract, to the
Knowledge of Seller, is legal, valid, binding, enforceable, in full force and
effect and will continue to be so on identical terms following the Closing
Date. Seller is not in breach or default, and no event has occurred
that with notice or lapse of time would constitute a breach or default, or
permit termination, modification or acceleration, under any Material
Contract. To the Knowledge of Seller, no other party is in breach or
default, and no event has occurred that with notice or lapse of time would
constitute a breach or default, or permit termination, modification or
acceleration, under any Material Contract. No party to any Material
Contract has repudiated any provision of any Material Contract.
9
Intellectual
Property
Seller
owns or has the right to use all Intellectual Property used in connection with
the operation of the Business as presently conducted.
To
the Knowledge of Seller, Seller has not violated or infringed upon or otherwise
come into conflict with any Intellectual Property of third parties, and Seller
has not received any notice alleging any such violation, infringement or other
conflict. To the Knowledge of Seller, no third party has infringed
upon or otherwise come into conflict with any Intellectual Property of
Seller.
Tax. Seller has
timely filed with the appropriate Governmental Body all Tax Returns that Seller
is required to have filed. All Tax Returns filed by Seller are true,
correct and complete in all respects. All Taxes owed (or to be
remitted) by Seller (whether or not shown on any Tax Return) have been paid to
the proper Governmental Body.
Legal
Compliance
Except as
set forth on Schedule
0, Seller is, and
since January 1, 2005, has been, in compliance in all material respects with all
applicable Laws and Permits. Except as set forth on Schedule 0, no Proceeding
is pending, nor since January 1, 2005, has been filed or commenced, against
Seller alleging any failure to comply with any applicable Law or
Permit. No event has occurred or circumstance exists that (with or
without notice or lapse of time) may constitute or result in a violation by
Seller of any Law or Permit. Seller has not received any notice or
other communication from any Person regarding any actual, alleged or potential
violation by Seller of any Law or Permit or any cancellation, termination or
failure to renew any Permit held by Seller. Schedule 0 contains a
complete and accurate list of each Permit held by Seller or that otherwise
relates to the Business or any asset owned or leased by Seller. Each
Permit listed or required to be listed on Schedule 0 is valid and in
full force and effect. The Permits listed on Schedule 0 constitute all
of the Permits necessary to allow Seller to lawfully conduct and operate the
Business as currently conducted and operated and to own and use its assets as
currently owned and used.
Litigation
. Except
as set forth on Schedule 0, there is no
Proceeding pending or, to the Knowledge of Seller, threatened or anticipated
relating to or affecting (a) Seller or the Business or any asset owned or used
by it or (b) the Transactions. To the Knowledge of Seller, no event
has occurred or circumstance exists that would reasonably be expected to give
rise to or serve as a basis for the commencement of any such
Proceeding. The Proceedings listed in Schedule 0 have not
resulted in and are not reasonably likely to result in any Material Adverse
Effect. Except as set forth on Schedule 0, there is no
outstanding Order to which Seller or any asset owned or used by Seller is
subject. Schedule 0 lists all
Proceedings pending at any time since January 1, 2004, in which Seller has been
named as a defendant (whether directly, by counterclaim or as a third-party
defendant) and all Proceedings pending at any time since January 1, 2004, in
which Seller has been a plaintiff. Schedule 0 lists all
Orders in effect at any time since January 1, 2004, to which Seller has been
subject or any asset owned or used by Seller is subject.
Environmental
To the
Knowledge of Seller and Members, except as set forth on Schedule 0, Seller and
each of its predecessors have complied and is in compliance with all
Environmental Laws. Seller has received no written or oral notice,
report or other information regarding any actual or alleged violation of any
Environmental Law, or any Liabilities or potential Liabilities, including any
investigatory, remedial or corrective obligations, relating to it or its
facilities arising under any Environmental Law.
Employees
Schedule 0 sets forth the
name, job title, current rate of direct compensation, date of commencement of
employment, any change in compensation since December 31, 2008 and sick and
vacation leave that is accrued and unused with respect to each Active
Employee. Seller is not, nor has Seller been, a party to or bound by
any collective bargaining agreement. To the Knowledge of Seller, no
employee, officer or manager of Seller is a party to or bound by any agreement
that (i) could adversely affect the performance of his or her duties as an
employee, officer or manager other than for the benefit of Seller, (ii) could
adversely affect the ability of Seller to conduct the Business, (iii) restricts
or limits in any way the scope or type of work in which he or she may be engaged
other than for the benefit of Seller or (iv) requires him or her to transfer,
assign or disclose information concerning his or her work to anyone other than
Seller. To the Knowledge of Seller, no officer or employee of Seller
has any plans to accept employment with any Person other than Buyer after
Closing.
10
Employee
Benefits
Schedule 0 lists each
Employee Benefit Plan that Seller maintains or to which Seller contributes, has
any obligation to contribute or has any other Liability.
Each
such Employee Benefit Plan (and each related trust, insurance contract or fund)
complies in form and in operation in all respects with the applicable
requirements of ERISA, the Code and other applicable Laws.
All
premiums or other payments for all periods ending on or before the Closing Date
have been paid with respect to each such Employee Benefit Plan that is an
Employee Welfare Benefit Plan.
Transactions
with Related Persons
Except as
set forth in Schedule
0, for the past
five years, neither any equity owner, officer, manager or employee of Seller nor
any Related Person of any of the foregoing has (a) owned any interest in any
asset used in the Business or (b) been involved in any business transaction with
Seller. Except as set forth in Schedule 0, neither any
equity owner, officer, manager or employee of Seller nor any Related Person of
any of the foregoing (i) is a party to any Contract with, or has any claim or
right against, Seller or (ii) has any Indebtedness owing to
Seller. Except as set forth in Schedule 0, Seller (A) has
no claim or right against any equity owner, officer, manager or employee of
Seller nor any Related Person of any of the foregoing or (B) has any
Indebtedness owing to any equity owner, officer, manager or employee of Seller
nor any Related Person of any of the foregoing.
Solvency
Seller is
not now insolvent and will not be rendered insolvent by any of the
Transactions. As used in this section, “insolvent” means that the sum
of the debts and other probable Liabilities of Seller exceeds the present fair
saleable value of Seller’s assets. Immediately after giving effect to
the Transactions: (a) Seller will be able to pay its Liabilities (including the
Excluded Liabilities) as they become due in the usual course of business, (b)
Seller will not have unreasonably small capital with which to conduct its
present or proposed business, (c) Seller will have assets (calculated at fair
market value) that exceed its Liabilities and (d) taking into account all
pending and threatened litigation, final judgments against Seller in actions for
money damages are not reasonably anticipated to be rendered at a time when, or
in amounts such that, Seller will be unable to satisfy any such judgments
promptly in accordance with their terms and all other obligations of
Seller.
Insurance
Seller
has delivered to Buyer true and complete copies of each Insurance Policy and
each pending application of Seller for any insurance policy. Seller
has no self-insurance arrangements. Seller has been covered since its
organization by insurance in scope and amount customary and reasonable for the
businesses in which it has been engaged during such period. Seller is
in compliance with all obligations relating to insurance created by Law or any
Contract to which Seller is a party.
No
Brokers’ Fees
Except as
set forth on Schedule
0, Seller has no
Liability for any fee, commission or payment to any broker, finder or agent with
respect to the Transactions.
No
Acceleration of Rights and Benefits
Except
for customary professional fees incurred in connection with the Transactions or
as set forth on Schedule 0, Seller has not
made, nor is Seller obligated to make, any payment to any Person in connection
with the Transactions or any change of control. No rights or benefits
of any Person have been (or will be) accelerated, increased or modified and no
Person has the right to receive any payment or remedy (including rescission or
liquidated damages), in each case as a result of a change of control or the
consummation of the Transactions. Except as set forth on Schedule 0, Seller is not
party to any Contract which, by its terms, will require Buyer or Seller to
support its obligations under such contract with a letter of credit or other
collateral.
Disclosure
No
representation or warranty contained in this 0 and
no statement in any Schedule related thereto contains any untrue statement of
material fact or omits to state any material fact necessary to make the
statements therein not misleading. To the Knowledge of Seller, there
is no impending change in the Business or in Seller’s competitors, relations
with employees, suppliers or customers, or in any Laws affecting the Business
that (a) has not been disclosed in the Schedules to the representations and
warranties in this 0 and (b) has resulted in or is
reasonably likely to result in any Material Adverse Effect.
11
REPRESENTATIONS
AND WARRANTIES REGARDING BUYER AND PARENT
Buyer and
Parent, jointly and severally represent and warrant to Seller as
follows:
Organization
and Authority
Buyer is
a limited liability company duly organized, validly existing and in good
standing under the laws of the jurisdiction of its
organization. Parent is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation. Buyer and Parent each have full limited liability
company or corporate power, as applicable, and authority to execute and deliver
the Transaction Documents to which it is a party and to perform its obligations
thereunder. The execution and delivery by Buyer and Parent of each
Transaction Document to which Buyer and Parent are a party and the performance
by Buyer and Parent of the Transactions have been duly approved by all requisite
limited liability company or corporate action, as applicable, on their
part. This Agreement constitutes the valid and legally binding
obligation of Buyer and Parent, enforceable against Buyer and Parent in
accordance with the terms of this Agreement.
No
Conflicts
Neither
the execution and delivery of this Agreement nor the performance of the
Transactions will, directly or indirectly, with or without notice or lapse of
time: (a) violate any Law to which Buyer or Parent are subject; (b)
violate any Organizational Document of Buyer or Parent; or (c) violate, conflict
with, result in a breach of, constitute a default under, result in the
acceleration of or give any Person the right to accelerate the maturity or
performance of, or to cancel, terminate, modify or exercise any remedy under,
any Contract to which Buyer or Parent are a party or by which Buyer or Parent
are bound or the performance of which is guaranteed by Buyer or
Parent. Buyer and Parent are not required to notify, make any filing
with, or obtain any Consent of any Person in order to perform the
Transactions.
Litigation
There is
no Proceeding pending or, to the Knowledge of Buyer or Parent, threatened or
anticipated against Buyer or Parent relating to or affecting the
Transactions.
No
Brokers’ Fees
Neither
Buyer nor Parent has Liability for any fee, commission or payment to any broker,
finder or agent with respect to the Transactions for which Seller could be
liable.
PRE-CLOSING
COVENANTS
The Parties agree as follows with
respect to the period between the date hereof and the Closing:
Capitalization
and Funding of Buyer by Parent
At the
Closing and as described in the Operating Agreement, Parent and Members shall
make the capital contributions to Buyer specified therein and Buyer and the
applicable lenders shall enter into the Credit Agreement and the initial closing
thereunder shall occur. An additional Line of Credit in the amount of
One Million ($1,000,000) Dollars, with an applicable annual interest rate of
twenty (20%) percent shall be made available to Buyer by Parent, or an affiliate
of Parent, in the event Parent is satisfied with the financial performance of
Buyer and such additional funding is needed by Buyer. In accordance
with the Employment Agreements, each Member shall guaranty the Credit Agreement
for $300,000; provided Buyer and Parent acknowledge that no other guarantees of
Buyer’s debt will required from the Members.
Best
Efforts
Each
Party will use its best efforts to take all actions necessary, proper or
advisable in order to perform the Transactions (including satisfaction, but not
waiver, of the closing conditions set forth in 0).
12
Consents
and Approvals
As
promptly as practicable after the date hereof, Seller and the Members will make
all filings required by Law to be made by them in order to perform the
Transactions contemplated to be performed on or before the Closing
Date. As promptly as practicable after the date hereof, Seller will
solicit the Consents set forth on Schedule 0, but not prior
to Buyer’s approval of the form and substance of each such Consent, which
approval will not be unreasonably withheld or delayed. Seller will
use its best efforts (at its expense), and Buyer will cooperate in all
reasonable respects with Seller to obtain prior to the Closing all such
Consents; provided, however, that such
cooperation will not include any requirement to pay any consideration, to agree
to any undertaking or modification to a Contract or Permit or to offer or grant
any financial accommodation not required by the terms of such Contract or
Permit.
Operation
of Business
Seller
will, and the Members will cause Seller to: (a) conduct the Business only in the
ordinary course of business; (b) use their best efforts to maintain the Business
and the properties, physical facilities and operations of Seller, preserve
intact the current business organization of Seller, keep available the services
of the current officers, employees and agents of Seller, and maintain the
relations and goodwill with suppliers, customers, lessors, licensors, lenders,
creditors, employees, agents and others having business relationships with
Seller; and (c) confer with Buyer concerning matters of a material nature to
Seller.
Exclusivity
. Seller
and each Member agree that it will not, and will cause its Representatives not
to, directly or indirectly: (a) solicit, initiate or encourage any
inquiry, proposal, offer or contact from any Person (other than Buyer and its
Affiliates and Representatives) relating to any transaction involving the sale
of any equity interest or assets (other than the sale of Inventory in the
ordinary course of business) of Seller or any acquisition, divestiture, merger,
share exchange, consolidation, business combination, recapitalization,
redemption, financing or similar transaction involving Seller (in each case, an
“Acquisition Proposal”);
or (b) participate in any discussion or negotiation regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any Acquisition Proposal. If any Person makes an
Acquisition Proposal, Seller and the Members will immediately notify Buyer of
such Acquisition Proposal and all related details. Each Member agrees
not to vote its Interests in favor of any transaction associated with an
Acquisition Proposal.
Confidentiality,
Press Releases and Public Announcements
Each
Party will, and will cause its respective Representatives to, maintain in
confidence all information received from another Party or a Representative of
another Party in connection with this Agreement or the Transactions (including
the existence and terms of this Agreement and the Transactions) and use such
information solely to evaluate the Transactions, unless (a) such information is
already known to the receiving Party or its Representatives, (b) such
information is subsequently disclosed to the receiving Party or its
Representatives by a third party that, to the Knowledge of the receiving Party,
is not bound by a duty of confidentiality, (c) such information becomes publicly
available through no fault of the receiving Party, (d) the receiving Party in
good faith believes that the use of such information is necessary or appropriate
in making any filing or obtaining any Consent required for the performance of
the Transactions (in which case the receiving Party will use its best efforts to
advise the other Parties prior to making the disclosure) or (e) the receiving
Party in good faith believes that the furnishing or use of such information is
required by or necessary or appropriate in connection with any Proceeding, Law
or any listing or trading agreement concerning its publicly-traded securities
(in which case the receiving Party will use its best efforts to advise the other
Parties prior to making the disclosure). No Party will issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of Buyer and Seller; provided, however, that
notwithstanding the foregoing Parent may make the public disclosures regarding
this Agreement and the transactions contemplated thereby required by applicable
SEC regulations including filing a Form 8-K with the SEC and issuing a news
release reporting entry into this Agreement and the consummation of the Closing
without the prior approval of Seller. Seller and Buyer will consult
with each other concerning the means by which any employee, customer or supplier
of Seller or any other Person having any business relationship with Seller will
be informed of the Transactions, and Buyer will have the right to be present for
any such communication.
CLOSING
CONDITIONS
13
Conditions
to Buyer’s Obligations
Buyer’s
obligation to perform the Transactions contemplated to be performed on or about
the Closing Date is subject to satisfaction, or written waiver by Buyer, of each
of the following conditions:
Each
of the following documents must have been delivered to Buyer and must be dated
as of the Closing Date (unless otherwise indicated):
a
bill of sale and assignment executed by Seller, in form satisfactory to
Buyer;
the
Operating Agreement, executed by Parent and each Member;
the
Employment Agreements, executed by Hilton and McNiff;
an
assignment and termination agreement executed by Seller and Lenders Funding, LLC
pursuant to which Lenders Funding shall have assigned all of its rights in
respect of Acquired Client Transaction Rights to Seller and released all
Encumbrances on the Purchased Assets prior to the Closing;
an
assignment and termination agreement executed by Seller and Myles Wittenstein
pursuant to which Mr. Wittenstein shall have assigned all of his rights in
respect of Acquired Client Transaction Rights to Seller and released all
Encumbrances on the Purchased Assets prior to the Closing;
an assignment and termination
agreement from Brookridge Trade Finance pursuant to which it shall have assigned
all of its rights, title and interest in any of the Acquired Client Transaction
Rights to Seller prior to the Closing (the “Trade Finance
Assignment”);
such
other bills of sale, assignments, certificates of title and other instruments of
transfer (including UCC-3 amendments listing Buyer as the secured party for all
Acquired Client Transaction Rights), all in form and substance reasonably
satisfactory to Buyer, as are necessary or desirable to convey fully and
effectively to Buyer all of the Purchased Assets in accordance with the terms of
this Agreement; and
such
other documents as Buyer may reasonably request for the purpose of (A)
evidencing the accuracy of Seller’s and the Members’ representations and
warranties, (B) evidencing Seller’s and the Members’ performance of, and
compliance with, any covenant or agreement required to be performed or complied
with by Seller or the Members, (C) evidencing the satisfaction of any condition
referred to in this Section 0, (D) vesting in Buyer
legal and beneficial title to the Purchased Assets or (E) otherwise facilitating
the performance of the Transactions.
(i) All
of the representations and warranties of each Member in this Agreement must have
been accurate in all material respects as of the date hereof and must be
accurate in all material respects as if made on the Closing Date, (ii) each
Member must have performed and complied with all of its covenants and agreements
in this Agreement to be performed prior to or at the Closing, and (iii) each
Member must deliver to Buyer at the Closing a certificate, in form and substance
reasonably satisfactory to Buyer, confirming satisfaction, with respect to such
Member, of the conditions in clauses (i) and (ii) above.
(i) All of the representations and
warranties of Seller in this Agreement must have been accurate in all material
respects as of the date hereof and must be accurate in all material respects as
if made on the Closing Date, except if necessary, the Seller Bringdown
Certificate may include revised Schedules
0 and 0, (ii) Seller must have performed and
complied with all of its covenants and agreements in this Agreement to be
performed prior to or at the Closing; and (iii) Seller must deliver to Buyer at
the Closing a certificate, in form and substance reasonably satisfactory to
Buyer, confirming satisfaction of the conditions in Section 0 (the “Seller Bringdown
Certificate”).
Each
Consent listed on Schedule 0 must have been
obtained, delivered to Buyer, be in full force and effect and be in the form
approved by Buyer pursuant to Section 0.
14
Buyer
must have completed all of its business, financial, accounting, legal and
environmental due diligence to its satisfaction and the facts discovered as a
result of such due diligence must be to its satisfaction.
The
lenders under the Credit Agreement must have completed all of its business,
financial, accounting, legal and environmental due diligence to their
satisfaction and the facts discovered as a result of such due diligence must be
to its satisfaction.
There
must not be any Proceeding pending or threatened against Buyer or any of its
Affiliates that (i) challenges or seeks damages or other relief in connection
with any of the Transactions or (ii) may have the effect of preventing,
delaying, making illegal or interfering with any of the
Transactions.
The
performance of the Transactions must not, directly or indirectly, with or
without notice or lapse of time, violate any Law.
There
shall not have occurred a Material Adverse Effect.
Buyer
must have obtained all Permits necessary to operate the Business in all material
respects as operated immediately prior to Closing.
Conditions
to Seller’s Obligations
. Seller’s
and the Members’ obligations to perform the Transactions contemplated to be
performed on or before the Closing Date are subject to satisfaction, or written
waiver by Seller, of the following conditions:
Each
of the following documents must have been delivered to Seller and must be dated
as of the Closing Date (unless otherwise indicated):
an
assumption agreement, executed by Buyer, in the form satisfactory to
Seller;
the
Employment Agreements, executed by Buyer;
the
Credit Agreement;
the
Cash Purchase Price; and
the
Operating Agreement.
(i)
All of the representations and warranties of Buyer and Parent in this Agreement
must have been accurate in all material respects as of the date hereof and must
be accurate in all material respects as if made on the Closing Date, (ii) Buyer
and Parent must have performed and complied with all of their respective
covenants and agreements in this Agreement to be performed prior to or at the
Closing and (iii) Buyer and Parent must deliver to Seller at the Closing a
certificate, in form and substance reasonably satisfactory to Seller, confirming
satisfaction of the conditions in clauses (i) and (ii) above.
The
sale of the Purchased Assets to Buyer must not violate any Law that has been
adopted or issued, or has otherwise become effective, since the date
hereof.
TERMINATION
Termination
Events
This
Agreement may, by written notice given to Seller or Buyer, as applicable, prior
to the Closing, be terminated:
15
by
(i) Buyer, if any representation or warranty made by Seller or any Member is
inaccurate in any material respect or Seller or any Member has breached any
covenant or agreement in this Agreement in any material respect or (ii) Seller,
if any representation or warranty made by Buyer is inaccurate in any material
respect or Buyer has breached any covenant or agreement in this Agreement in any
material respect;
by
(i) Buyer, if any condition in Section 0 has not
been satisfied or waived in writing by December 11, 2009 or if satisfaction of
any such condition is or becomes impossible (in either case, for reasons other
than the failure of Buyer to comply with its obligations under this Agreement)
or (ii) Seller, if any condition in Section 0 has
not been satisfied or waived in writing by December 11, 2009 or if satisfaction
of any such condition is or becomes impossible (in either case, for reasons
other than the failure of Seller or any Member to comply with such Party’s
obligations under this Agreement); or
by
mutual consent of Buyer and Seller.
Effect
of Termination
If this
Agreement is terminated pursuant to Section 0, all
further obligations of the Parties under this Agreement will terminate; provided, however, that the
obligations in Section 0 (confidentiality) and 0 (miscellaneous) will survive the
termination. Nothing in this 0 will
release any Party from any Liability for any breach of any representation,
warranty, covenant or agreement in this Agreement.
EMPLOYEES,
EMPLOYEE BENEFITS AND EMPLOYMENT AGREEMENTS
Employment
of Active Employees by Buyer
Subject
to compliance with customary procedures including completion of satisfactory
background checks and acceptance of applicable employment policies, Buyer
intends to make an offer of employment to all Active Employees (the “Hired
Active Employees”).
Buyer’s
expressed intention to extend offers of employment as set forth in this Section
0 will not constitute any commitment or Contract by
Buyer to enter into an employment relationship with any employee of Seller of
any fixed term or duration or upon any terms or conditions other than those that
Buyer may establish pursuant to individual offers of
employment. Employment offered by Buyer is “at will” and may be
terminated by Buyer or by an employee at any time for any reason (subject to any
written commitments to the contrary made by Buyer or an employee and any
requirements of Law).
Salaries
and Benefits
Seller
will be responsible for (a) the payment of all wages and other remuneration due
to Active Employees with respect to their services as employees of Seller,
including pro rata bonus payments and all vacation pay earned prior to the
Closing Date, (b) the payment of any termination or severance payments
(including any that arise as a result of the consummation of the Transactions)
and the provision of health plan continuation coverage in accordance with the
requirements of COBRA and ERISA §§ 601 through 608, and (c) any claims made or
incurred by Active Employees and their beneficiaries under any of Seller’s
Employee Benefits Plans.
Seller’s
Retirement and Savings Plans
All Hired
Active Employees who are participants in Seller’s retirement plans will retain
their accrued benefits under Seller’s retirement plans as of the Closing Date,
and Seller (or Seller’s retirement plans) will retain sole liability for the
payment of such benefits as and when such Hired Active Employees become eligible
therefor under such plans.
General
Employee Provisions
Each of
Seller and Buyer will give any notices required by Law and take whatever other
actions with respect to the plans, programs and policies described in this 0 as may be reasonably required for it to carry out
its obligations described in this 0. Seller will provide Buyer with completed
I-9 forms and attachments with respect to all Hired Active Employees, except for
such employees as Seller certifies in writing to Buyer are exempt from such
requirement. Buyer will not have any responsibility, liability or
obligation, whether to Active Employees, former employees, their beneficiaries
or to any other Person, with respect to any Employee Benefit Plans (including
the establishment, operation or termination thereof and the notification and
provision of COBRA coverage extension) maintained by Seller.
16
POST-CLOSING
COVENANTS
The
Parties agree as follows with respect to the period following (and subject to)
the Closing:
Payment
of Excluded Liabilities
Seller
will, and the Members will cause Seller to, pay, perform and discharge the
Excluded Liabilities as and when due.
Payment
of Assumed Liabilities
Buyer
will pay, perform and discharge the Assumed Liabilities as and when
due.
Bulk
Transfer Compliance
Inasmuch
as Buyer is to assume the Assumed Liabilities and Seller is to pay, perform and
discharge the Excluded Liabilities, Buyer and Seller hereby mutually agree to
waive compliance with the provisions of any bulk transfer or sales laws, to the
extent applicable to the Transactions.
Tax
Covenants
Seller
will, at its own expense, file when due all necessary Tax Returns and other
documentation with respect to all such transfer, documentary, sales, use, stamp,
registration and other Taxes and fees, including penalties an interest thereon
(collectively, the “Transfer
Taxes”), and, if required by applicable Law, Buyer will, and will cause
its Affiliates to, join in the execution of any such properly completed Tax
Returns and other documentation. Seller will pay its Transfer Taxes
when due. Each of Seller and Buyer shall be responsible for its pro
rata share of the current year’s personal property, real property, ad valorem
and similar Taxes with respect to the Purchased Assets, prorated on a calendar
year basis as of the Closing Date. Notwithstanding the foregoing,
Seller shall be responsible for all Taxes for all prior calendar years and
periods prior to and including the Closing Date.
Consents
This
Agreement will not constitute an assignment, attempted assignment or agreement
to assign any Contract or Permit to the extent that any attempted assignment or
agreement to assign such Contract or Permit without the Consent of any Person
would constitute a breach thereof or would impair the rights of Seller or Buyer
thereunder and such Consent is not obtained. If any Consent set forth
or required to be set forth on Schedule 0 has not been
obtained prior to or at the Closing, then Seller will, and the Members will
cause Seller to, use its best efforts to obtain such Consent. Until
such Consent is obtained, or the Contract or Permit to which such Consent
relates is novated or terminated, to the extent permissible under such Contract
or Permit, Buyer will be entitled to receive all of Seller’s benefits under such
Contract or Permit and, to the extent it receives such benefits, will perform
all of the obligations of Seller under such Contract or
Permit. Seller will, at Buyer’s request, do all such acts and things
as Buyer may reasonably request to enable due performance of such Contract or
Permit and to provide for Buyer the benefits, subject to the obligations, of
such Contract or Permit. Without limiting the generality of the
foregoing, Seller will provide all reasonable assistance to Buyer (at Buyer’s
request) to enable Buyer to enforce its rights under such Contract or
Permit.
Client
and Account Debtor Notifications; Mail and Receivables; Accounts Receivable
Financing Agreement
As soon
as practicable following the Closing, Buyer will send notifications to (a) each
Client and any related guarantor notifying them that such Client’s Client
Agreement, Client Documentation and Client Obligations have been transferred and
assigned to Buyer and (b) to each account debtor in respect of the Acquired
Client Transaction Rights that its payment obligations with respect thereto
should be made to Buyer. Seller hereby irrevocably authorizes Buyer
after the Closing to receive and open all mail and other communications received
by Buyer and addressed or directed to Seller and, to the extent relating to the
Business, the Purchased Assets or the Assumed Liabilities, to act with respect
to such communications in such manner as Buyer may elect. Seller
hereby irrevocably authorizes Buyer after the Closing to endorse, without
recourse, the name of Seller on any check or any other evidence of indebtedness
received by Buyer on account of any of the Purchased Assets or the
Business. After the Closing, Seller will, and the Members will cause
Seller to, remit to Buyer within 24 hours any payment relating to the Business
or the Purchased Assets (including payments on Receivables and Purchase Orders)
that Seller receives. As soon as practicable following the Closing,
Buyer and Anchor will work in good faith to negotiate the terms of an agreement
pursuant to which Buyer would receive accounts receivable financing at Parent’s
lower cost of funds while retaining all profit and loss associated with such
accounts receivable on mutually satisfactory terms (the “Anchor/Brookridge Financing
Agreement”).
Litigation
Support
If any
Party is evaluating, pursuing, contesting or defending against any Proceeding in
connection with (a) any Transaction or (b) any fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction on or prior to the Closing Date involving
Seller, each other Party will cooperate with such Party and such Party’s counsel
in the evaluation, pursuit, contest or defense, make available its personnel,
and provide such testimony and access to its books and records as may be
necessary in connection therewith. The evaluating, pursuing,
contesting or defending Party will reimburse each other Party for its
out-of-pocket expenses related to such cooperation (unless the contesting or
defending Party is entitled to indemnification therefor under 0).
17
Transition
After the
Closing, at Buyer’s request, Seller will cooperate with Buyer in its efforts to
continue and maintain for the benefit of Buyer those business relationships of
Seller existing prior to the Closing, including relationships with lessors,
lessees, employees, Governmental Bodies, licensors, licensees, customers,
suppliers and others, and Seller will satisfy the Excluded Liabilities in a
manner that is not detrimental to any of such relationships. Seller
will refer to Buyer all inquiries relating to the Business.
Confidentiality;
Public Disclosure
Seller
and each Member will, and will cause its Affiliates and Representatives to,
maintain the confidentiality of the Confidential Information at all times, and
will not, directly or indirectly, use any Confidential Information for its own
benefit or for the benefit of any other Person or reveal or disclose any
Confidential Information to any Person other than authorized Representatives of
Buyer, except in connection with this Agreement or with the prior written
consent of Buyer. The covenants in this Section 0 will not apply to Confidential Information that (a)
is or becomes available to the general public through no breach of this
Agreement by Seller, any Member or any of their respective Affiliates or
Representatives or, to the Knowledge of Seller or any Member, breach by any
other Person of a duty of confidentiality to Buyer or (b) Seller is required to
disclose by applicable Law; provided, however, that Seller will notify
Buyer in writing of such required disclosure as much in advance as practicable
in the circumstances and cooperate with Buyer to limit the scope of such
disclosure. At any time that Buyer may request, Seller and each
Member will, and will cause their respective Affiliates and Representatives to,
turn over or return to Buyer all Confidential Information in any form (including
all copies and reproductions thereof) in their respective possession or
control. No Party will issue any press release or make any public
announcement relating to the subject matter of this Agreement without the prior
written approval of Buyer and Seller; provided, however, that any
Party may make any public disclosure it believes in good faith is required by
Law or any listing agreement concerning its publicly-traded securities (in which
case such Party will use its best efforts to advise the other Parties prior to
making the disclosure). Seller and Buyer will consult with each other
concerning the means by which any employee, customer or supplier of Seller or
any other Person having any business relationship with Seller will be informed
of the Transactions, and Buyer will have the right to be present for any such
communication.
Change
and Use of Name
Seller
and the Members will cease to use and will not grant any license to use any name
containing the term “Brookridge” or any name, slogan, logo or trademark that is
similar to any of the trademarks acquired by Buyer pursuant hereto and will take
such actions as Buyer may reasonably request to enable Buyer and its Affiliates
to use such name, slogan, logo or trademark. Buyer may refer to its
business as formerly being Seller’s.
Retention
of and Access to Books and Records
Buyer
will retain for a period consistent with Buyer’s record-retention policies and
practices the Books and Records delivered to Buyer. Buyer also will provide
Seller and its Representatives reasonable access thereto, during normal business
hours and on at least three Business Days’ prior written notice, to enable them
to prepare financial statements or tax returns or deal with tax
audits. Seller will provide Buyer and its Representatives reasonable
access to those books and records that are Excluded Assets, during normal
business hours and on at least three Business Days’ prior written notice, for
any reasonable business purpose specified by Buyer in such notice.
Further
Assurances; Cooperation with Audit
Seller
and the Members shall, at any time and from time to time after the Closing, upon
the request of Buyer, do, execute, acknowledge and deliver, and cause to be
done, executed, acknowledged or delivered, all such further acts, deeds,
assignments, transfers, conveyances, powers of attorney or assurances as may be
reasonably required to sell, transfer, convey, assign and deliver to Buyer, or
to aid and assist in the collection of or reducing to possession by Buyer, of
the applicable Purchased Assets, or to vest in Buyer good and marketable title
to the Purchased Assets. Additionally, Seller agrees, for a period of
two years after the Closing, upon the request of Buyer, to assist Buyer in
compiling historical information of Seller (including the compilation of
financial information or otherwise) and to comply with any financial reporting
obligations imposed by law, including the provision of audited financial
statements for the years ended December 31, 2009, 2008 and 2007, respectively,
in accordance with GAAP; provided the cost of such audited financial statements
shall be borne by Parent.
18
Non-competition/Non-solicitation
Restrictions. Seller agrees not to engage
in any activities competitive with the Business at any time during the
Restricted Period, including any activities similar to those described in the
subsections of this Section 0. Furthermore, Seller agrees that, except
as otherwise approved in writing by Buyer and Parent, during the Restricted
Period, Seller will not, directly or indirectly, alone or in conjunction with
any other party:
encourage,
induce or attempt to induce any employee of Buyer to terminate his or her
employment with Buyer or to violate any agreements between Buyer and such
employee; or
call
upon, contact, solicit, divert, encourage or appropriate or attempt to call
upon, contact, solicit, divert, encourage or appropriate any Customer for
purposes of engaging in the Business or aiding any other person in doing so;
or
divert
away or attempt to divert away any business from Buyer to another person or
entity; or
interfere
with the business relationship between a Customer and Buyer; or
engage in
the Business in the Territory.
Reasonableness
of Restrictions. Seller agrees that the
covenants in this Section 0 are reasonable given
the real and potential competition encountered (and reasonably expected to be
encountered) by Buyer and the substantial knowledge and goodwill Seller has
acquired with respect to the Business. Notwithstanding the foregoing,
in the event that any provision of this Section 0
is determined by a court to be invalid or unenforceable, such court may, and is
hereby authorized to, reduce or limit the terms of such provision to allow it to
be enforced to the maximum extent possible.
Remedies;
Injunctive Relief. Seller acknowledges that
Buyer will suffer irreparable harm in the event that Seller breaches any of
Seller’s obligations under this Section 0 and that
monetary damages will be inadequate to compensate Buyer for such
breach. Accordingly, Seller agrees that, in the event of a breach by
Seller of any of Seller’s obligations under this Section 0, in addition to Buyer’s right to damages and any
other rights Buyer may have at law, in equity, by contract or otherwise, Buyer
will be entitled to obtain from any court of competent jurisdiction preliminary
and permanent injunctive relief, and expedited discovery for the purpose of
seeking relief, in order to prevent or to restrain any such breach (and Seller
agrees to waive any requirement for the securing or posting of any bond in
connection with such remedies).
Member Restrictive
Covenants. Each Member hereby agrees to comply with the
non-competition and other restrictive covenants contained in his Employment
Agreement.
Key
Person Life Insurance.
Each
Member shall take all actions reasonably requested by Parent so that Parent may
purchase “key person” life insurance covering each Member and on such other
terms and conditions as are satisfactory to Parent.
Client
Agreements
As soon
as practicable following the Closing, Anchor and the Members shall, at the
Company’s expense, cause the Company’s form Purchase Order Purchase Agreement to
be reviewed by counsel selected by Anchor to ensure the enforceability
thereof. Following such review, the Company’s form Purchase Order
Purchase Agreement shall be modified to address any issues identified thereby
(the “New Purchase Order
Agreement”). Each Member shall, jointly and severally,
indemnify Anchor and hold Anchor harmless against any loss suffered by Anchor as
a result of the unenforceability of any Purchase Order Purchase Agreement that
is not in the form of the New Purchase Order Agreement.
19
INDEMNIFICATION
Indemnification
by Seller and the Members
After the
Closing and subject to the terms and conditions of this 0:
Each
Member, severally and not jointly, will indemnify and hold harmless Buyer,
Parent and their Affiliates and Representatives from, and pay and reimburse
Buyer, Parent and their Affiliates and Representatives for, all Losses directly
or indirectly relating to or arising from: (i) any breach or inaccuracy or any
allegation of any third party that, if true, would be a breach or inaccuracy of
any representation or warranty made by such Member in 0 or, to the extent related to any such representation
or warranty, pursuant to the certificates delivered by such Member pursuant to
Section 0; or (ii) any breach of any covenant or
agreement of such Member in 0.
Seller
and each Member, to the extent of their respective Liability Caps as set forth
below, jointly and severally, will indemnify and hold harmless Buyer and its
Affiliates and Representatives from, and pay and reimburse Buyer and its
Affiliates and Representatives for, all Losses directly or indirectly relating
to or arising from: (i) any material breach or inaccuracy or any
allegation of any third party that, if true, would be a breach or inaccuracy of
any representation or warranty made by Seller in this Agreement; (ii) any
material breach of any covenant or agreement of Seller in this Agreement; (iii)
any failure to pay, perform or otherwise discharge any Excluded Liability as and
when due or any Liability arising out of or in connection with non-compliance
with any “bulk sales,” “bulk transfer” or any similar Law other than as a result
of any failure by Buyer to discharge any Assumed Liability; or (iv) any claim by
Seller, any Member or any Person claiming through or on behalf of Seller or any
Member arising out of or relating to any act or omission by Buyer or any other
Person in reliance upon instructions from or notices given by
Seller.
Indemnification
by Buyer and Parent
After the
Closing and subject to the terms and conditions of this 0, Buyer and Parent, jointly and severally, will
indemnify and hold harmless Seller from, and pay and reimburse Seller for, all
Losses, directly or indirectly, relating to or arising from: (i) any
breach or inaccuracy or any allegation of any third party that, if true, would
be a breach or inaccuracy of any representation or warranty made by Buyer in
this Agreement; (ii) any breach of any covenant or agreement of Buyer in this
Agreement; or (iii) any failure to pay, perform or otherwise discharge any
Assumed Liability as and when due.
Survival
and Time Limitations
All
representations, warranties, covenants and agreements of the Parties in this
Agreement or any other certificate or document delivered pursuant to this
Agreement will survive the Closing. Seller and the
Members will have no Liability with respect to any claim for any breach or
inaccuracy of any representation or warranty in this Agreement or any other
certificate or document delivered pursuant to this Agreement, or any covenant or
agreement in this Agreement to be performed and complied with prior to the
Closing Date, unless Parent or Buyer notifies the Members of such a claim on or
before the date two (2) years after the Closing Date; provided, however, that any
claim relating to 0 (Members) or Section 0 (organization), 0
(authority), 0 (conflicts) or 0 (title to assets), fraud, or any covenant or
agreement to be performed or complied with at or after the Closing may be made
at any time within any applicable statute or period of limitations.
Manner
of Payment
Buyer or
Parent may set off any amount to which it may be entitled under Section 0 or this 0 against any
amount otherwise payable by Buyer, Parent or their Affiliates to Seller or any
Member, including amounts otherwise payable to Seller pursuant to Section 0 or any other written commercial agreement between
Buyer and Seller. The exercise of such set-off right in good faith
will not constitute a breach or event of default under any Contract relating to
any amount against which the set-off is applied.
Other
Indemnification Matters
All indemnification payments payable
to Buyer under this
0 will be deemed adjustments to the
Purchase Price. The right to indemnification will not
be affected by any investigation conducted with respect to, or any Knowledge
acquired (or capable of being acquired) at any time, whether before or after the
date hereof, with respect to any representation, warranty, covenant or agreement
in this Agreement. THE INDEMNIFICATION PROVISIONS IN THIS
ARTICLE XI WILL BE ENFORCEABLE REGARDLESS OF WHETHER ANY PERSON ALLEGES OR
PROVES THE SOLE, CONCURRENT, CONTRIBUTORY OR COMPARATIVE NEGLIGENCE OF THE
PERSON SEEKING INDEMNIFICATION OR ITS AFFILIATES, OR THE SOLE OR CONCURRENT
STRICT LIABILITY IMPOSED ON THE PERSON SEEKING INDEMNIFICATION OR ITS
AFFILIATES.The waiver of any condition based on
the accuracy of any representation or warranty, or on the performance of or
compliance with any covenant or agreement, will not affect the right to
indemnification, payment of damages, or other remedy based on any such
representation, warranty, covenant or agreement.
20
Any person or entity claiming
indemnification hereunder is hereinafter referred to as the “Indemnified Party”
and any person against whom such claims are asserted hereunder is hereinafter
referred to as the “Indemnifying Party.” In the event that any Losses
are asserted against or sought to be collected from an Indemnified Party by a
third party, said Indemnified Party shall with reasonable promptness notify the
Indemnifying Party of the Losses, specifying the nature of and specific basis
for such Losses and the amount or the estimated amount thereof to the extent
then feasible (the “Claim Notice”); provided, however, that any failure to so notify the
Indemnifying Party will not relieve the Indemnifying Party from any obligation
hereunder unless (and then solely to the extent) the Indemnifying Party is
materially prejudiced by such failure. The Indemnifying Party shall
have 30 days from the personal delivery or receipt of the Claim Notice (the
“Notice Period”) to
notify the Indemnified Party (i) whether or not it disputes the liability of the
Indemnifying Party to the Indemnified Party hereunder with respect to such
Losses and (ii) whether or not it desires, at the sole cost and expense of the
Indemnifying Party, to defend the Indemnified Party against such Losses;
provided,
however, that any
Indemnified Party is hereby authorized prior to and during the Notice Period to
file any motion, answer or other pleading that it shall deem necessary or
appropriate to protect its interests or those of the Indemnifying Party (and of
which it shall have given notice and opportunity to comment to the Indemnifying
Party) and not prejudicial to the Indemnifying Party. In the event
that the Indemnifying Party notifies the Indemnified Party within the Notice
Period that it desires to defend the Indemnified Party against such Losses and
except as hereinafter provided, the Indemnifying Party shall have the right to
defend by all appropriate proceedings, and with counsel of its own choosing
which such counsel shall be reasonably satisfactory to the Indemnified Party,
which proceedings shall be promptly settled or prosecuted by them to a final
conclusion. If the Indemnified Party desires to participate in, but
not control, any such defense or settlement it may do so at its sole cost and
expense. In such case, (A) if requested by the Indemnifying Party,
the Indemnified Party agrees to cooperate with the Indemnifying Party and its
counsel in contesting any Losses that the Indemnifying Party elects to contest,
or, if appropriate and related to the claim in question, in making any
counterclaim against the person asserting the third party Losses, or any
cross-complaint against any person and (B) the subject claims may be settled or
otherwise compromised only with the prior written consent of the Indemnified
Party which consent will not be withheld unreasonably. If the
Indemnified Party does not so choose to defend the Indemnified Party against
such Losses the Indemnified Party shall be entitled to defend against, and
consent to the entry of any judgment or enter into any settlement with respect
to, such claims in any manner it may deem appropriate (and the Indemnified Party
need not consult with, or obtain any consent from, the Indemnifying Party in
connection therewith), and (X) the Indemnifying Party will reimburse the
Indemnified Party promptly and periodically (but no less often than monthly) for
the costs of defending against such claims, including attorneys’ fees and
expenses, and (Y) the Indemnifying Party will remain responsible for any Losses
the Indemnified Party may incur relating to or arising out of the Third-Party
Claim to the fullest extent provided in this 0.
Member’s
Liability Cap
. Notwithstanding
anything contained herein to the contrary, each Member’s maximum aggregate
liability with respect to Section 0 and any
representation or warranty made by such Member pursuant to this Agreement will
be limited to an amount equal to one-quarter (1/4) of the Cash Purchase Price
and any subsequent Contingent Purchase Price Consideration actually paid by
Buyer (“Member’s Liability Cap”), unless such liability is the result of fraud
on the part of a Member. In the event the liability of a Member
hereunder results from the fraudulent activity of a Member, such liability shall
be unlimited in amount as to any such Member engaging in the fraudulent
activity.
MISCELLANEOUS
Further
Assurances
Each
Party agrees to furnish upon request to any other Party such further
information, to execute and deliver to any other Party such other documents, and
to do such other acts and things (including the execution and delivery of such
further instruments or documents as may be necessary or convenient to transfer
and convey any Purchased Asset to Buyer), all as any other Party may reasonably
request for the purpose of carrying out the intent of the Transaction
Documents.
21
No
Third-Party Beneficiaries
This
Agreement does not confer any rights or remedies upon any Person (including any
employee of Seller) other than the Parties, their respective successors and
permitted assigns and, as expressly set forth in this Agreement, any Indemnified
Party.
Entire
Agreement
The
Transaction Documents constitute the entire agreement among the Parties with
respect to the subject matter of the Transaction Documents and supersede all
prior agreements (whether written or oral and whether express or implied) among
any Parties to the extent related to the subject matter of the Transaction
Documents (including any letter of intent or confidentiality
agreement).
Successors
and Assigns
This
Agreement will be binding upon and inure to the benefit of the Parties and their
respective successors and permitted assigns. Neither Seller nor any
Member may assign, delegate or otherwise transfer (whether by operation of law
or otherwise) any of its rights, interests or obligations in this Agreement
without the prior written approval of Buyer. Buyer may assign any or
all of its rights or interests, or delegate any or all of its obligations, in
this Agreement to (a) any successor to Buyer or any acquirer of a material
portion of the business or assets of Buyer, (b) one or more of Buyer’s
Affiliates, or (c) any lender to Buyer or its Affiliates as security for
obligations to such lender.
Counterparts
This
Agreement may be executed by the Parties in multiple counterparts and shall be
effective as of the date set forth above when each Party shall have executed and
delivered a counterpart hereof, whether or not the same counterpart is executed
and delivered by each Party. When so executed and delivered, each
such counterpart shall be deemed an original and all such counterparts shall be
deemed one and the same document. Transmission of images of signed
signature pages by facsimile, e-mail or other electronic means shall have the
same effect as the delivery of manually signed documents in person.
Notices
Any
notice pursuant to this Agreement must be in writing and will be deemed
effectively given to another Party on the earliest of the date (a) three
Business Days after such notice is sent by registered U.S. mail, return receipt
requested, (b) one Business Day after receipt of confirmation if such notice is
sent by facsimile, (c) one Business Day after delivery of such notice into the
custody and control of an overnight courier service for next day delivery, (d)
one Business Day after delivery of such notice in person and (e) such notice is
received by that Party; in each case to the appropriate address below (or to
such other address as a Party may designate by notice to the other
Parties):
|
If
to Seller:
|
with
a copy to (which shall not constitute notice):
|
|
Brookridge
Funding, LLC
|
Cramer
& Anderson LLP
|
|
26
Mill Plain Road
|
51
Main Street
|
|
Danbury,
CT 06811
|
New
Milford, CT 06776
|
|
Fax:(203)
790-7326
|
Fax:
(860) 355-9460
|
|
Phone: (203)
790-7301
|
Phone:
(860)
355-2631
|
|
Attn:
Michael
P. Hilton
|
Attn:
Mitchell J. Melnick
|
|
If
to Hilton:
|
If
to McNiff:
|
|
26
Mill Plain Road
|
26
Mill Plain Road
|
|
Danbury,
CT 06811
|
Danbury,
CT 06811
|
|
Fax: (203)
790-7326
|
Fax: (203)
790-7326
|
|
Phone: (203)
790-7301
|
Phone: (203)
790-7301
|
|
If
to Buyer:
|
with
a copy to (which shall not constitute notice):
|
|
Brookridge
Funding Services, LLC
|
K&L
Gates LLP
|
|
10801
Johnston Road, Suite 210
|
214
North Tryon Street , 47th
Floor
|
|
Charlotte,
NC 28226
|
Charlotte,
NC 28202
|
|
Fax: (561)
961-9005
|
Fax: (704)
353-3140
|
|
Phone: (866)
950-6669 (ext. 303)
|
Phone: (704)
331-7440
|
|
Attn:
Brad Bernstein
|
Attn:
Mark R. Busch
|
Arbitration
Any
controversy, claim or dispute arising out of or relating to Section 0 (Contingent Purchase Price Consideration) shall be
determined by binding arbitration to be conducted in Charlotte, North Carolina
(or such other location as Buyer and Seller may mutually agree to in writing)
before a single arbitrator selected in accordance with the
Rules. Arbitration proceedings shall be conducted in accordance with
the commercial arbitration rules of the American Arbitration Association or such
other rules and procedures as shall be agreed upon by Buyer and Seller (the
“Rules”). The
Parties hereby agree to abide and be bound by all decisions and awards rendered
by the arbitrator. Judgment upon such decisions and awards may be
entered in any court of competent jurisdiction.
22
JURISDICTION;
SERVICE OF PROCESS
EACH
PARTY (a) CONSENTS TO THE PERSONAL JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED IN CHARLOTTE, NORTH CAROLINA (AND ANY CORRESPONDING APPELLATE COURT) IN
ANY PROCEEDING ARISING OUT OF OR RELATING TO ANY TRANSACTION DOCUMENT, (b)
WAIVES ANY VENUE OR INCONVENIENT FORUM DEFENSE TO ANY PROCEEDING MAINTAINED IN
SUCH COURTS, AND (c) EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT, AGREES NOT
TO INITIATE ANY PROCEEDING ARISING OUT OF OR RELATING TO ANY TRANSACTION
DOCUMENT IN ANY OTHER COURT OR FORUM. PROCESS IN ANY SUCH PROCEEDING
MAY BE SERVED ON ANY PARTY ANYWHERE IN THE WORLD.
Governing
Law
This
Agreement and all other Transaction Documents (unless otherwise stated therein)
will be governed by the laws of the State of North Carolina without giving
effect to any choice or conflict of law principles of any
jurisdiction.
Amendments
and Waivers
Prior to
the Closing, no amendment of any provision of this Agreement will be valid
unless the amendment is in writing and signed by Buyer and
Seller. After the Closing, no amendment of any provision of this
Agreement will be valid unless the amendment is in writing and signed by Buyer,
Seller and the Members. No waiver of any provision of this Agreement
will be valid unless the waiver is in writing and signed by the waiving
Party. The failure of a Party at any time to require performance of
any provision of this Agreement will not affect such Party’s rights at a later
time to enforce such provision. No waiver by any Party of any breach
of this Agreement will be deemed to extend to any other breach hereunder or
affect in any way any rights arising by virtue of any other breach.
Severability
Any
provision of this Agreement that is determined by any court of competent
jurisdiction to be invalid or unenforceable will not affect the validity or
enforceability of any other provision hereof or the invalid or unenforceable
provision in any other situation or in any other jurisdiction. Any provision of
this Agreement held invalid or unenforceable only in part or degree will remain
in full force and effect to the extent not held invalid or
unenforceable.
Expenses
Seller
and the Members will bear all expenses incurred by Seller or any Member or any
of their respective Representatives in connection with the Transactions
contemplated to be performed before or on the
Closing Date. Except as otherwise expressly provided in
this Agreement, Buyer will bear all expenses incurred by Buyer or any of its
Representatives in connection with the Transactions contemplated to be performed
before or on the Closing Date. If this Agreement is terminated, the
obligation of each Party to pay its own expenses will be subject to any rights
of such Party arising from a breach of this Agreement by another
Party.
Interpretation
The
article and section headings in this Agreement are inserted for convenience only
and are not intended to affect the interpretation of this
Agreement. Any reference in this Agreement to any Article or Section
refers to the corresponding Article or Section of this Agreement. Any
reference in this Agreement to any Schedule or Exhibit refers to the
corresponding Schedule or Exhibit attached to this Agreement and all such
Schedules and Exhibits are incorporated herein by reference. The word
“including” in this Agreement means “including without
limitation.” This Agreement will be construed as if drafted jointly
by the Parties and no presumption or burden of proof will arise favoring or
disfavoring any Party by virtue of the authorship of any provision in this
Agreement. Unless the context requires otherwise, any reference to
any Law will be deemed also to refer to all amendments and successor provisions
thereto and all rules and regulations promulgated thereunder, in each case as in
effect as of the date hereof and the Closing Date. All accounting
terms not specifically defined in this Agreement will be construed in accordance
with GAAP as in effect on the date hereof (unless another effective date is
specified herein). The word “or” in this Agreement is disjunctive but
not necessarily exclusive. All words in this Agreement will be
construed to be of such gender or number as the circumstances
require. References in this Agreement to time periods in terms of a
certain number of days mean calendar days unless expressly stated herein to be
Business Days. In interpreting and enforcing this Agreement, each
representation and warranty will be given independent significance of fact and
will not be deemed superseded or modified by any other such representation or
warranty.
23
Specific
Performance
Each
Party acknowledges that the other Parties would be damaged irreparably and would
have no adequate remedy of law if any provision of this Agreement is not
performed in accordance with its specific terms or otherwise is
breached. Accordingly, each Party agrees that the other Parties will
be entitled to an injunction to prevent any breach of any provision of this
Agreement and to enforce specifically any provision of this Agreement, in
addition to any other remedy to which they may be entitled and without having to
prove the inadequacy of any other remedy they may have at law or in equity and
without being required to post bond or other security.
Time
Is of the Essence
Time is
of the essence with respect to all time periods and dates set forth
herein.
Attorneys’
Fees
In the
event any Party has to enforce its rights under this Agreement due to a breach
by another Party, the prevailing Party in any such enforcement action shall be
entitled to recover from the other Party, all costs it incurs in connection with
enforcing its rights hereunder including but not limited to, all attorneys’
fees, court costs and costs and fees of appeal.
[Signature
pages follow]
24
The
Parties have executed and delivered this Asset Purchase Agreement as of the date
first written above.
Buyer:
BROOKRIDGE
FUNDING SERVICES, LLC
By: /s/ Michael P.
Hilton
Name: Michael P.
Hilton
Title: Manager
Seller:
BROOKRIDGE
FUNDING, LLC
By: /s/ John A. McNiff,
III
Name: John A.
McNiff
Title: Manager
Parent:
ANCHOR
FUNDING SERVICES, INC.
By:/s/ Brad
Bernstein
Name:Brad
Bernstein
Title: President
Members:
/s/ Michael P.
Hilton
Michael
P. Hilton
/s/ John A.
McNiff,III
John A.
McNiff III
25
EXHIBIT
A
DEFINITIONS
“Account Debtor” means any
Person obligated to pay in respect of a Receivable.
“Active Employees” means all
employees employed by Seller, including employees on temporary leave of absence,
including family medical leave, military leave, temporary disability or sick
leave, but excluding employees on long-term disability leave.
“Affiliate” means, with
respect to a specified Person, any other Person that directly or indirectly
controls, is controlled by, or is under common control with, the specified
Person. The term “control” means (a) the possession, directly or
indirectly, of the power to vote 10% or more of the securities or other equity
interests of a Person having ordinary voting power, (b) the possession, directly
or indirectly, of the power to direct or cause the direction of the management
policies of a Person, by contract or otherwise or (c) being a director, officer,
executor, trustee or fiduciary (or their equivalents) of a Person or a Person
that controls such Person.
“Agreement” is defined in the
opening paragraph.
“Assumed Liabilities” is
defined in Section 0.
“Balance Sheet” means the
audited balance sheet of Seller as of December 31, 2008, and the notes thereto,
all of which are attached to Schedule 0.
“Balance Sheet Date” means the
date of the Balance Sheet.
“Books and Records” is defined
in Section 0.
“Book Value” means (1) with
respect to Acquired Client Transaction Rights associated with Purchase Orders,
net funds employed with respect to the related Purchase Orders plus accrued fees,
and (2) with respect to Acquired Client Transaction Rights associated with
Receivables, the amount of the related Receivables less client reserves
(net of accrued fees). “Broker
Agreement” means any Contract between Seller and any Person pursuant to
which such Person solicits new prospective clients for Seller.
“Business” means the business
conducted by Seller, including (a) invoice or accounts receivable factoring, (b)
inventory financing, purchase order financing or services related to the sale
and assignment of purchase orders and (c) the activities carried on by Seller
for the purpose of providing factoring services to its customers.
“Business Day” means any day
that is not a Saturday, Sunday or any other day on which banks are required or
authorized by law to be closed in Charlotte, North Carolina.
“Buyer” is defined in the
opening paragraph.
“Cap” is defined in Section 0.
“Client” means any Person who
sells Purchase Orders or Receivables to Seller under a Client
Agreement.
“Client Agreements” shall mean
all purchase order finance agreements, factoring agreements, related security
agreements, assignments of purchase orders and accounts, agreements for the sale
and assignment of purchase orders, accounts or billings and any other agreements
pertaining to the purchase of purchase orders or accounts to which Seller is a
party with any Client.
26
“Client Documentation” shall
mean, collectively, all Client Agreements, all powers of attorney executed by
any Client in favor of Seller in connection with any factoring or purchase order
financing arrangement between such Client and Seller, all financing statements
between Seller, as secured party, and any Client, as debtor, filed in connection
with any such arrangements, all guarantees of any such arrangements, all
agreements, instruments, certificates, invoices, letters of credit, performance
bonds, promissory notes, chattel paper, bills of lading and other documents
evidencing or pertaining to any and all purchase order which are financed or
accounts which are factored pursuant to such arrangement and all other
documentation relating to any such arrangement.
“Client Obligations” means the
principal amount of all advances, and other extensions of credit or other
financial accommodations made to or on behalf of the Client pursuant to any
Client Agreement, and all other amounts, such as attorney’s fees (other than
interest or other compensation) chargeable to the Client pursuant
thereto.
“Client Transaction Rights”
means Seller’s rights with respect to Client Agreements including the related
Client Obligations, the Collateral and all other sources of repayment
thereof.
“Closing” is defined in
Section 0.
“Closing Date” is defined in
Section 0.
“COBRA” means the requirements
of Part 6 of Subtitle B of Title I of ERISA and Code § 4980B.
“Code” means the Internal
Revenue Code of 1986.
“Collateral” means all
collateral, guarantees, letters of credit and performance bonds received by or
granted to Seller pursuant to a Client Agreement, or otherwise securing the
Client Obligations, including security interests in present and future
Inventory, Accounts, Instruments, Documents, Chattel Paper, General Intangibles,
Investment Property (each as defined in the Uniform Commercial Code), and the
proceeds of all of the foregoing.
“Confidential Information”
means information concerning the Business or affairs of Seller, including
information relating to customers, clients, suppliers, distributors, investors,
lenders, consultants, independent contractors or employees, customer and
supplier lists, price lists and pricing policies, cost information, financial
statements and information, budgets and projections, business plans, production
costs, market research, marketing plans and proposals, sales and distribution
strategies, manufacturing and production processes and techniques, processes and
business methods, technical information, pending projects and proposals, new
business plans and initiatives, research and development projects, inventions,
discoveries, ideas, technologies, trade secrets, know-how, formulae, technical
data, designs, patterns, marks, names, improvements, industrial designs, mask
works, compositions, works of authorship and other Intellectual Property,
devices, samples, plans, drawings and specifications, photographs and digital
images, computer software and programming, all other confidential information
and materials relating to the Business, and all notes, analyses, compilations,
studies, summaries, reports, manuals, documents and other materials prepared by
or for Seller containing or based in whole or in part on any of the foregoing,
whether in verbal, written, graphic, electronic or any other form and whether or
not conceived, developed or prepared in whole or in part by Seller.
“Consent” means any consent,
approval, authorization, permission or waiver.
27
“Contingent Purchase Price
Consideration” is defined in Section 0.
“Contract” means any contract,
obligation, understanding, commitment, lease, license, purchase order, bid or
other agreement, whether written or oral or whether express or implied, together
with all amendments and other modifications thereto.
“Credit Agreement” means that
certain Credit Agreement, dated as of the Closing Date, by and among Buyer and
Parent or its Affiliates, providing for a senior line of credit in the aggregate
original principal amount of $3,700,000 at an applicable annual interest rate of
twenty (20%) percent, as amended, restated, supplemented or otherwise modified
from time to time.
“Customer” means any
Person who sells or sold Purchase Orders or Receivables to Seller under a Client
Agreement on the Closing Date or during the 12-month period prior to such
date.
“Debt Repayment Amount” is
defined in Section 0.
“Employee Benefit Plan” means
any (a) qualified or nonqualified Employee Pension Benefit Plan (including any
Multiemployer Plan) or deferred compensation or retirement plan or arrangement,
(b) Employee Welfare Benefit Plan or (c) equity-based plan or arrangement
(including any stock option, stock purchase, stock ownership, stock appreciation
or restricted stock plan) or material fringe benefit or other retirement,
severance, bonus, profit-sharing or incentive plan or arrangement.
“Employee Pension Benefit
Plan” has the meaning set forth in ERISA § 3(2).
“Employee Welfare Benefit
Plan” has the meaning set forth in ERISA § 3(1).
“Employment Agreements” means
the Employment Agreements between Buyer and each Hilton and McNiff in the form
of Exhibits B-1
and B-2
attached hereto.
“Encumbrance” means any lien,
mortgage, pledge, encumbrance, charge, security interest, adverse or other
claim, community property interest, condition, equitable interest, option,
warrant, right of first refusal, easement, profit, license, servitude, right of
way, covenant, zoning or other restriction of any kind or nature.
“Environmental Law” means any
Law relating to the environment, health or safety, including any Law relating to
the presence, use, production, generation, handling, management, transportation,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control or cleanup of any material,
substance or waste limited or regulated by any Governmental Body.
“ERISA” means the Employee
Retirement Income Security Act of 1974.
“Excluded Clients” shall mean
all Client Transaction Rights under the Client Agreements that are not purchased
by Buyer, as set forth on Schedule 3.10(b).
“Excluded Assets” is defined
in Section 0.
“Excluded Contracts” is
defined in Section 0.
“Excluded Liabilities” is
defined in Section 0.
“Financial Statements” is
defined in Section 0.
28
“GAAP” means generally
accepted accounting principles in the United States as set forth in
pronouncements of the Financial Accounting Standards Board (and its
predecessors) and the American Institute of Certified Public Accountants and,
unless otherwise specified, as in effect on the date hereof or, with respect to
any financial statements, the date such financial statements were
prepared.
“Governmental Body” means any
federal, state, local, foreign or other government or quasi-governmental
authority or any department, agency, subdivision, court or other tribunal of any
of the foregoing.
“Hired Active Employees” is
defined in Section 0.
“Indebtedness” means as to any
Person at any time: (a) obligations of such Person for borrowed
money; (b) obligations of such Person evidenced by bonds, notes, debentures or
other similar instruments; (c) obligations of such Person to pay the deferred
purchase price of property or services (including obligations under noncompete,
consulting or similar arrangements), except trade accounts payable of such
Person arising in the ordinary course of business that are not past due by more
than 90 days or that are being contested in good faith by appropriate
proceedings diligently pursued and for which adequate reserves have been
established on the financial statements of such Person; (d) capitalized lease
obligations of such Person; (e) indebtedness or other obligations of others
guaranteed by such Person; (f) obligations secured by an Encumbrance existing on
any property or asset owned by such Person; (g) reimbursement obligations of
such Person relating to letters of credit, bankers’ acceptances, surety or other
bonds or similar instruments; (h) Liabilities of such Person relating to
unfunded, vested benefits under any Employee Benefit Plan (excluding obligations
to deliver stock pursuant to stock options or stock ownership plans); and (i)
net payment obligations incurred by such Person pursuant to any hedging
agreement.
“Insurance Policies” is
defined in Section 0.
“Intellectual Property” means
(a) inventions (whether patentable or unpatentable and whether or not reduced to
practice), improvements thereto, and patents, patent applications, and patent
disclosures, together with reissuances, continuations, continuations-in-part,
revisions, extensions and reexaminations thereof; (b) trademarks, service marks,
trade dress, logos, trade names, and corporate names, together with
translations, adaptations, derivations and combinations thereof and including
goodwill associated therewith, and applications, registrations, and renewals in
connection therewith; (c) copyrightable works, copyrights, and applications,
registrations and renewals in connection therewith; (d) mask works and
applications, registrations and renewals in connection therewith; (e) trade
secrets and Confidential Information; (f) computer software, in object and
source code format (including data and related documentation); (g) plans,
drawings, architectural plans and specifications; (h) websites; (i) other
proprietary rights; and (j) copies and tangible embodiments and expressions
thereof (in whatever form or medium), all improvements and modifications thereto
and derivative works thereof.
“Interests” means the limited
liability company membership interests of Seller.
“Interim Balance Sheet” is
defined in Section 0.
“Interim Balance Sheet Date”
means the date of the Interim Balance Sheet.
“IRS” means the U.S. Internal
Revenue Service.
“Knowledge” means (a) actual
knowledge or (b) knowledge that would be expected to be obtained after a
reasonably comprehensive investigation concerning the matter at
issue. Seller and each Member that is not an individual will be
deemed to have Knowledge of a matter if any Affiliate of such Person or any
employee of such Person with responsibility for such matter has, or at any time
had, Knowledge of such matter.
29
“Law” means any federal,
state, local, foreign or other law, statute, ordinance, regulation, rule,
regulatory or administrative guidance, Order, constitution, treaty, principle of
common law or other restriction of any Governmental Body.
“Lease” is defined in Section
0.
“Liability” means any
liability, obligation or commitment of any kind or nature, whether known or
unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated, or due or to become due.
“License” is defined in
Section 0.
“Loss” means any loss, claim,
demand, Order, damage, penalty, fine, cost (including any opportunity cost),
settlement payment, Liability, Tax, Encumbrance, diminution of value, expense,
fee, court costs or reasonable attorneys’ fees and expenses.
“Material Adverse Effect”
means any material adverse effect on the Business, operations, properties,
assets, Liabilities, condition (financial or otherwise) or prospects of
Seller.
“Material Contract” is defined
in Section 0.
“Members” is defined in the
opening paragraph.
“Net Operating Income” means,
the net operating income (or net operating loss) of Buyer for the period in
question after giving effect to deduction of or provision for all operating
expenses, all taxes (excluding federal, state and local income taxes) and
reserves (including reserves for deferred taxes) and all other proper
deductions, all determined in accordance with GAAP; provided, that there shall be
excluded: (a) any net gains or losses on the sale or other disposition, not
in the ordinary course of business, of investments and other capital assets,
(b) any net gain arising from the collection of the proceeds of any
insurance policy, (c) any write-up of any asset and (d) any other
extraordinary item (as determined by GAAP); provided, further, that in
determining Net Operating Income, (1) any costs for services or benefits
provided to Buyer by Parent or any Affiliate thereof shall be deducted as
expenses and be allocated to Buyer in reasonable proportion to the percentage of
the benefit to Buyer as compared to the benefit to Parent’s Affiliates
generally, provided that in no event will such allocations exceed $5,000 in a
fiscal quarter; (2) if any amount owing from a client of Buyer shall fail for
any reason to be collected within 150 days, such amount shall be treated as a
deduction from Net Operating Income at that time whether or not such amount is
required to be written off under GAAP (provided that any such deduction shall be
reversed if later collected); and (3) to the extent any Purchase Order or
Receivable fails to be collected and results in a payment to Buyer pursuant to
Section 0, any income or loss associated with such
Purchase Order or Receivable shall be disregarded in computing Net Operating
Income.
“Operating Agreement” means
the Operating Agreement of Buyer in the form of Exhibit
C.
“Order” means any order,
award, decision, injunction, judgment, ruling, decree, charge, writ, subpoena or
verdict entered, issued, made or rendered by any Governmental Body or
arbitrator.
“Organizational Documents”
means (a) the certificate or articles of formation and the limited liability
company agreement, (b) any documents comparable to those described in clause (c)
as may be applicable pursuant to any Law and (d) any amendment or modification
to any of the foregoing.
30
“Parent” means Anchor Funding
Services, Inc., a Delaware corporation.
“Participation Agreement”
means any Contract between Seller and any Person pursuant to which Seller sold
to such Person a participation in Seller’s financing relationship with any
Client.
“Party” means Buyer, Seller or
any Member.
“Permit” means any permit,
license or Consent issued by any Governmental Body or pursuant to any
Law.
“Permitted Encumbrance” means
(a) any mechanic’s, materialmen’s or similar statutory lien incurred in the
ordinary course of business for monies not yet due, (b) any lien for Taxes not
yet due, (c) any recorded easement, covenant, zoning or other restriction on the
Real Property that, together with all other Permitted Encumbrances, does not
prohibit or impair the current use, occupancy, value or marketability of title
of the property subject thereto and (d) the Encbumbrances set forth on Schedule 0.
“Person” means any individual,
corporation, limited liability company, partnership, company, sole
proprietorship, joint venture, trust, estate, association, organization, labor
union, Governmental Body or other entity.
“Proceeding” means any
proceeding, charge, complaint, claim, demand, notice, action, suit, litigation,
hearing, audit, investigation, arbitration or mediation (in each case, whether
civil, criminal, administrative, investigative or informal) commenced,
conducted, heard or pending by or before any Governmental Body, arbitrator or
mediator.
“Purchase Price” is defined in
Section 0.
“Purchased Assets” is defined
in Section 0.
“Purchase Orders” means
purchase orders sold to Seller under a Client Agreement.
“Real Property” is defined in
Section 0.
“Receivables” means accounts
receivable sold to Seller under a Client Agreement.
“Related Person” means (a)
with respect to a specified individual, any member of such individual’s Family
and any Affiliate of any member of such individual’s Family and (b) with respect
to a specified Person other than an individual, any Affiliate of such Person and
any member of the Family of any such Affiliates that are
individuals. The “Family” of a specified
individual means the individual, such individual’s spouse and former spouses,
any other individual who is related to the specified individual or such
individual’s spouse or former spouse within the third degree, and any other
individual who resides with the specified individual. Seller will not
be deemed to be a Related Person of any Member.
“Representative” means, with
respect to a particular Person, any director, officer, employee, agent,
consultant, advisor or other representative of such Person, including legal
counsel, accountants and financial advisors.
“Restricted Period” means the
period commencing on the Closing Date and ending on the fifth anniversary of
such date.
“Rules” is defined in Section
0.
31
“Secured Debt” means any
Indebtedness that is secured by any Encumbrance other than a Permitted
Encumbrance on any Purchased Asset.
“Securities Act” means the
Securities Act of 1933, as amended.
“Seller” is defined in the
opening paragraph.
“Senior Indebtedness” means
Indebtedness of Buyer pursuant to the Senior Credit Agreement, together with
fees, costs and other amounts, in each case, incurred pursuant to the Senior
Credit Agreement.
“Tangible Personal Property”
is defined in Section 0.
“Tax” means any federal,
state, local, foreign or other income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Code § 59A), customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, general service, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, however denominated, and will
include any interest, penalty, or addition thereto, whether disputed or
not.
“Tax Return” means any return,
declaration, report, claim for refund, or information return or statement
relating to Taxes, including any form, schedule or attachment thereto and any
amendment or supplement thereof.
“Territory” means: (a) the
State of North Carolina; (b) the State of Connecticut; (c) the State of Florida;
(d) any other State in which the Seller does or did business on the date of this
Agreement or during the 12-month period prior to such date; and (e) the United
States of America.
“Transactions” means the
transactions contemplated by the Transaction Documents.
“Transaction Documents” means
this Agreement, the Employment Agreements and all other written agreements,
documents and certificates contemplated by any of the foregoing
documents.
32
Exhibit
10.2 Senior
Credit Facility between the Company and MGM Funding LLC
Execution
Copy
CREDIT
AGREEMENT
by and
between
BROOKRIDGE
FUNDING SERVICES, LLC
and
MGM
FUNDING, LLC
________________
Dated as
of December 7, 2009
TABLE
OF CONTENTS
|
1.
|
AMOUNT
AND TERMS OF THE LOANS
|
1
|
|
1.01.
|
Loans
|
1
|
|
1.02.
|
Note
|
1
|
|
1.03.
|
Procedure
for Borrowing
|
2
|
|
1.04.
|
Termination,
Reduction or Increase of Maximum Amount
|
2
|
|
1.05.
|
Payments
of the Loans
|
3
|
|
1.06.
|
Treatment
and Application of Payments
|
3
|
|
1.07.
|
Use
of Proceeds
|
4
|
|
1.08.
|
Guarantee
|
4
|
|
1.09.
|
Security
Agreement
|
4
|
|
2.
|
INTEREST,
FEES, YIELD PROTECTIONS, ETC.
|
5
|
|
2.01.
|
Interest
Rate and Payment Dates
|
5
|
|
2.02.
|
Taxes;
Net Payments
|
6
|
|
2.03.
|
Lender's
Records
|
6
|
|
3.
|
REPRESENTATIONS
AND WARRANTIES
|
6
|
|
3.01.
|
Existence
and Power; Subsidiaries
|
6
|
|
3.02.
|
Authority
and Execution
|
7
|
|
3.03.
|
Binding
Agreement
|
7
|
|
3.04.
|
Absence
of Defaults; No Conflicting Agreements
|
7
|
|
3.05.
|
Consents
|
7
|
|
3.06.
|
Litigation
|
8
|
|
3.07.
|
Compliance
with Applicable Laws
|
8
|
|
3.08.
|
Taxes
|
8
|
|
3.09.
|
Governmental
Regulations
|
8
|
|
3.10.
|
Federal
Reserve Regulations; Use of Loan Proceeds
|
9
|
|
3.11.
|
Property
|
9
|
|
3.12.
|
Plans
|
9
|
|
3.13.
|
Environmental
Matters
|
10
|
|
3.14.
|
Security
Interests
|
10
|
|
3.15.
|
No
Misrepresentation
|
10
|
|
3.16.
|
Solvency
|
11
|
|
4.
|
CONDITIONS
TO EFFECTIVENESS AND RIGHT OF BORROWER TO REQUEST LOANS
|
11
|
|
4.01.
|
Conditions
Precedent to Effectiveness
|
11
|
|
4.02.
|
Certain
Conditions Precedent to Each Loan Request
|
15
|
|
5.
|
AFFIRMATIVE
COVENANTS
|
16
|
|
5.01.
|
Financial
and Other Information
|
16
|
|
5.02.
|
Existence,
Maintenance of Properties, Insurance, Licenses
|
18
|
|
5.03.
|
Payment
of Taxes, Indebtedness, etc.
|
19
|
|
5.04.
|
Maintenance
of Records; Inspection; Collateral Audit
|
19
|
|
6.
|
NEGATIVE
COVENANTS
|
19
|
|
6.01.
|
Indebtedness
|
19
|
|
6.02.
|
Liens
|
19
|
|
6.03.
|
Merger,
Sale of Assets, Nature of Business
|
21
|
|
6.04.
|
Investments
|
21
|
|
6.05.
|
Compliance
with ERISA
|
21
|
|
6.06.
|
Restricted
Payments
|
22
|
|
6.07.
|
Transactions
with Affiliates
|
22
|
|
6.08.
|
Amendment
of Material Agreements
|
22
|
|
6.09.
|
Use
of Proceeds
|
23
|
|
6.10.
|
Nature
of Business
|
23
|
|
7.
|
DEFAULT
|
23
|
|
7.01.
|
Events
of Default
|
23
|
|
7.02.
|
Remedies
|
26
|
|
8.
|
DEFINITIONS
AND PRINCIPLES OF CONSTRUCTION
|
26
|
|
8.01.
|
Definitions
|
26
|
|
8.02.
|
Principles
of Construction
|
26
|
|
9.
|
OTHER
PROVISIONS
|
27
|
|
9.01.
|
Amendments
and Waivers
|
27
|
|
9.02.
|
Notices
|
27
|
|
9.03.
|
Assignments
and Participations
|
28
|
|
9.04.
|
No
Waiver; Cumulative Remedies
|
29
|
|
9.05.
|
Survival
of Representations and Warranties and Certain Obligations
|
29
|
|
9.06.
|
Expenses
|
29
|
|
9.07.
|
Indemnity
|
31
|
|
9.08.
|
Limitation
of Liability
|
32
|
|
9.09.
|
Counterparts
|
32
|
|
9.10.
|
Set-off
|
33
|
|
9.11.
|
Construction
|
34
|
|
9.12.
|
Governing
Law
|
34
|
|
9.13.
|
Headings
Descriptive
|
34
|
|
9.14.
|
Severability
|
34
|
|
9.15.
|
Integration
|
35
|
|
9.16.
|
Consent
to Jurisdiction
|
35
|
|
9.17.
|
Service
of Process
|
36
|
|
9.18.
|
No
Limitation on Service or Suit
|
36
|
|
9.19.
|
WAIVER
OF TRIAL BY JURY
|
36
|
|
9.20.
|
USA
Patriot Act Notice
|
37
|
|
Annex
I
|
Definitions
|
|
Schedules
|
|
|
Schedule
6.02
|
Liens
in existence on the Effective Date
|
|
Exhibits
|
|
|
Exhibit
A
|
Form
of Note
|
|
Exhibit
B
|
Form
of Guarantee
|
|
Exhibit
C
|
Form
of Security Agreement
|
|
Exhibit
D
|
Form
of Borrowing Request
|
|
Exhibit
E
|
Form
of Borrowing Base Certificate
|
CREDIT
AGREEMENT, dated as of December 7, 2009 (this "Agreement"),
by and between BROOKRIDGE
FUNDING SERVICES, LLC, a North Carolina limited liability company (the
"Borrower")
and MGM FUNDING, LLC, a
North Carolina limited liability company (the "Lender").
AMOUNT AND TERMS OF THE
LOANS
Loans
Subject
to the terms and conditions of this Agreement, the Borrower may request that the
Lender to make loans (each a "Loan" and,
collectively, the "Loans") to
the Borrower from time to time during the Availability Period in an aggregate
principal amount at any one time outstanding not to exceed the lesser of the
Maximum Amount and the Borrowing Base. During the Availability
Period, the Borrower may request Loans, prepay Loans in whole or in part in
accordance with Section 1.05(a) and request additional Loans, all in accordance
with the terms and conditions hereof. The aggregate outstanding
principal balance of the Loans shall be due and payable in full on the Maturity
Date. Nothing herein shall constitute or be construed as an agreement
or commitment by Lender to make any Loans or otherwise extend credit pursuant to
this Agreement, the making of which Loans or other extensions of credit shall be
in the sole and absolute discretion of the Lender.
Note
The Loans shall be evidenced by a
promissory note of the Borrower, substantially in the form of Exhibit A, with
appropriate insertions therein as to date and principal amount (as indorsed or
modified from time to time, including all replacements thereof and substitutions
therefor, the "Note"), payable to the order of the
Lender and representing the obligation of the Borrower to pay the aggregate
outstanding principal balance of the Loans, in each case with interest thereon
as prescribed in Section 2.01.
The
Lender is hereby authorized to record (i) the date and amount of each Loan made
by the Lender and (ii) the date and amount of each payment and prepayment of
principal of any Loans on the schedule (and any continuations thereof) annexed
to and constituting a part of the Note. No failure so to record or
any error in so recording shall affect the obligation of the Borrower to repay
the Loans, with interest thereon, as herein provided.
Procedure for
Borrowing
The
Borrower may request a Loan on any Business Day during the Availability Period,
provided that the Borrower shall notify the Lender in writing, which may be by
facsimile not later than (i) 1:100 a.m. on the same Business Day, in the case of
a request for a Loan in an a principal amount of $500,000 or less and
(ii) 1:00 p.m. two Business Days prior to the date of the requested Loan, in the
case of a request for a Loan in an a principal in excess of $500,000
specifying (A) the aggregate principal amount of Loans to be borrowed and (B)
the requested Borrowing Date. Such notice shall be irrevocable and
confirmed immediately by delivery to the Lender of a written Borrowing
Request.
Subject
to the satisfaction of the terms and conditions of this Agreement, as determined
by the Lender, the Lender shall disburse the proceeds of each Loan by wire
transfer to a bank account of the Borrower in the United States in accordance
with wire transfer instructions provided by the Borrower to the
Lender.
Termination, Reduction or
Increase of Maximum
Amount
The
Borrower shall have the right, upon at least three Business Days' prior written
notice to the Lender, at any time, to terminate this Agreement or from time to
time to permanently reduce the Maximum Amount, provided, however, that any such
reduction shall be in the amount of $100,000 or an integral multiple of $100,000
in excess thereof. Simultaneously with each reduction of the Maximum
Amount under this Section, the Borrower shall prepay the Loans as required by
Section 1.05(b).
The
Borrower shall have the right, upon at least three Business Days' prior written
notice to the Lender, at any time, to request that the Lender increase the
Maximum Amount by an amount of up to $1,000,000, provided, however, that the
determination as to whether to grant such request for an increase shall be made
by the Lender in its sole and absolute discretion.
Payments of the
Loans
Voluntary
Prepayments. The Borrower may, at its option, prepay the Loans without
premium or penalty in full at any time or in part from time to time by notifying
the Lender in writing not later than the date of such prepayment specifying the
principal amount of the Loans to be prepaid and the date of
prepayment. Each such notice shall be irrevocable and the amount
specified in each such notice shall be due and payable on the date
specified.
Mandatory Prepayments of
Loans. (i) Simultaneously with each reduction of the Maximum
Amount under Section 1.04, the Borrower shall prepay the outstanding Loans by
the amount, if any, by which the aggregate unpaid principal balance of the Loans
exceeds the Maximum Amount as so reduced.
(ii) If,
at any time, the sum of the aggregate outstanding principal balance of the Loans
exceeds the Borrowing Base, the Borrower shall immediately prepay the
outstanding Loans in an amount equal to such excess.
In General.
Simultaneously with each prepayment of the Loans, the Borrower shall prepay all
accrued interest on the amount prepaid through the date of
prepayment.
Treatment and Application of
Payments
Each
payment, including each prepayment, of principal and interest on the Loans shall
be made by the Borrower prior to 12:00 noon on the date such payment is due, at
the Lender's office set forth in Section 9.02, in lawful money of the United
States, in funds immediately available to the Lender and without set-off or
counterclaim. The failure of the Borrower to make any such payment by
such time shall not constitute a Default, provided that such payment is made on
such due date, but any such payment made after 12:00 noon on such due date shall
be deemed to have been made prior to12:00 noon on the next Business Day for the
purpose of calculating interest.
If
any payment shall be due and payable on a day which is not a Business Day, the
due date thereof shall be extended to the next Business Day and interest shall
be payable at the applicable rate specified herein during such extension, provided, however, that if
such next Business Day is after the Maturity Date, any such payment shall be due
on the immediately preceding Business Day.
Use of
Proceeds
The
Borrower agrees that the proceeds of the Loans shall be used solely, directly or
indirectly, (i) to finance a portion of the purchase price payable in connection
with the Acquisition, (ii) to fund accounts receivable and purchase orders in
the operation of its financing business and (iii) to pay the out-of-pocket fees
and expenses incurred by the Borrower in connection with the Loan
Documents. Notwithstanding anything to the contrary contained in any
Loan Document, the Borrower agrees that no part of the proceeds of the Loans
will be used, directly or indirectly, for a purpose which violates any law, rule
or regulation of any Governmental Authority, including, without limitation, the
provisions of Regulations T, U or X of the Board of Governors of the Federal
Reserve System, as amended.
Guarantee
Subject
to the limitations therein, all obligations of the Borrower hereunder shall be
jointly and severally guaranteed by John A. McNiff III and Michael P. Hilton
(the "Guarantors"),
pursuant to the terms of a Guarantee in the form of Exhibit B (as the same may
be amended, supplemented or otherwise modified from time to time, the "Guarantee").
Security
Agreement
All
obligations of the Borrower hereunder shall be secured pursuant to the terms of
a Security Agreement in the form of Exhibit C (as the same may be amended,
supplemented or otherwise modified from time to time, the "Security
Agreement"). The Guarantee shall be unsecured.
INTEREST, FEES, YIELD
PROTECTIONS, ETC.
Interest Rate and Payment
Dates
Prior to Maturity.
Except as otherwise provided in Section 2.01(b), prior to maturity, the
outstanding principal balance of the Loans shall bear interest at a rate per
annum equal to 20.00%.
Default Rate. If any
payment of principal and/or interest is not paid when due (whether at stated
maturity, by acceleration or otherwise) the unpaid principal balance of the
Loans shall bear interest at a rate per annum (whether before or after the entry
of a judgment thereon) equal to 4% above the rate which would otherwise be
applicable under Section 2.01(a) and any overdue interest or other amount
payable under the Loan Documents shall bear interest at a rate per annum equal
to 24.00%. All such interest shall be payable on demand.
In General. Interest
on all amounts due and payable hereunder shall be calculated on the basis of a
360-day year for the actual number of days elapsed. Except as
otherwise provided in Section 2.01(b), interest shall be payable monthly in
arrears on the first day of each month (commencing with the first such date to
occur after the making of the first Loan hereunder), and, as provided in Section
1.05(c), upon each prepayment of the Loans.
Highest Lawful Rate.
At no time shall the interest rate payable on the Loans, together with the Fees
and all other amounts payable under the Loan Documents to the Lender, to the
extent the same are construed to constitute interest, exceed the maximum rate of
interest that at any time may be contracted for, taken, charged or received by
the Lender under the Loan Documents under applicable law. If for any
period during the term of this Agreement, any amount paid to the Lender under
the Loan Documents, to the extent the same shall (but for the provisions of this
Section) constitute or be deemed to constitute interest, would exceed the
maximum amount of interest permitted during such period, then such excess amount
shall be applied or shall be deemed to have been applied as a prepayment of the
Loans in such order as the Lender shall determine.
Taxes; Net
Payments
All
payments made by the Borrower under the Loan Documents shall be made free and
clear of, and without reduction for or on account of, any Taxes required by law
to be withheld from any amounts payable under the Loan Documents. In
the event that the Borrower is prohibited by law from making payments under the
Loan Documents free of deductions or withholdings, the Borrower shall pay such
additional amounts to the Lender as may be necessary in order that the actual
amounts received by the Lender in respect of interest and any other amounts
payable under the Loan Documents after such deduction or withholding (and after
payment of any additional taxes or other charges due as a consequence of the
payment of such additional amounts) shall equal the amount which would have been
received if such deduction or withholding were not required.
The
Borrower agrees to pay any current or future stamp or documentary Taxes and any
other excise or property Taxes, charges or similar levies that arise from any
payment made hereunder or from the execution, delivery or registration of, or
any amendment of, supplement to or modification of, or any waiver or consent
under or in respect of, the Loan Documents or otherwise with respect to, the
Loan Documents.
Lender's
Records
The
Lender's records with respect to the Loans, the interest rates applicable
thereto, each payment and prepayment by the Borrower of principal and interest
on the Loans and fees, expenses and any other amounts due and payable in
connection with this Agreement shall be presumed correct absent manifest
error.
REPRESENTATIONS AND
WARRANTIES
In order
to induce the Lender to enter into this Agreement and to make the Loans, the
Borrower makes the following representations and warranties to the
Lender:
Existence and Power;
Subsidiaries
The
Borrower is a duly formed and validly existing limited liability company, in
good standing under the laws of the State of North Carolina, has all requisite
power and authority to own its Property and to carry on its business as now
conducted, and is in good standing and authorized to do business in each
jurisdiction in which the nature of the business conducted therein or the
Property owned by it therein makes such qualification necessary, except where
such failure to qualify could not reasonably be expected to have a Material
Adverse Effect on the Borrower. As of the Effective Date, the
Borrower has no Subsidiaries.
Authority and
Execution
The
Borrower has full legal power and authority to enter into, execute, deliver and
perform the terms of the Loan Documents to which it is a party, all of which
have been duly authorized by all proper and necessary corporate or other
applicable action and are in full compliance with its Organizational
Documents. The Borrower has duly executed and delivered the Loan
Documents to which it is a party.
Binding
Agreement
The Loan
Documents (other than the Note) constitute, and the Note, when issued and
delivered pursuant hereto for value received, will constitute, the valid and
legally binding obligations of each Credit Party, in each case, to the extent it
is a party thereto, enforceable in accordance with their respective terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement of
creditors' rights generally.
Absence of Defaults; No
Conflicting Agreements
Neither
the Borrower, nor any other Credit Party, is in default under any mortgage,
indenture, contract or agreement to which it is a party or by which it or any of
its Property is bound. The execution, delivery and carrying out of
the terms of the Loan Documents will not (i)
constitute a default under any such mortgage, indenture, contract or agreement,
or result in the creation or imposition of, or obligation to create, any Lien
upon any Property of the Borrower or any other Credit Party, except for Liens
created pursuant to the Loan Documents, (ii) result in a breach of or require
the mandatory repayment of or other acceleration of payment under or pursuant to
the terms of any such mortgage, indenture, contract or agreement or (iii) result
in the violation of any statute, regulation, rule and order of any Governmental
Authority which is applicable to it.
Consents
No
consent, authorization or approval of, filing with, notice to, or exemption by,
any Governmental Authority or any other Person is required to authorize, or is
required in connection with the execution, delivery and performance of the Loan
Documents and the transactions contemplated thereby, or is required as a
condition to the validity or enforceability of the Loan Documents, except for
the filing of financing statements to perfect the Liens granted pursuant to the
Security Agreement.
Litigation
There are
no actions, suits or proceedings at law or in equity or by or before any
Governmental Authority pending or, to the knowledge of the Borrower, threatened
against any Credit Party, maintained by any Credit Party or which may affect the
Property of any Credit Party, which could reasonably be expected to have a
Material Adverse Effect on any Credit Party, which call into question the
validity or enforceability of, or otherwise seek to invalidate, any Loan
Document, or might, individually or in the aggregate, materially and adversely
affect any of the transactions contemplated by any Loan Document.
Compliance with Applicable
Laws
Neither
the Borrower, nor any other Credit Party, is in default with respect to any
judgment, order, writ, injunction, decree or decision of any Governmental
Authority. The Borrower, and each other Credit Party, is in
compliance in all material respects with all statutes, regulations, rules and
orders applicable to it, including, without limitation, Environmental
Laws.
Taxes
The
Borrower has filed or caused to be filed all tax returns required to be filed
and has paid, or has made adequate provision for the payment of, all taxes shown
to be due and payable on said returns or in any assessments made against it
(except such thereof as are being contested in good faith and by appropriate
proceedings diligently conducted, and for which adequate reserves have been set
aside in accordance with GAAP), and no tax Liens have been filed and no claims
are being asserted with respect to such taxes.
Governmental
Regulations
Neither
the Borrower, nor any Person controlled by, controlling, or under common control
with, the Borrower, is subject to regulation under the Federal Power Act, as
amended, or the Investment Company Act of 1940, as amended, or is subject to any
statute or regulation which prohibits or restricts the incurrence of
Indebtedness, including, without limitation, statutes or regulations relative to
common or contract carriers or to the sale of electricity, gas, steam, water,
telephone, telegraph or other public utility services.
Federal Reserve Regulations;
Use of Loan Proceeds
The
Borrower is not engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of purchasing or carrying any
Margin Stock. No part of the proceeds of the Loans will be used,
directly or indirectly, for a purpose that violates any law, rule or regulation
of any Governmental Authority, including, without limitation, the provisions of
Regulations T, U or X of the Board of Governors of the Federal Reserve System,
as amended. After giving effect to the making of the Loans, Margin
Stock will constitute less than 25% of the aggregate assets (as determined by
any reasonable method) of the Borrower.
Property
The
Borrower has (i) good and marketable title to all of its Property, title to
which is material to it, and (ii) a valid leasehold interest in all Property, a
leasehold interest in which is material to it, in each case subject to no Liens,
except Permitted Liens.
The
Borrower owns, or is entitled to use, all trademarks, trade names, copyrights,
patents and other intellectual property material to its business, and the use
thereof by the Borrower does not infringe upon the rights of any other Person,
except for any such infringements that, individually or in the aggregate, could
not reasonably be expected to result in a Material Adverse Effect.
Plans
Neither
the Borrower nor any of its ERISA Affiliates is a party to a multiemployer plan
as defined in Section 4001(a)(3) of ERISA. The Borrower and its ERISA
Affiliates have fulfilled all obligations under the minimum funding standards of
ERISA and the Code with respect to each Pension Plan established or maintained
by the Borrower or its ERISA Affiliates and with respect to each such Pension
Plan are not subject to any material liability to the PBGC under Title IV of
ERISA. With respect to each Employee Benefit Plan, the Borrower is in
compliance in all material respects with the currently applicable provisions of
ERISA and the Code.
Environmental
Matters
The
Borrower is in compliance in all material respects with the requirements of all
applicable Environmental Laws, the violation of which could have a Material
Adverse Effect on the Borrower.
No
hazardous substances have been generated or manufactured on, transported to or
from, treated at, stored at or discharged from any real property owned, leased
or operated by the Borrower except in compliance with all applicable
Environmental Laws.
The
Borrower has not received notice or otherwise learned of any claim, demand,
suit, action, proceeding, event, condition, report, directive, Lien, violation,
non-compliance or investigation indicating or concerning any potential or actual
liability or remedial action arising in connection with: (x) any non-compliance
with or violation of the requirements of any applicable Environmental Laws, or
(y) the presence of, or release or threatened release of any hazardous substance
on or from any real property owned, leased or operated by the Borrower or either
Company Guarantor.
Security
Interests
Subject
to the filing of UCC-1 financing statements in the applicable filing offices,
the payment of the fees in respect thereof and the filing of continuation
statements when required by applicable law, the security interests granted under
the Security Agreement constitute valid, binding and continuing duly perfected
first priority Liens in and to the Collateral, subject to no other Liens, other
than Permitted Liens.
No
Misrepresentation
No
representation or warranty contained in any Loan Document and no certificate or
report from time to time furnished by any Credit Party in connection with the
transactions contemplated thereby, contains or will contain a misstatement of
material fact, or, to the best knowledge of the Borrower, omits or will omit to
state a material fact required to be stated in order to make the statements
therein contained not misleading in the light of the circumstances under which
made, provided that any projections or pro-forma financial information contained
therein are good faith estimates based upon assumptions believed by the Borrower
to be reasonable at the time such estimates are made.
Solvency
After
giving effect to the Loans to be made on the Effective Date, the Borrower is
Solvent.
CONDITIONS TO EFFECTIVENESS
AND RIGHT OF BORROWER TO REQUEST LOANS
Conditions Precedent to
Effectiveness
The
effectiveness of this Agreement, and the willingness of the Lender to consider
making a Loan on the first Borrowing Date, is subject to the fulfillment of the
following conditions prior to or simultaneously therewith:
This
Agreement
The
Lender shall have received counterparts of this Agreement duly executed by an
Authorized Signatory of the Borrower.
Note
The
Lender shall have received the Note, duly executed by an Authorized Signatory of
the Borrower.
Security
Agreement
(i) The
Lender shall have received the Security Agreement, duly executed by an
Authorized Signatory of the Borrower, together with such financing statements
and other documents as the Lender may require in connection with the perfection
of its security interests therein.
(ii) The
Lender shall have received Uniform Commercial Code, tax and judgment lien search
reports with respect to each public office where Liens are or may be filed
disclosing that there are no Liens of record in such official's office covering
any Collateral or showing the Borrower as debtor thereunder (other than
Permitted Liens).
Guarantees
The
Lender shall have received the Guarantee, duly executed by the
Guarantors.
Evidence of
Action
The
Lender shall have received a certificate, dated the Effective Date, of the
managers of the Borrower:
attaching
a true and complete copy of the resolutions of its Managing Person and of all
documents evidencing all necessary company action (in form and substance
satisfactory to the Lender) taken by it to authorize the Loan Documents to which
it is a party and the transactions contemplated thereby,
attaching
a true and complete copy of its Organizational Documents,
attaching
a certificate of good standing of the Secretary of State of the State of North
Carolina and of the Secretary of State of the State of Connecticut, issued not
more than 10 days prior to the Effective Date, and
setting
forth the incumbency of its managers (or other analogous counterpart) who may
sign the Loan Documents to which it is a party, including therein a signature
specimen of each such manager (or other analogous counterpart).
Managers'
Certificate
The
Lender shall have received a certificate, in all respects satisfactory to the
Lender, of the managers of the Borrower, dated the Effective Date, certifying
that:
Absence of
Litigation. There is no injunction, writ, preliminary
restraining order or other order of any nature by which the Borrower is bound or
to which any of its Property is subject issued by any Governmental Authority in
any respect affecting the transactions provided for in the Loan Documents and no
action or proceeding by or before any Governmental Authority has been commenced
against the Borrower or is pending or, to the knowledge of the Borrower,
threatened against the Borrower, seeking to prevent or delay the transactions
contemplated by the Loan Documents or challenging any other terms and provisions
hereof or thereof or seeking any damages in connection therewith.
Approvals and
Consents. All approvals and consents of all Persons required
to be obtained in connection with the consummation by the Borrower of the
transactions contemplated by the Loan Documents have been obtained and are in
full force and effect, and all notices required to be given by the Borrower have
been given and all required waiting periods applicable to the Borrower have
expired.
Absence of Material Adverse
Change. No Material Adverse Change in the business, assets,
liabilities, financial condition or results of operations of the Borrower has
occurred since the date of the formation of the Borrower.
No Liens other than
Permitted Liens. Upon the making of the Loans on the Effective
Date, there exist no Liens on any Property of the Borrower other than Permitted
Liens.]
Borrowing Base
Certificate
The
Lender shall have received a duly completed and executed Borrowing Base
Certificate.
Participation
Agreements
The
Lender shall have received copies of all Participation Agreements to which the
Borrower is party, certified as true and complete by a manager of the Borrower,
which Participation Agreements shall be satisfactory in form and substance to
the Lender.
Subordination
Agreements
The
Lender shall have received with respect to each Participation Agreement a
Subordination Agreement executed by an Authorized Signatory of the Borrower and
the participant party to such Participation Agreement.
Acquisition
The
Lender shall have received a certificate, dated the Effective Date and signed by
the managers of the Borrower,
confirming
that the Acquisition has been consummated in accordance with the terms and
conditions of the Acquisition Agreement, which shall be in form and substance
reasonably satisfactory to the Lender and
attaching
(A) a true and complete copy of the Acquisition Agreement and all documents and
instruments executed and delivered in connection therewith and (B) any
information the Lender may reasonably require regarding the assets and
liabilities of the Borrower immediately after giving effect to the consummation
of the Acquisition.
Other
Documents
The
Lender shall have received such other documents, each in form and substance
reasonably satisfactory to the Lender, as the Lender shall reasonably require in
connection with the making of the Loans.
Certain Conditions Precedent
to Each Loan
Request
The
willingness of the Lender to consider making a Loan (including, without
limitation, the Loan on the first Borrowing Date) is subject to the satisfaction
of the following conditions precedent:
Compliance
On the
Borrowing Date after giving effect to the Loans to be made on such date, (i) the
Borrower shall be in compliance with all of the terms, covenants and conditions
of the Loan Documents to which it is a party, (ii) there shall exist no Default
or Event of Default, (iii) the representations and warranties contained in the
Loan Documents shall be true and correct with the same effect as though such
representations and warranties had been made on such Borrowing Date, except to
the extent the same relate solely to an earlier date, (iv) no Material Adverse
Change shall have occurred with respect to any Credit Party and (v) and all
outstanding Loans plus the requested Loan shall not exceed the Borrowing
Base.
Loan
Closings
All
documents required by the provisions of the Loan Documents to be executed or
delivered to the Lender on or before the applicable Borrowing Date shall have
been executed and shall have been delivered to the Lender on or before such
Borrowing Date.
Borrowing Request and
Borrowing Base Certificate
The
Lender shall have received a Borrowing Request and Borrowing Base Certificate,
duly executed by an Authorized Signatory of the Borrower.
Each
request for a Loan and the acceptance by the Borrower of the proceeds thereof
shall constitute a representation and warranty by the Borrower, as of the date
of the Loans comprising such borrowing, that the conditions specified in
Subsections 4.02(a) and (b) have been satisfied.
AFFIRMATIVE
COVENANTS
The
Borrower agrees that, so long as this Agreement is in effect, any Loan remains
outstanding and unpaid, or any other amount is owing under any Loan Document to
the Lender, the Borrower shall:
Financial and Other
Information
Maintain
a standard system of accounting in accordance with GAAP, and furnish to the
Lender:
As
soon as available, but in any event within (i) 20 days after the end of each
calendar month, a balance sheet of the Borrower as at the end of the prior
calendar month, together with the related statements of operations, members'
equity and cash flows for such month and (ii) 30 days after the end of each
fiscal year of the Borrower, a balance sheet of the Borrower as at the end of
such fiscal year, together with the related statements of operations, members'
equity and cash flows for such fiscal year, in each case prepared in accordance
with GAAP applied on a basis consistently maintained throughout the periods
involved and certified by a manager of the Borrower as being complete and
correct in all material respects and as presenting fairly the financial
condition and the results of operations of the Borrower (subject to normal
year-end adjustments) as at the dates and for the periods covered
thereby,
Concurrently
with the delivery of the financial statements required by Section 5.01(a), a
certificate of a manager of the Borrower certifying as to whether a Default has
occurred and, if a Default has occurred, specifying the details thereof and any
action taken or proposed to be taken with respect thereto;
Prompt
written notice if: (i) any Indebtedness of any Credit Party is declared or shall
become due and payable prior to its stated maturity, or is called and not paid
when due, (ii) a default shall have occurred under any note (other than the
Note) or (iii) the holder of, or any obligee with respect to, any Indebtedness
of any Credit Party has the right to declare any such Indebtedness due and
payable prior to its stated maturity;
Prompt
written notice of: (i) any citation, summons, subpoena, order to show cause or
other document naming any Credit Party a party to any proceeding before any
Governmental Authority that could reasonably be expected to have a Material
Adverse Effect on any Credit Party or that expressly calls into question the
validity or enforceability of any of the Loan Documents, (ii) any lapse or other
termination of any material license, permit, franchise or other authorization of
any Credit Party, or (iii) any refusal by any Person or Governmental Authority
to renew or extend any such material license, permit, franchise or other
authorization, which lapse, termination, refusal or dispute could reasonably be
expected to have a Material Adverse Effect on any Credit Party;
Prompt
written notice of: (i) any development in its business affairs which could
reasonably be expected to have a Material Adverse Effect on any Credit Party,
disclosing the nature thereof, and (ii) any information (coming to its
attention) which indicates that any financial statements which are the subject
of any representations contained in this Agreement, or which are furnished to
the Lender pursuant to this Agreement, fail, to a material extent, to present
fairly the financial condition and results of operations purported to be
presented therein, disclosing the nature thereof;
Prompt
written notice of the occurrence of an Event of Default or Default hereunder,
setting forth details of such Event of Default or Default and the action which
is proposed to be taken with respect thereto;
not
later than 30 calendar days after the last day of each calendar month, a
Borrowing Base Certificate indicating a computation of the Borrowing Base as of
the last day of such month executed by an Authorized Signatory of the
Borrower;
within
30 days after the last day of each calendar month, (i) an accounts receivable
aging report as of the last day of such month, organized by invoice date and
(ii) an accounts payable aging report as of the last day of such
month;
not
later then Tuesday of each week, a report with respect to the preceding week for
each account debtor on accounts that have been purchased, in form and substance
satisfactory to the Lender, itemizing gross funds employed thereon, applicable
client reserves and the amount of each related purchase order and receivable and
the aging thereof. The Borrower shall not grant any allowances or
credit to any account debtor without notice to and without prior written consent
of the Lender.
Such
other information as the Lender shall reasonably request from time to
time.
Existence, Maintenance of
Properties, Insurance,
Licenses
(a) At
all times preserve and keep in full force its corporate existence and rights;
(b) observe and comply in all material respects with all laws, rules and
regulations applicable to it, including, without limitation, ERISA and all
Environmental Laws; (c) at all times maintain and preserve all Property used or
necessary in the conduct of its affairs and keep the same in good repair,
working order and condition; (d) beginning 30 days after the Effective Date and
at all times thereafter, keep its insurable Properties adequately insured at all
times, by financially sound and reputable insurers, and maintain such insurance,
to such extent and against such risks, as is customary (including
self-insurance) in the case of comparable businesses or as may be required by
law; (e) conduct and operate its affairs in substantially the manner in which
they are presently conducted and operated; and (f) maintain, in full force and
effect, all material licenses, franchises, permits, authorizations and other
rights as are necessary for the conduct of its business. Not later
than 30 days after the Effective Date, the Borrower shall provide the lender
with evidence that all insurance policies have been indorsed to provide, in
respect of the interests of the Lender, that (i) the Lender shall be an
additional insured on liability coverage and loss payee on property coverage and
(ii) 30 days' prior written notice of any cancellation or modification thereof
or any reduction of amounts payable thereunder shall be given to the
Lender.
Payment of Taxes,
Indebtedness, etc.
Pay and
discharge when due (i) all taxes, assessments and governmental charges and
levies upon, or with respect to the Borrower and upon its Property prior to the
date penalties attach thereto, and (ii) all Indebtedness, obligations and claims
for labor, materials and supplies or otherwise which, if unpaid, might (x) have
a Material Adverse Effect on the Borrower, or (y) become a Lien upon any
Property, in each case, unless being contested by the Borrower in good faith by
appropriate proceedings, and the Borrower shall have set aside adequate reserves
therefor.
Maintenance of Records;
Inspection;
Collateral Audit
At all
times maintain proper books of record and account in which full, true and
correct entries are made of all dealings and transactions in relation to its
business and activities and, at all reasonable times during normal business
hours and as often as the Lender may reasonably request upon reasonable notice,
permit any Lender representative to visit and inspect any of the properties of
the Borrower, and to make extracts from its books and to discuss its affairs,
finances and accounts with its managers and its independent certified public
accountants or other parties preparing statements for or on behalf of the
Borrower.
NEGATIVE
COVENANTS
The
Borrower agrees that, so long as this Agreement is in effect, any Loan remains
outstanding and unpaid, or any other amount is owing under any Loan Document to
the Lender, the Borrower shall not, directly or indirectly:
Indebtedness
Create,
incur, assume or permit to exist any Indebtedness, except: (i) Indebtedness
due under the Loan Documents, (ii) other Indebtedness to the Lender
(Indebtedness in respect of guarantees executed in favor of the Lender) and
(iii) Indebtedness of the Borrower pursuant to Participation Agreements
approved by the Lender.
Liens
Create,
incur, assume or suffer to exist any Lien upon any of its Property, whether now
owned or hereafter acquired, except: (i) Liens in favor of the Lender,
(ii) Liens for taxes, assessments or similar charges incurred in the
ordinary course of business which are not delinquent, (iii) Liens in
connection with workers' compensation, unemployment insurance or other social
security obligations (but not ERISA), (iv) Liens arising by operation of
law such as mechanics', materialmen's, carriers', and warehousemen's liens
incurred in the ordinary course of business which are not delinquent,
(v) judgment liens in existence less than 30 days after the entry thereof
or with respect to which execution has been stayed, (vi) unexercised
banker's Liens; (vii) Liens on assets securing Indebtedness permitted by
Section 6.01(iii), provided
that such Lien (A) attaches only to the assets which are the subject of
the Participation Agreement giving rise to such Indebtedness and (B) is
subordinated pursuant to a Subordination Agreement, (viii) any interest or
title of a licensor, sublicensor, lessor or sublessor with respect to any assets
under any license or lease agreement entered into in the ordinary course of
business; provided that
the same do not interfere in any material respect with the business of the
Borrower or materially detract from the value of the relevant assets of the
Borrower, (ix) Liens to the extent arising solely from the filing of
protective Uniform Commercial Code Financing Statements in respect of equipment
leased to the Borrower in the ordinary course of its business under true, as
opposed to finance, leases, (x) any interest or title of a lessor secured
by a lessor's interest under any lease permitted by the Loan Documents and
(xi) Liens in existence on the Effective Date as set forth on Schedule 6.02
(the foregoing, collectively, "Permitted
Liens").
Merger, Sale of Assets,
Nature of
Business
Consolidate
with, be acquired by, or merge into or with any Person, or liquidate, wind up or
dissolve or sell, lease or otherwise dispose of any of its Property, except in
the ordinary course of business, or materially change the nature of its business
as conducted on the Effective Date.
Investments
Make any
loan or advance to, or enter into any arrangement for the purpose of providing
funds or credit to, or make any other investment, by capital contribution or
otherwise, in or with any Person (each of the foregoing, an "Investment"),
except (i) any money market account maintained at the Lender or investment
account maintained at an affiliate of the Lender and (ii) the purchase of assets
in the ordinary course of the Borrower's business pursuant to Purchase
Agreements.
Compliance with
ERISA
(i)
Terminate, or permit any ERISA Affiliate to terminate, any Pension Plan so as to
result in any material liability to the Borrower, or (ii) permit, with respect
to any Employee Benefit Plan any prohibited transaction or prohibited
transactions under ERISA or the Code, resulting in any material liability to the
Borrower, or (iii) permit to exist any occurrence of any reportable event as
defined in Section 4043(c) of ERISA with respect to a Pension Plan if with
respect to such reportable event there is or would be any material liability of
the Borrower.
Restricted
Payments
Declare
or pay any dividends in cash or otherwise, or set apart any sum for the payment
of dividends on, or make any other distribution by reduction of capital or
otherwise in respect of any shares of its stock of any class or any other equity
interest or warrant or right, other than (i) dividends and distributions paid in
cash by the Borrower to its members, in the manner and to the extent provided by
the Borrower's operating agreement, for the sole purpose of paying ongoing
estimated and actual federal, state and local income tax liabilities, if any, of
such members resulting solely from the inclusion of the Borrower's net income in
such members' taxable income, (ii) dividends and distributions payable by the
Borrower to Anchor Funding Services, Inc. pursuant to Section 3.3 of the
operating agreement of the Borrower as in effect on the date hereof and (iii)
dividends and distributions to which the Lender shall have given its prior
written consent.
Transactions with
Affiliates
Enter
into any transactions, including without limitation, the purchase, sale or
exchange of property or the rendering of any service, with any Affiliate except
(i) the Loan Documents, (ii) transactions in the ordinary course of and pursuant
to the reasonable requirements of its business and upon fair and reasonable
terms no less favorable to the Borrower as would obtain in any arm's-length
transaction with a Person not an Affiliate and (iii) transactions to which the
Lender has given its prior written consent.
Amendment of Material
Agreements
Amend,
modify or waive any of its rights under (i) its articles of formation or
operating agreement, other than immaterial amendments, modifications or waivers
that would not reasonably be expected to adversely affect the Lender or
(ii) any Purchase Agreement without the prior written consent of the
Lender.
Use of
Proceeds
Use the
proceeds of the Loans any purpose other than the purposes set forth in Section
1.07.
Nature of
Business
Engage in
any business or business activity other than the businesses and business
activities conducted by the Borrower as of the Effective Date and activities
reasonably similar, complementary, ancillary or related thereto.
DEFAULT
Events of
Default
Each of
the following shall constitute an "Event of Default"
hereunder:
The
failure of the Borrower to make any payment of principal on the Loans on the
date when due and payable; or
The
failure of the Borrower to make any payment of interest, expenses or other
amounts payable under any Loan Document; or
The
failure of the Borrower to observe or perform any covenant or agreement
contained in Section 1.07, 5.01(a), (b), (g), (h) or (i), or Article 6;
or
The
failure of any Credit Party to observe or perform any other term, covenant, or
agreement contained in any Loan Document to which it is a party, which failure
shall have continued unremedied for a period of 5 days after the occurrence
thereof; or
Any
representation, warranty, certification or statement made by the Borrower (or
any of its managers) in any Loan Document to which it is a party, or in any
certificate, financial statement or other document delivered or to be delivered
by it pursuant thereto, shall prove to have been incorrect or misleading in any
material respect when made or deemed made; or
(i)
Any Indebtedness of the Borrower (other than its obligations hereunder) in an
amount in excess of $100,000, whether as principal, guarantor, surety or other
obligor (x) shall become or shall be declared to be due and payable prior to the
expressed maturity thereof, or (y) shall not be paid when due or within any
grace period for the payment thereof, or (ii) any holder of any obligation
referred to in clause (i) of this Subsection (f) shall have the right to declare
such obligation due and payable prior to the expressed maturity thereof;
or
The
Borrower or any Guarantor shall (i) suspend or discontinue its business,
(ii) make an assignment for the benefit of creditors, (iii) generally
not be paying its debts as such debts become due, (iv) admit in writing its
inability to pay its debts as they become due, (v) file a voluntary
petition in bankruptcy, (vi) become insolvent (however such insolvency
shall be evidenced), (vii) file any petition or answer seeking for itself
any reorganization, arrangement, composition, readjustment of debt, liquidation
or dissolution or similar relief under any present or future statute, law or
regulation of any jurisdiction, (viii) petition or apply to any tribunal
for any receiver, custodian or any trustee for any substantial part of its
Property, (ix) be the subject of any such proceeding filed against it which
remains undismissed for a period of 45 days, (x) file any answer admitting
or not contesting the material allegations of any such petition filed against it
or any order, judgment or decree approving such petition in any such proceeding,
(xi) seek, approve, consent to, or acquiesce in, any such proceeding, or in
the appointment of any trustee, receiver, sequestrator, custodian, liquidator,
or fiscal agent for it, or any substantial part of its Property, or an order is
entered appointing any such trustee, receiver, custodian, liquidator or fiscal
agent and such order remains in effect for 45 days, or (xii) take any
formal action for the purpose of effecting any of the foregoing or looking to
the liquidation or dissolution of the Borrower or any Guarantor; or
(1)
An order for relief is entered under the United States bankruptcy laws, or (2)
any other decree or order is entered by a court having jurisdiction
(i) adjudging the Borrower or any Guarantor bankrupt or insolvent,
(ii) approving as properly filed a petition seeking reorganization,
liquidation, arrangement, adjustment or composition of or in respect of the
Borrower or any Guarantor under the United States bankruptcy laws or any other
applicable Federal or state law, (iii) appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator (or other similar official) of the
Borrower or any Guarantor or of any substantial part of the Property thereof, or
(iv) ordering the winding up or liquidation of the affairs of the Borrower
or any Guarantor, and any such decree or order under this clause (2) continues
unstayed and in effect for a period of 45 days; or
Judgments
or other orders for the payment of money aggregating in excess of $50,000 or
nonmonetary judgments or orders which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect on the Borrower shall
be rendered against the Borrower and shall remain unpaid, unstayed on appeal,
undischarged, unbonded or undismissed for a period of 30 days; provided, however, that any such
judgment or order shall not give rise to an Event of Default under this Section
7.01(i) if and for so long as (A) the amount of such judgment or order is
covered by a valid and binding policy of insurance between the defendant and the
insurer, which shall be rated at least "A" by A.M. Best Company, covering full
payment thereof and (B) such insurer has been notified, and has not disputed the
claim made for payment, of the amount of such judgment or order; or
Any
Loan Document shall cease, for any reason, to be in full force and effect, or
the Borrower or any obligor thereunder shall so assert in writing or shall
disavow any of its obligations thereunder or hereunder; or
(i)
Any Termination Event shall occur; (ii) any accumulated funding deficiency as
defined in Section 302 of ERISA, whether or not waived, shall exist with respect
to any Pension Plan; (iii) any Person shall engage in any prohibited transaction
involving any Employee Benefit Plan; (iv) the Borrower shall fail to pay when
due an amount which is payable by it to the PBGC or to a Pension Plan under
Title IV of ERISA; (v) the imposition of any tax under Section 4980(B)(a) of the
Code; (vi) the assessment of a civil penalty with respect to any Employee
Benefit Plan under Section 502(c) of ERISA; or (vii) any other event or
condition shall occur or exist with respect to an Employee Benefit Plan which
would have a Material Adverse Effect on any Credit Party; or
the
Lender, for any reason in its sole and absolute discretion, deems itself
insecure with respect to the repayment or performance of the Loans and the other
Obligations;
A
Material Adverse Change shall have occurred with respect to any Credit Party;
or
A
Change in Management shall have occurred.
Remedies
Upon the
occurrence of an Event of Default or at any time thereafter during the
continuance thereof, (a) if such event is an Event of Default specified in
Section 7.01(g) or 7.01(h), (i) the Loans, all accrued and unpaid interest
thereon and all other amounts owing under the Loan Documents shall immediately
become due and payable, (ii) the right of the Borrower to request Loans shall
immediately terminate and the Lender shall have no obligation to consider
requests for the making of any additional Loans hereunder, and (iii) the Lender
may exercise any and all remedies and other rights provided in the Loan
Documents, and (b) if such event is any other Event of Default, any or all of
the following actions may be taken: (i) the Lender may by notice to the
Borrower, (x) declare the Loans, all accrued and unpaid interest thereon and all
other amounts owing under any Loan Documents to be due and payable, whereupon
the same shall immediately become due and payable, and (y) declare the right of
the Borrower to request Loans to be immediately terminated, whereupon the Lender
shall have no obligation to consider requests for the making of additional Loans
hereunder, and (ii) the Lender may exercise any and all remedies and other
rights provided in the Loan Documents, presentment, demand, protest and all
other notices of any kind being in each case hereby expressly waived by the
Borrower.
DEFINITIONS AND PRINCIPLES
OF CONSTRUCTION
Definitions
In
addition to terms defined elsewhere in the Loan Documents, capitalized terms
appearing in this Agreement are used as defined in Annex I hereto
Principles of
Construction
All
terms defined in a Loan Document shall have the meanings given such terms
therein when used in the other Loan Documents or any certificate, opinion or
other document made or delivered pursuant thereto, unless otherwise defined
therein.
The
words "hereof",
"herein",
"hereto" and
"hereunder" and
similar words when used in a Loan Document shall refer to such Loan Document as
a whole and not to any particular provision thereof, and Section, Subsection,
schedule and exhibit references contained therein shall refer to Sections or
Subsections thereof or schedules or exhibits thereto unless otherwise expressly
provided therein.
The
phrase "may
not" is prohibitive and not permissive.
Unless
the context otherwise requires, words in the singular number include the plural,
and words in the plural include the singular.
Unless
specifically provided in a Loan Document to the contrary, any reference to a
time shall refer to such time in New York City.
Unless
specifically provided in a Loan Document to the contrary, in the computation of
periods of time from a specified date to a later specified date, the word "from"
means "from and including" and the words "to" and "until" each means "to but
excluding".
OTHER
PROVISIONS
Amendments and
Waivers
No
amendment or waiver of any provision of this Agreement or any Loan Document
shall in any event be effective unless the same shall be in writing and signed
by all parties, and such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
Notices
All
notices, requests and demands to or upon the respective parties to the Loan
Documents to be effective shall be in writing and, unless otherwise expressly
provided herein, shall be deemed to have been duly given or made (i) when
delivered by hand, (ii) five days after having been deposited with the United
States Postal Service as certified or registered mail, return receipt requested,
with first-class postage and fees prepaid, (iii) on the next Business Day after
being consigned, for next business day delivery, to Federal Express or another
comparable overnight courier service, or (iv) when sent by facsimile
transmission upon electronic confirmation of receipt, addressed as
follows:
The
Borrower:
Brookridge
Funding Services, LLC
10801
Johnston Road, Suite 210
Charlotte,
NC 28226
Attention:
Brad Bernstein
Telephone: (866)
950-6669 (ext. 303)
Fax: (561)
961-9005
Brookridge
Funding Services, LLC
26 Mill
Plain Road
Danbury,
CT 06811
Attention:
Michael P. Hilton
Telephone: (203)
790-7301
Fax: (203)
790-7326
The
Lender:
MGM
Funding, LLC
2799 NW
2nd
Avenue, Suite 218
Boca
Raton, FL 33431
Attention:
Morry Rubin
Telephone: (561)
961-5000
Fax: (561)
961-5005
except
that any notice by the Borrower to the Lender pursuant to Section 1.03 shall not
be effective until received. Any party to a Loan Document may change
its address for notices by giving notice to each of the other parties as
provided in this Section, but such notice shall not be effective against any
such party until actually received. Any party to a Loan Document may
rely on signatures thereon which are transmitted by fax or other electronic
means as fully as if manually signed.
Assignments and
Participations
This
Agreement, the Note and the other Loan Documents to which the Borrower is a
party shall be binding upon and inure to the benefit of the Borrower and the
Lender, all future holders of the Note and their respective successors and
assigns, provided, however, that the Borrower may neither delegate its
liabilities and obligations, nor assign its rights and benefits, under any Loan
Document to any Person. The Lender shall have the right at any time,
upon written notice to the Borrower, to sell, assign, transfer or negotiate, or
grant participations in, all or any part of the Lender's rights with respect to
the Loans to one or more banks, insurance companies, financial institutions,
pension funds or mutual funds, provided, however, the
Borrower shall not, at any time, be obligated to pay any participant hereunder
any sum pursuant to Section 2.02 in excess of the sum which the Borrower would
have been obligated to pay to the Lender in respect of such interest had the
Lender not sold such participation. The Lender may at any time
assign all or any part of its rights under the Loan Documents to a Federal
Reserve Lender, without notice to the Borrower, provided that any such
assignment shall not release the Lender from its obligations
thereunder.
No Waiver; Cumulative
Remedies
No
failure to exercise and no delay in exercising, on the part of the Lender, any
right, remedy, power or privilege under any Loan Document shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege under any Loan Document preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges under the Loan
Documents are cumulative and not exclusive of any rights, remedies, powers and
privileges provided by law.
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Survival of
Representations and Warranties and Certain
Obligations
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All
representations and warranties made under the Loan Documents and in any
document, certificate or statement delivered pursuant thereto or in connection
therewith shall survive the execution and delivery of the Loan
Documents.
The
obligations of the Borrower under Sections 2.03 9.06 and 9.07 shall survive the
payment of the Loans and all other amounts payable under the Loan
Documents. The Lender's determination of any amount or amounts owed
by the Borrower to it under any such Section shall be presumed correct absent
manifest error.
Expenses
The
Borrower agrees, promptly upon presentation of a statement or invoice therefor,
and whether or not any Loans are made, (i) to pay or reimburse the Lender for
all its out-of-pocket costs and expenses reasonably incurred in connection with
the development, preparation and execution of, the Loan Documents and any
amendment, supplement or modification thereto (whether or not executed or
effective), any documents prepared in connection therewith and the consummation
of the transactions contemplated thereby, including, without limitation, the
reasonable fees and disbursements of the Lender's counsel, (ii) to pay or
reimburse the Lender for all of its costs and expenses, including, without
limitation, reasonable fees and disbursements of counsel, incurred in connection
with (A) any Default or Event of Default and any enforcement or collection
proceedings resulting therefrom or in connection with the negotiation of any
restructuring or "work-out" (whether consummated or not) of the obligations of
the Borrower under any of the Loan Documents and (B) the enforcement of this
Section, and (iii) to pay, indemnify and hold the Lender and each of its
managers, officers, directors and employees harmless from and against any and
all other liabilities, obligations, claims, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever (including, without limitation, reasonable counsel fees and
disbursements) with respect to the enforcement and performance of the Loan
Documents, the use of the proceeds of the Loans and the enforcement and
performance of the provisions of any subordination agreement involving the
Lender, and, if and to the extent that the foregoing indemnity may be
unenforceable for any reason, the Borrower agrees to make the maximum payment
not prohibited under applicable law; provided, however, that the Borrower shall
have no obligation to pay any of the liabilities set forth in this Section to
the Lender arising from the finally adjudicated gross negligence or willful
misconduct of the Lender or claims between one indemnified party and another
indemnified party.
Indemnity
The
Borrower agrees to indemnify and hold harmless the Lender and its Affiliates,
managers, directors, officers, employees, attorneys and agents (each an "Indemnified
Person") from and against any loss, cost, liability, damage or expense
(including the reasonable fees and disbursements of counsel of such Indemnified
Person, including all local counsel hired by any such counsel) incurred by such
Indemnified Person in investigating, preparing for, defending against, or
providing evidence, producing documents or taking any other action in respect
of, any commenced or threatened litigation, administrative proceeding or
investigation under any federal securities law or any other statute of any
jurisdiction, or any regulation, or at common law or otherwise, which is alleged
to arise out of or is based upon (i) any untrue statement or alleged untrue
statement of any material fact by any Credit Party in any document or schedule
executed or filed with any Governmental Authority by or on behalf of such Credit
Party; (ii) any omission or alleged omission to state any material fact required
to be stated in such document or schedule, or necessary to make the statements
made therein, in light of the circumstances under which made, not misleading;
(iii) any acts, practices or omissions or alleged acts, practices or omissions
of the Borrower or its agents relating to the use of the proceeds of the Loans,
or in violation of any federal securities law or of any other statute,
regulation or other law of any jurisdiction applicable thereto; or (iv) any
acquisition or proposed acquisition by any Credit Party of all or a portion of
the stock, or all or a portion of the assets, of any Person whether such
Indemnified Person is a party thereto. The indemnity set forth herein
shall be in addition to any other obligations or liabilities of the Borrower to
each Indemnified Person under this Agreement or any other Loan Document or at
common law or otherwise, and shall survive any termination of this Agreement or
any other Loan Document and the payment of all indebtedness of the Borrower
under the Loan Documents, provided that the Borrower shall have no obligation
under this Section to an Indemnified Person with respect to any of the foregoing
to the extent determined in a final judgment of a court having jurisdiction to
have resulted primarily out of the gross negligence or willful misconduct of
such Indemnified Person.
Limitation of
Liability
No claim
may be made by the Borrower or any other Person against the Lender or any
managers, directors, officers, employees or agents of the Lender for any
special, indirect, consequential or punitive damages in respect of any claim for
breach of contract or any other theory of liability arising out of or related to
the transactions contemplated by any Loan Document, or any act, omission or
event occurring in connection therewith, and the Borrower hereby waives,
releases and agrees not to sue upon any claim for any such damages, whether or
not accrued and whether or not known or suspected to exist in its
favor.
Counterparts
Each Loan
Document (other than the Note) may be executed by one or more of the parties
thereto on any number of separate counterparts and all of said counterparts
taken together shall be deemed to constitute one and the same
document. It shall not be necessary in making proof of any Loan
Document to produce or account for more than one counterpart signed by the party
to be charged. A counterpart of any Loan Document, and of any an
amendment, modification, consent or waiver to or of any Loan Document,
transmitted by telecopy shall be deemed to be an originally executed
counterpart. A set of the copies of the Loan Documents signed by all
the parties thereto shall be deposited with the Borrower and the
Lender. Any party to a Loan Document may rely upon the signatures of
any other party thereto which are transmitted by telecopy or other electronic
means to the same extent as if originally signed.
Set-off
In
addition to any rights and remedies of the Lender provided by law, upon the
occurrence of an Event of Default and the acceleration of the obligations owing
in connection with the Loan Documents, or at any time upon the occurrence and
during the continuance of an Event of Default under Section 7.01(a) or 7.01(b),
the Lender shall have the right, without prior notice to the Borrower, any such
notice being expressly waived by the Borrower to the extent not prohibited by
applicable law, to set-off and apply against any indebtedness, whether matured
or unmatured, of the Borrower to the Lender, any amount owing from the Lender to
the Borrower, at, or at any time after, the happening of any of the
above-mentioned events. To the extent not prohibited by applicable
law, the aforesaid right of set-off may be exercised by the Lender against the
Borrower or against any trustee in bankruptcy, custodian, debtor in possession,
assignee for the benefit of creditors, receiver, or execution, judgment or
attachment creditor of the Borrower or against anyone else claiming through or
against the Borrower or such trustee in bankruptcy, custodian, debtor in
possession, assignee for the benefit of creditors, receiver, or execution,
judgment or attachment creditor, notwithstanding the fact that such right of
set-off shall not have been exercised by the Lender prior to the making, filing
or issuance, or service upon the Lender of, or of notice of, any such petition,
assignment for the benefit of creditors, appointment or application for the
appointment of a receiver, or issuance of execution, subpoena, order or
warrant. The Lender agrees promptly to notify the Borrower after any
such set-off and application made by the Lender, provided that the failure to
give such notice shall not affect the validity of such set-off and
application.
Construction
The
Borrower represents that it has been represented by counsel in connection with
the Loan Documents and the transactions contemplated thereby and that the
principle that agreements are to be construed against the party drafting the
same shall be inapplicable.
Governing
Law
The Loan
Documents and the rights and obligations of the parties thereunder shall be
governed by, and construed and interpreted in accordance with, the internal laws
of the State of North Carolina, without regard to conflicts or choice-of-law
principles thereof.
Headings
Descriptive
Section
headings have been inserted in the Loan Documents for convenience only and shall
not be construed to be a part thereof.
Severability
Every
provision of the Loan Documents is intended to be severable, and if any term or
provision thereof shall be invalid, illegal or unenforceable for any reason, the
validity, legality and enforceability of the remaining provisions thereof shall
not be affected or impaired thereby, and any invalidity, illegality or
unenforceability in any jurisdiction shall not affect the validity, legality or
enforceability of any such term or provision in any other
jurisdiction.
Integration
All
exhibits to a Loan Document shall be deemed to be a part thereof. The
Loan Documents embody the entire agreement and understanding between the
Borrower and the Lender with respect to the subject matter thereof and supersede
all prior agreements and understandings between the Borrower and the Lender with
respect to the subject matter thereof.
Consent to
Jurisdiction
Each of
the Borrower and the Lender hereby irrevocably submits to the jurisdiction of
any North Carolina State or Federal court sitting in Mecklenburg County, North
Carolina over any suit, action or proceeding arising out of or relating to the
Loan Documents. Each of the Borrower and the Lender hereby
irrevocably waives, to the fullest extent permitted or not prohibited by law,
any objection which it may now or hereafter have to the laying of the venue of
any such suit, action or proceeding brought in such a court and any claim that
any such suit, action or proceeding brought in such a court has been brought in
an inconvenient forum. Each of the Borrower and the Lender hereby
agrees that a final judgment in any such suit, action or proceeding brought in
such a court, after all appropriate appeals, shall be conclusive and binding
upon it.
Service of
Process
Each of
the Borrower and the Lender hereby irrevocably consents to the service of
process in any suit, action or proceeding by sending the same by first class
mail, return receipt requested or by overnight courier service, to the address
of such party set forth in Section 9.02. Each of the Borrower and the
Lender hereby agrees that any such service (i) shall be deemed in every respect
effective service of process upon it in any such suit, action, or proceeding,
and (ii) shall to the fullest extent enforceable by law, be taken and held to be
valid personal service upon and personal delivery to it.
No Limitation on Service or
Suit
Nothing
in the Loan Documents or any modification, waiver, consent or amendment thereto
shall affect the right of the Lender to serve process in any manner permitted by
law or limit the right of the Lender to bring proceedings against the Borrower
in the courts of any jurisdiction or jurisdictions in which the Borrower may be
served.
WAIVER OF TRIAL BY
JURY
EACH OF
THE BORROWER AND THE LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
ARISING OUT OF, UNDER OR IN CONNECTION WITH THE LOAN DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED THEREIN. FURTHER, THE BORROWER HEREBY
CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF THE LENDER, OR COUNSEL TO THE
LENDER, HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE LENDER WOULD NOT, IN
THE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL
PROVISION. THE BORROWER ACKNOWLEDGES THAT THE LENDER HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, INTER ALIA, THE PROVISIONS OF
THIS SECTION.
USA Patriot Act
Notice
In the
event the Lender is subject to the requirements of the USA Patriot Act (Title
III of Pub. L. 107-56 (signed into law October 26, 2001)) (the "Patriot
Act"), the Lender hereby notifies the Borrower that, pursuant to the
requirements of the Patriot Act, the Lender is required to obtain, verify and
record information that identifies the Borrower, which information includes the
name and address of the Borrower and other information that will allow it to
identify the Borrower in accordance with the Patriot Act.
[THE
REMAINDER OF THIS PAGE HAS INTENTIONALLY BEEN LEFT BLANK.]
IN
WITNESS WHEREOF, the parties hereto have executed and delivered this Credit
Agreement as of the day and year first written above.
| BROOKRIDGE FUNDING SERVICES, LLC | |||
|
|
By:
|
/s/ John A. McNiff III | |
| Name: John A. McNiff III | |||
| Title: Manager | |||
|
|
By:
|
/s/ Michael P. Hilton | |
| Name: Michael P. Hilton | |||
| Title: Manager | |||
| MGM FUNDING, LLC | |||
|
|
By:
|
/s/ Morry Rubin | |
| Name: Morry Rubin | |||
| Title: Managing Member | |||
ANNEX
I
DEFINITIONS
"Accounts":
Purchased Accounts and Purchased Invoices.
"Acquisition":
the purchase by the Borrower of certain assets of Brookridge Funding, LLC
pursuant to the Acquisition Agreement.
"Acquisition
Agreement": The Asset Purchase Agreement dated as of December 4, 2009, by
and among the Borrower, as purchaser, Brookridge Funding, LLC, a Delaware
limited liability company, as seller, Anchor Funding Services, Inc., a Delaware
corporation, Michael P. Hilton, an individual and John A. McNiff III, an
individual.
"Affiliate":
as to any Person, any other Person which, directly or indirectly, is in control
of, is controlled by, or is under common control with, such
Person. For purposes of this definition, control of a Person shall
mean the power, direct or indirect, (i) to vote 5% or more of the securities or
other interests having ordinary voting power for the election of directors or
other managing Persons thereof or (ii) to direct or cause the direction of the
management and policies of such Person, whether by contract or
otherwise.
"Agreement":
this Credit Agreement, as the same may be amended, supplemented or otherwise
modified from time to time.
"Authorized
Signatory": as to (i) any Person which is a corporation, the chairman of
the board, the president, any vice president, the chief financial officer or any
other officer (acceptable to the Lender) of such Person and (ii) any Person
which is not a corporation, the general partner or other Managing Person thereof
or a duly authorized representative of such Managing Person (acceptable to the
Lender).
"Availability
Period": the period commencing on the Effective Date and ending on the
Business Day immediately preceding the Maturity Date.
"Borrowing
Availability": on the date of any Loan request, the excess of (i) the
lesser of (a) the Borrowing Base and the (b) the Maximum Amount, each computed
at such date, over (ii) the outstanding principal amount of the Loans computed
at such date prior to giving effect to the requested Loan.
"Borrowing
Base": on any date, shall mean the "Calculated Loan Availability" defined
and computed as of such date in accordance with the Borrowing Base Certificate,
based on the Eligible Accounts as of such date.
"Borrowing Base
Certificate": a certificate substantially in the form of Exhibit E
hereto, duly completed and executed by an authorized signatory of the
Borrower.
"Borrowing
Date": any date upon which a Loan is made hereunder.
"Borrowing
Request": a request in the form of Exhibit D, duly completed and executed
by an authorized signatory of the Borrower.
"Business
Day": any day other than a Saturday, a Sunday or a day on which
commercial banks located in North Carolina are authorized or required by law or
other governmental action to close.
"Capital
Stock": as to any Person, all shares, interests, partnership interests,
limited liability company membership interests, participations, rights in or
other equivalents (however designated) of such Person's equity (however
designated) and any rights, warrants or options exchangeable for or convertible
into such shares, interests, participations, rights or other
equity.
"Change in
Management": that at any time each of John A. McNiff III and Michael P.
Hilton shall cease (whether due to retirement, disability, death or otherwise)
to hold the office, serve in the capacity or exercise the managerial
policy-making responsibilities which on the date hereof he holds, serves in or
exercises with or on behalf of the Borrower, unless he is replaced within 6
months by another individual or individuals reasonably acceptable to the
Lender.
"Code": the
Internal Revenue Code of 1986, as the same may be amended from time to time, or
any successor thereto, and the rules and regulations issued thereunder, as from
time to time in effect.
"Collateral": the Property in which a
security interest has been granted to the Lender pursuant to the Security
Agreement.
"Credit
Party": the Borrower, the Guarantors and each other party (other than the
Lender) to a Loan Document.
"Default":
any event or condition which constitutes an Event of Default or which, with the
giving of notice, the lapse of time, or any other condition, would, unless cured
or waived, become an Event of Default.
"Effective
Date": December 7, 2009.
"Eligible
Accounts " shall mean Accounts subject to a fully perfected first
priority security interest in favor of the Lender pursuant to the Security
Agreement and which conform to the representations and warranties contained in
the Security Agreement, reduced by the amount of any returns, discounts, claims,
credits and allowances of any nature and less reserves for other matters
affecting the creditworthiness of account debtors owing the Purchased Accounts
and Purchased Invoices, but specifically excluding the following:
(1)
Purchased Accounts outstanding 90 days or more after the invoice date
thereof,
(2)
Purchased Invoices outstanding 150 days or more after the purchase order date
thereof,
(3) all
Accounts due from (i) any Affiliate of the Borrower or (ii) from an account
debtor which is the subject of any reorganization, bankruptcy, receivership,
custodianship, insolvency or other analogous condition,
(4) all
Accounts subject to a purchase money security interest or other Lien in favor of
any person, except a Lien granted in connection with a Participation Agreement
and subject to a Subordination Agreement,
(5)
Accounts from any government (federal, state, local or foreign) or any agency,
bureau or department thereof,
(6)
contra accounts,
(7)
Accounts subject to any dispute, setoff, counterclaim or other claim or defense
on the part of the account debtor denying liability in whole or in
part,
(8)
Accounts not payable in U.S. Dollars or which are not evidenced by an invoice or
purchase order or which are evidenced by an instrument or chattel
paper,
(9)
Accounts due from a customer of a client of the Borrower 25% or more of whose
Accounts (by dollar amount) due to the client consist of Purchased Accounts
outstanding 90 days or more after the invoice date thereof and/or Purchased
Invoices outstanding 150 days or more after the purchase order date
thereof,
(11)
Accounts due from an account debtor with no regular place of business in the
United States (unless such Accounts are secured by clean letters of credit in
favor of the Borrower and in which the Lender has a fully perfected first
priority security interest, are secured by letters of credit in favor of the
Lender or which are assigned to the Lender (provided that in each of the
foregoing situations the letter of credit is (x) in form and substance
acceptable to the Lender and (y) issued by a bank or insurance company, as
applicable, doing business in the United States and acceptable to the
Lender).]
"Employee Benefit
Plan": an employee benefit plan within the meaning of Section 3(3) of
ERISA maintained, sponsored or contributed to by the Borrower.
"Environmental
Laws": any and all federal, state and local laws relating to the
environment, the use, storage, transporting, manufacturing, handling, discharge,
disposal or recycling of hazardous substances, materials or pollutants or
industrial hygiene and including, without limitation, (i) the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 USCA
§9601 et seq.; (ii) the
Resource Conservation and Recovery Act of 1976, as amended, 42 USCA §6901 et seq.; (iii) the Toxic
Substance Control Act, as amended, 15 USCA §2601 et. seq.; (iv) the Water
Pollution Control Act, as amended, 33 USCA §1251 et. seq.; (v) the Clean
Air Act, as amended, 42 USCA §7401 et seq.; (vi) the Hazardous Materials
Transportation Authorization Act of 1994, 49 USCA §5101 et seq. and (viii) all
rules, regulations judgments decrees injunctions and restrictions thereunder and
any analogous state law.
"ERISA":
the Employee Retirement Income Security Act of 1974, as amended, and the rules
and regulations issued thereunder.
"ERISA
Affiliate": with respect to a Pension Plan, ERISA, the PBGC or a
provision of the Code pertaining to employee benefit plans, any Person that is a
member of any group of organizations within the meaning of Section 414 of the
Code of which the Borrower or any Subsidiary of the Borrower is a
member.
"Event of
Default": any of the events specified in Section 7.01, provided that any
requirement for the giving of notice, the lapse of time or any other condition
has been satisfied.
"GAAP":
generally accepted accounting principles in the United States as in effect from
time to time.
"Governmental
Authority": any court, or any federal or foreign, state, municipal or
other governmental department, commission, board, bureau, agency, authority,
instrumentality, or any arbitrator.
"Guarantees"
and "Guarantors":
as defined in Section 1.08.
"Indebtedness":
as to any Person, at a particular time, all items which constitute, without
duplication, (i) indebtedness for borrowed money or the deferred purchase price
of Property (other than trade payables incurred in the ordinary course of
business), (ii) indebtedness evidenced by notes, bonds, debentures or similar
instruments, (iii) obligations with respect to any conditional sale or title
retention agreement, (iv) indebtedness arising under acceptance and letter of
credit facilities and the amount available to be drawn under all letters of
credit issued for the account of such Person, (v) all liabilities secured by any
Lien on any Property owned by such Person (other than carriers', warehousemen's,
mechanics', repairmen's or other like non-consensual statutory Liens arising in
the ordinary course of business with respect to obligations which are not past
due), (vi) all guarantees or other liabilities with respect to any Indebtedness
of any other Person and (vii) all lease obligations which are required to be
capitalized under GAAP.
"Lien": any
mortgage, pledge, hypothecation, assignment, deposit or preferential
arrangement, encumbrance, lien (statutory or other), or other security agreement
or security interest of any kind or nature whatsoever, including, without
limitation, any conditional sale or other title retention agreement and any
capital or financing lease having substantially the same economic effect as any
of the foregoing.
"Loan
Documents": collectively, this Agreement, the Note, the Guarantee, the
Security Agreement and any other document delivered pursuant to this
Agreement.
"Loans": as
defined in Section 1.01.
"Managing
Person": with respect to any Person that is (i) a corporation, its board
of directors, (ii) a limited liability company, its board of control, managing
member or members, (iii) a limited partnership, its general partner, (iv) a
general partnership or a limited liability partnership, its managing partner or
executive committee or (v) any other Person, the managing body thereof or other
Person analogous to the foregoing.
"Margin
Stock": any "margin stock", as defined in Regulation U of the Board of
Governors of the Federal Reserve System, as the same may be amended or
supplemented from time to time.
"Material Adverse
Change; Material Adverse Effect": with respect to any Person, a material
adverse change in, or effect on, as the case may be (i) the financial condition,
operations, business or Property of such Person, (ii) the ability of such Person
to perform its obligations under the Loan Documents or (iii) the ability of the
Lender to enforce the Loan Documents.
"Maturity
Date": the date occurring on the first anniversary of the Effective Date,
such earlier date on which all outstanding Loans shall become due and payable,
whether by acceleration or otherwise or such later date to which the maturity of
the Loan may be extended by the Lender, provided that the Maturity
Date shall be deemed to be automatically extended on each anniversary of the
original Maturity Date if (i) no Default exists on such date and (ii) the Lender
has not notified the Borrower of its intention to terminate this Agreement as of
such date.
"Maximum
Amount": $3,700,000, as such figure may be increased or reduced from time
to time pursuant to Section 1.04.
"Note": as
defined in Section 1.02.
"Obligations":
(a) the due and punctual payment of (i) the principal of and premium, if any,
and interest (including interest accruing during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of whether
allowed or allowable in such proceeding) on the Loans, when and as due, whether
at maturity, by acceleration, upon one or more dates set for prepayment or
otherwise, and (ii) all other monetary obligations, including fees, commissions,
costs, expenses and indemnities, whether primary, secondary, direct, contingent,
fixed or otherwise (including monetary obligations incurred during the pendency
of any bankruptcy, insolvency, receivership or other similar proceeding,
regardless of whether allowed or allowable in such proceeding), of each Credit
Party to the Lender under the Loan Documents and (b) the due and punctual
performance of all covenants, agreements, obligations and liabilities of each
Credit Party pursuant to the Loan Documents.
"Organizational
Documents": as to any Person which is (i) a corporation, the certificate
or articles of incorporation and by-laws of such Person, (ii) a limited
liability company, the articles of organization and limited liability company
agreement or similar agreement of such Person, (iii) a partnership, the
partnership agreement or similar agreement of such Person, or (iv) any other
form of entity or organization, the organizational documents analogous to the
foregoing.
"Participation
Agreement": an agreement between the Borrower and another Person (the
"Participant") pursuant to which the participant acquires a participation
interest in the Borrower's financing relationship with a client.
"PBGC": the
Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title
IV of ERISA, or any Governmental Authority succeeding to the functions
thereof.
"Pension
Plan": at any date of determination, any Employee Benefit Plan (including
a multiemployer plan as defined in Section 4001(a)(3) of ERISA), the funding
requirements of which (under Section 302 of ERISA or Section 412 of the Code)
are, or at any time within the six years immediately preceding such date, were
in whole or in part, the responsibility of the Borrower or any ERISA
Affiliate.
"Permitted
Liens": as defined in Section 6.02.
"Person":
an individual, a partnership, a corporation, a limited liability company, a
business trust, a joint stock company, a trust, an unincorporated association, a
joint venture, a Governmental Authority or any other entity of whatever
nature.
"Property":
all types of real, personal, tangible, intangible or mixed
property.
"Purchase
Agreements": (i) purchase order purchase agreements pursuant to
which the Borrower purchases purchase orders issued to its clients by customers
of such clients in connection with the purchases of inventory by such customers
from such clients and (ii) accounts receivable purchase agreements pursuant
to which the Borrower purchases accounts receivable of its clients arising from
transactions in the ordinary course of business between such clients and their
customers, each such agreement to be in the form delivered to and approved by
the Lender.
"Purchased
Accounts": accounts receivable of clients of the Borrower arising from
transactions in the ordinary course of business between such clients and their
customers and purchased by the Borrower pursuant to Purchase
Agreements.
"Purchased
Invoices": purchase orders issued to clients of the Borrower by customers
of such clients in connection with the purchases of inventory by such customers
from such clients and purchased by the Borrower pursuant to Purchase
Agreements.
"Security
Agreement": as defined in Section 1.09.
"Solvent":
means, with respect to any Person on a particular date, that on such date
(a) the fair value of the property of such Person is greater than the total
amount of liabilities, including, without limitation, contingent liabilities, of
such Person, (b) the present fair salable value of the assets of such
Person is not less than the amount that will be required to pay the probable
liability of such Person on its debts as they become absolute and matured,
(c) such Person does not intend to, and does not believe that it will,
incur debts or liabilities beyond such Person's ability to pay such debts and
liabilities as they mature and (d) such Person is not engaged in business
or a transaction, and is not about to engage in business or a transaction, for
which such Person's property would constitute unreasonably small
capital. The amount of contingent liabilities at any time shall be
computed as the amount that, in the light of all the facts and circumstances
existing at such time, represents the amount that would reasonably be expected
to become an actual or matured liability.
"Subordination
Agreement": an agreement among the Borrower, the Lender and a participant
party to a Participation Agreement subordinating to the Lien of the Lender any
Liens granted to such participant in connection with such Participation
Agreement.
"Subsidiary":
any corporation or other Person, at least a majority of the outstanding Capital
Stock of which is owned (either directly or indirectly) by the
Borrower.
"Taxes":
any and all present or future taxes, levies, imposts, duties, charges, fees,
deductions or withholdings of any nature and whatever called, now or hereafter
imposed, levied, collected, withheld or assessed by any Governmental
Authority.
"Termination
Event": with respect to any Pension Plan, (i) a reportable event set
forth in Section 4043(c), 4063(a) or 4068(f) of ERISA or an event requiring
security to a Pension Plan under Section 401(a)(29) of the Code, (ii) the
termination of a Pension Plan, the filing of a notice of intent to terminate a
Pension Plan, or the treatment of a Pension Plan amendment as a termination
under Section 4041(c) of ERISA, (iii) the institution of proceedings to
terminate a Pension Plan under Section 4042 of ERISA, or (iv) the appointment of
a trustee to administer any Pension Plan under Section 4042 of
ERISA.
Exhibit
A
NOTE
$3,700,000 December
7, 2009
Charlotte,
North Carolina
For Value
Received, BROOKRIDGE FUNDING
SERVICES, LLC, a North Carolina limited liability company (the "Borrower"),
hereby promises to pay to the order of MGM FUNDING, LLC (the "Lender")
on the Maturity Date, the lesser of THREE MLILION SEVEN HUNDRED THOUSAND and
00/100 DOLLARS ($3,700,000.00), or the outstanding principal balance of the
Loans made by the Lender, and to pay interest from the date hereof on the
principal balance thereof from time to time outstanding, at the rate or rates,
and at the times, set forth in the Credit Agreement, of even date herewith, by
and between the Borrower and the Lender (as the same may be amended,
supplemented or otherwise modified from time to time, the "Credit
Agreement"), in each case at the office of the Lender located at 2799 NW
2nd
Avenue, Suite 218, Boca Raton, FL 33431, or at such other place as the Lender
may specify from time to time, in lawful money of the United States of America
in immediately available funds.
Capitalized
terms used herein which are not otherwise defined herein shall have the
respective meanings ascribed thereto in the Credit Agreement.
The Loans
evidenced by this Note are prepayable in the amounts and under the
circumstances, and the maturity is subject to acceleration upon the terms, set
forth in the Credit Agreement. This Note is the Note under, and as
such term is defined in, the Credit Agreement, and is subject to, and should be
construed in accordance with, the provisions thereof, and is entitled to the
benefits and security set forth in the Loan Documents.
The
Lender is hereby authorized to record on the schedule annexed hereto, and any
continuation sheets which the Lender may attach hereto, the (i) date and amount
of each Loan made by the Lender and (ii) date and amount of each payment or
prepayment of principal of, any Loan. No failure so to record or any
error in so recording shall affect the obligation of the Borrower to repay the
Loans, together with interest thereon, as provided in the Credit Agreement, and
the outstanding principal balance of the Loans as set forth in such schedule
shall be presumed to be correct absent manifest error.
Except as
specifically otherwise provided in the Credit Agreement, the Borrower hereby
waives presentment, demand, notice of dishonor, protest, notice of protest and
all other demands, protests and notices in connection with the execution,
delivery, performance, collection and enforcement of this Note.
This Note
may be amended only by an instrument in writing executed pursuant to the
provisions of Section 9.01 of the Credit Agreement.
THIS NOTE
SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NORTH CAROLINA.
| BROOKRIDGE FUNDING SERVICES, LLC | |||
|
|
By:
|
/s/ | |
| Name: John A. McNiff III | |||
| Title: Manager | |||
| By: | |||
| Name: Michael P. Hilton | |||
| Title: Manager | |||
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Exhibit 99.1
FOR
IMMEDIATE RELEASE-December 8, 2009
ANCHOR
FUNDING SERVICES, INC. COMPLETES ASSET ACQUISITION OF BROOKRIDGE FUNDING, LLC
FOR $2.4 million.
BOCA
RATON, Fla., Dec. 8 /PRNewswire-FirstCall/ -- Anchor Funding Services, Inc. (OTC
Bulletin Board Symbol “AFNG.OB”) is pleased to announce the asset acquisition of
Brookridge Funding, LLC (“Brookridge”), a purchase order finance (P.O.) and
accounts receivable factoring firm for $2.4 million representing Brookridge’s
outstanding client account balances at closing, plus an earn-out payment based
on its operating income.
Since
1995, Brookridge has provided over $430 million of purchase order and accounts
receivable financing to small and mid-sized U.S. businesses. The purchase order
financing industry, a specialty niche funding sector, is not dominated by any
single firm and serves to fill a critical need for companies requiring working
capital to source goods from suppliers in order to fill customer purchase orders
from credit worthy companies, Fortune 1000 corporations or government related
entities. Purchase order financing for U.S. based firms supports payments for
the flow of goods within the supply chain to suppliers for production of goods
which ultimately reach the end consumer.
Morry F.
Rubin, Chairman and CEO, stated “P.O. financing and accounts receivable
factoring which is a multibillion dollar industry offer a critical turnkey
working capital solutions for businesses from funding the original
cost of producing goods to then receiving immediate cash for sales invoices
created from the shipment of those goods. Many businesses have purchase orders
from credit worthy “Fortune 1000” companies but they do not have capital to fill
orders and pay suppliers. Brookridge, which is secured by inventory and other
assets, has been providing PO financing for approximately 15 years. Anchor’s
acquisition of Brookridge expands our general factoring services and creates an
opportunity to provide P.O. financing solutions to our clients and prospects as
a bundled working capital solution. Furthermore, additional capital provided by
Anchor to Brookridge will more rapidly expand its clients’ fundings and fulfill
its current revenue opportunities.” Mr. Rubin further added, “Given
the limited availability of business credit and traditional bank financing for
small businesses, the ability to fund opportunistic transactions with our
capital sources including Anchor’s recently announced Senior A/R Credit Facility
with Greystone Commercial Services L.P. is very favorable.”
Prior to
the credit crisis which began approximately 14 months ago, Brookridge’s finance
revenues were significantly greater than today. With a new $3.7 million credit
facility from Anchor’s Co-Chairmen and an investor plus a $1.5 million equity
investment from Anchor, its Co-Chairmen and Brookridge principals, Brookridge
can now fulfill its revenue opportunities and meet its current demand from
clients and prospects for its financial products.
Brookridge
Funding’s founders, Michael Hilton and John McNiff, will serve as Co-Presidents
of the company which will operate under the name Brookridge Funding Services,
LLC. In discussing the transaction, Michael Hilton stated, “We are excited to be
partnering with Anchor Funding Services, and utilizing our combined resources to
continue to expand our financing capabilities within the purchase order and
accounts receivable financing industry. It’s great to have the ability to meet
the demand for our financial services and grow the company.”
As
previously stated, we continue to explore acquisition opportunities of other
U.S. factoring and specialty finance firms which may accelerate our earnings and
revenue growth while expanding our finance product offerings.
For the 9
month period ended September 30, 2009, financing revenues (unaudited) were
approximately $1.3 million. With this acquisition of Brookridge and
its expected contribution to both revenue and net income, we anticipate Anchor
achieving profitability within calendar year 2010.
About
Anchor
Anchor
provides innovative accounts receivable funding to small and mid-size U.S.
businesses. Through our 80% owned subsidiary, Brookridge Funding
Services, LLC, we provide purchase order financing solutions to firms requiring
non-traditional financing for U.S. based clients conducting business with
creditworthy firms domestically. Our funding facility which is based upon
creditworthiness of accounts receivable, provides rapid and flexible financing
to support small and mid-size businesses’ working capital needs.
Additional
Information
For
additional information, a copy of Anchor’s Form 8-K filed with the Securities
and Exchange Commission on December 7, 2009 can be obtained on the Internet by
going to www.sec.gov, clicking “Search for Company filings,” then clicking
“Company or fund name, ticker symbol, CIK (Central Index Key), file number,
state, country, or SIC (Standard Industrial Classification)”, typing in our
company name and clicking “find Companies.”
Safe
Harbor Statement Under the Private Securities Litigation Reform Act of
1995.
Certain
statements in this press release constitute “forward-looking statements” within
the meaning of the Private Securities Litigation Reform Act of
1995. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievements of the company to be materially different from any
future results, performances or achievements express or implied by such
forward-looking statements. The forward-looking statements are
subject to risks and uncertainties including, without limitation, changes in
levels of competition, possible loss of customers, and the company’s ability to
attract and retain key personnel.
Contact
Morry F. Rubin, Chairman and C.E.O. (866) 950- 6669 EXT 302
Email:
mrubin@anchorfundingservices.com
Exhibit 99.2
FOR
IMMEDIATE RELEASE-December 8, 2009
ANCHOR
FUNDING SERVICES, INC.’s CO-CHAIRMEN AND INVESTOR AGREE TO PROVIDE
$3.7 MILLION SENIOR CREDIT FACILITY TO RECENTLY ACQUIRED
COMPANY, BROOKRIDGE FUNDING, LLC.
BOCA
RATON, Fla., Dec. 8 /PRNewswire-FirstCall/ -- Anchor Funding Services, Inc.’s
(OTC Bulletin Board Symbol “AFNG.OB”) Co-Chairmen, Morry F. Rubin and George
Rubin, and an investor, through a newly organized entity, MGM Funding, LLC, have
agreed to provide a $3.7 million Senior Credit Facility to Anchor’s 80% owned
Purchase Order Financing Subsidiary, Brookridge Funding Services, LLC
(‘Brookridge”) which recently acquired Brookridge Funding, LLC. Brookridge
provides its specialty niche financing to small and mid-sized U.S. based
businesses.
Morry F.
Rubin, Chairman and CEO, stated “We are excited to make an equity investment in
Anchor and to provide this Senior Credit Facility to Brookridge. The
opportunities to provide financing to small and mid sized businesses remain
strong given the environment of tight business credit; particularly, from
traditional banks and institutional investors.”
Prior to
the credit crisis which began approximately 14 months ago, Brookridge’s finance
revenues were significantly greater than today. With this new $3.7 million
credit facility and the additional $1.5 million equity investment from Anchor,
its Co-Chairmen and Brookridge principals, Brookridge can now fulfill its
revenue opportunities and meet its current demand from its clients and prospects
for its financial products.
Brookridge
Funding’s founders, Michael Hilton and John McNiff, will serve as Co-Presidents
of the company. In discussing the transaction, Michael Hilton stated, “We are
excited to be partnering with Anchor Funding Services, and utilizing our
combined resources to continue to expand our financing capabilities within the
purchase order and accounts receivable financing industry. It’s great to have
the ability to meet the demand for our financial services and grow the
company.”
About
Brookridge
Since
1995, Brookridge has provided over $430 million of purchase order and accounts
receivable financing to small and mid-sized U.S. businesses. The purchase order
financing industry, a specialty niche funding sector, is not dominated by any
single firm and serves to fill a critical need for companies requiring working
capital to source goods from suppliers in order to fill customer purchase orders
from credit worthy companies, Fortune 1000 corporations or government related
entities. Purchase order financing for U.S. based firms supports payments for
the flow of goods within the supply chain to suppliers for production of goods
which ultimately reach the end consumer.
About
Anchor
Anchor
provides innovative accounts receivable funding to small and mid-size U.S.
businesses. Through our 80% owned subsidiary, Brookridge Funding
Services, LLC, we provide purchase order financing solutions to firms requiring
non-traditional financing for U.S. based clients conducting business with
creditworthy firms domestically. Our funding facility which is based upon
creditworthiness of accounts receivable, provides rapid and flexible financing
to support small and mid-size businesses’ working capital needs.
Additional
Information
For
additional information, a copy of Anchor’s Form 8-K filed with the Securities
and Exchange Commission on December 8, 2009 can be obtained on the Internet by
going to www.sec.gov, clicking “Search for Company filings,” then clicking
“Company or fund name, ticker symbol, CIK (Central Index Key), file number,
state, country, or SIC (Standard Industrial Classification)”, typing in our
company name and clicking “find Companies.”
Safe
Harbor Statement Under the Private Securities Litigation Reform Act of
1995.
Certain
statements in this press release constitute “forward-looking statements” within
the meaning of the Private Securities Litigation Reform Act of
1995. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievements of the company to be materially different from any
future results, performances or achievements express or implied by such
forward-looking statements. The forward-looking statements are
subject to risks and uncertainties including, without limitation, changes in
levels of competition, possible loss of customers, and the company’s ability to
attract and retain key personnel.
Contact
Morry F. Rubin, Chairman and C.E.O. (866) 950- 6669 EXT 302
Email:
mrubin@anchorfundingservices.com
Exhibit 99.3
FOR
IMMEDIATE RELEASE-December 8, 2009
ANCHOR
FUNDING SERVICES, INC.’s CO-CHAIRMEN AND INVESTOR MAKE $500,000 INVESTMENT FOR
500,000 COMMON SHARES AT $1.00 PER SHARE
BOCA
RATON, Fla., Dec. 8 /PRNewswire-FirstCall/ -- Anchor Funding Services, Inc.’s
(OTC Bulletin Board Symbol “AFNG.OB”) Co-Chairmen, Morry F. Rubin and George
Rubin and a private investor have agreed to purchase from the Company 500,000
common shares at $1.00 per share and, in addition, will receive as a group,
2,000,000 warrants exercisable at $1.00 per share. The common stock investment
represents a 65% premium price above the December 7, 2009 closing bid price of
Anchor Common Stock. The Company plans to utilize the additional funds for
working capital and to complete the recently announced acquisition of Brookridge
Funding, LLC (“Brookridge”).
Morry F.
Rubin, Chairman and CEO, stated “We are excited about Anchor’s growth
opportunities and our investment in the Company at approximately a 65% premium
to its December 7, 2009 closing bid price highlights our belief in Anchor’s
prospects and growth potential. The current credit crisis facing small U.S.
businesses seeking new business credit facilities or seeking to expand existing
credit facilities poses serious challenges. Anchor continues to position itself
to capitalize upon providing credit to small U.S. businesses through its direct
marketing and sales efforts and from seeking acquisitions of factoring and
specialty finance firms serving the small to mid size business
sector.”
About
Brookridge
Since
1995, Brookridge has provided over $430 million of purchase order and accounts
receivable financing to small and mid-sized U.S. businesses. The purchase order
financing industry, a specialty niche funding sector, is not dominated by any
single firm and serves to fill a critical need for companies requiring working
capital to source goods from suppliers in order to fill customer purchase orders
from credit worthy companies, Fortune 1000 corporations or government related
entities. Purchase order financing for U.S. based firms supports payments for
the flow of goods within the supply chain to suppliers for production of goods
which ultimately reach the end consumer.
About
Anchor
Anchor
provides innovative accounts receivable funding to small and mid-size U.S.
businesses. Through our 80% owned subsidiary, Brookridge Funding
Services, LLC, we provide purchase order financing solutions to firms requiring
non-traditional financing for U.S. based clients conducting business with
creditworthy firms domestically. Our funding facility which is based upon
creditworthiness of accounts receivable, provides rapid and flexible financing
to support small and mid-size businesses’ working capital needs.
Additional
Information
For
additional information, a copy of Anchor’s Form 8-K filed with the Securities
and Exchange Commission on December 8, 2009 can be obtained on the Internet by
going to www.sec.gov, clicking “Search for Company filings,” then clicking
“Company or fund name, ticker symbol, CIK (Central Index Key), file number,
state, country, or SIC (Standard Industrial Classification)”, typing in our
company name and clicking “find Companies.”
Safe
Harbor Statement Under the Private Securities Litigation Reform Act of
1995.
Certain
statements in this press release constitute “forward-looking statements” within
the meaning of the Private Securities Litigation Reform Act of
1995. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievements of the company to be materially different from any
future results, performances or achievements express or implied by such
forward-looking statements. The forward-looking statements are
subject to risks and uncertainties including, without limitation, changes in
levels of competition, possible loss of customers, and the company’s ability to
attract and retain key personnel.
Contact
Morry F. Rubin, Chairman and C.E.O. (866) 950- 6669 EXT 302
Email:
mrubin@anchorfundingservices.com