Exhibit 10.89
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ASSET PURCHASE/LIABILITY ASSUMPTION AGREEMENT
Dated as of December 11, 2001
Among
National Australia Bank Limited
(ABN 12 004 044 937),
HomeSide Lending, Inc.
and
HomeSide International, Inc.,
as Sellers
and
Washington Mutual Bank, FA
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TABLE OF CONTENTS
Page
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ARTICLE I
Definitions
1.01 Defined Terms............................................................2
1.02 Interpretation..........................................................13
ARTICLE II
Purchase And Delivery of Purchased
Assets; Assumption of Assumed Liabilities
2.01 Delivery of Purchased Assets; Assumption of Assumed Liabilities.........13
2.02 Consideration for Purchased Assets......................................20
2.03 Proration of Expenses...................................................21
2.04 Calculation of Purchase Price...........................................22
2.05 Settlement Date Payments................................................23
2.06 Allocation of Purchase Price............................................23
2.07 No Offset...............................................................23
2.08 Interim Settlement......................................................24
2.09 Co-Issue................................................................24
ARTICLE III
Closing, Transfers and Related Items
3.01 Closing and Closing Date................................................24
3.02 Assignment and Assumption Documents.....................................25
3.03 Further Assistance and Assurances.......................................26
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3.04 Other Consents..........................................................26
ARTICLE IV
Representations and Warranties
4.01 Disclosure Schedules....................................................26
4.02 Representations and Warranties of Sellers...............................27
4.03 Representations and Warranties of Buyer.................................42
4.04 No Other Representations or Warranties..................................45
ARTICLE V
Covenants
5.01 Conduct of Business.....................................................45
5.02 Access; Confidentiality.................................................48
5.03 Taking of Necessary Action..............................................50
5.04 Disclosure..............................................................51
5.05 Missing Mortgage Loan Documents.........................................51
5.06 Post-Closing Collection of Certain Receivables..........................52
5.07 Granted Licenses........................................................52
5.08 Insurance Matters.......................................................52
5.09 No Solicitation.........................................................53
5.10 Non-Competition Agreement...............................................53
5.11 Non-Solicitation of Employees...........................................53
5.12 Transitional Matters....................................................54
5.13 MSR Purchases by Buyer..................................................56
5.14 Damage or Deterioration of 7301 Baymeadows Way..........................56
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ARTICLE VI
Employee Matters
6.01 Employees and Service Crediting.........................................56
ARTICLE VII
Conditions To The Closing
7.01 Conditions to Each Party's Obligation to Effect the Purchase............59
7.02 Conditions to Obligation of Buyer.......................................60
7.03 Conditions to Obligations of Sellers....................................60
ARTICLE VIII
Termination
8.01 Termination.............................................................61
8.02 Effect of Termination and Abandonment...................................62
ARTICLE IX
Tax Matters
9.01 Cooperation.............................................................62
9.02 Transfer Taxes..........................................................62
ARTICLE X
Indemnification
10.01 Indemnification Not Subject to Limitations..............................63
10.02 Indemnification Subject to Limitations..................................65
10.03 Survival Periods........................................................65
10.04 Miscellaneous...........................................................65
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10.05 De Minimis Liability, Deductible and Cap................................66
10.06 Third-Party Claims......................................................66
ARTICLE XI
General Provisions
11.01 Notices.................................................................67
11.02 Amendment and Modification; Waiver......................................69
11.03 Entire Agreement........................................................69
11.04 Fees and Expenses.......................................................69
11.05 Third Party Beneficiaries...............................................70
11.06 Assignment; Binding Effect..............................................70
11.07 Governing Law...........................................................70
11.08 Waiver of Jury Trial....................................................71
11.09 Counterparts............................................................71
11.10 Severability............................................................71
11.11 Affiliates of Buyer.....................................................71
EXHIBITS
Retained Portfolio Subservicing Agreement......................................A
Services Agreement.............................................................B
Intellectual Property Rights Agreements........................................C
Solicitation Rights Agreement..................................................D
Employee Lease.................................................................E
▇▇▇▇ of Sale and Instrument of Assumption of Liabilities.......................F
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ASSET PURCHASE/LIABILITY ASSUMPTION AGREEMENT (this "Agreement"), dated as
of December 11, 2001, among National Australia Bank Limited (ABN 12 004 044
937), an Australian corporation ("Parent"), HomeSide Lending, Inc., a Florida
corporation ("HSL") and HomeSide International, Inc., a Delaware corporation
("HSI") (collectively, "Sellers") and Washington Mutual Bank, FA, a federal
savings association ("Buyer").
RECITALS
A. HSL, HSI and the Selling Subsidiaries (collectively, the "Selling
Companies") are engaged in the Business.
B. On the terms and subject to the conditions set forth herein, Sellers
desire to sell, and Buyer desires to purchase, all of the assets of the Selling
Companies that are used in connection with the Business, other than certain
Excluded Assets.
C. In connection with the acquisition of the Business, Buyer agrees, on the
terms and subject to the conditions set forth herein, to assume certain
liabilities and obligations of Sellers.
D. Concurrently with the execution of this Agreement, Sellers and Buyer are
entering into (a) a subservicing agreement (the "Retained Portfolio Subservicing
Agreement"), which is attached hereto as Exhibit A providing for the
subservicing of the Retained Servicing Portfolio, (b) a services agreement (the
"Services Agreement"), which is attached hereto as Exhibit B pursuant to which
Buyer will provide certain services related to the administration and servicing
of Parent's Australian mortgages, (c) an intellectual property rights agreement
(the "Intellectual Property Rights Agreement"), which is attached hereto as
Exhibit C, (d) a solicitation rights agreement (the "Solicitation Rights
Agreement"), which is attached hereto as Exhibit D and (e) an employee lease
agreement (the "Employee Lease"), which is attached hereto as Exhibit E pursuant
to which Selling Companies will provide Buyer with the services of the
Prospective Employees for a transition period. At Closing, Sellers and Buyers
will enter into a transitional services agreement (the "Transitional
Agreement"), pursuant to which Sellers will continue to provide certain
transitional services to Buyer as described in Section 5.12, and a licensing
agreement (the "License Agreement"), pursuant to which Buyer will grant Parent
and its Affiliates certain rights and licenses as described in Section 5.07.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
ARTICLE I.
Definitions
1.01 Defined Terms.
(a) The following terms are used in this Agreement with the meanings set forth
below:
"Action" means any action, suit, arbitration, inquiry, proceeding or
investigation by or before any court, Regulatory Authority or other Governmental
Authority.
"Advances" means, with respect to any Selling Company and Mortgage Loans,
the moneys that have been advanced by such Selling Company on or before the
Closing Date from its funds in connection with its servicing of such Mortgage
Loans in accordance with applicable Regulations (which moneys include principal,
interest, taxes, ground rents, assessments, insurance premiums and other costs,
fees and expenses pertaining to the acquisition of title to and preservation and
repair of the Mortgaged Properties and including Foreclosure Buyout Claims).
"Affiliate" means, with respect to any specified Person, any other Person
directly or indirectly Controlling, Controlled by or under common Control with
such specified Person.
"Agency" means FHA, VA, GNMA, FNMA, FHLMC, HUD or State Agency, as
applicable.
"Agreement" has the meaning set forth in the preamble to this Agreement, as
this Agreement may be amended or modified from time to time in accordance with
the provisions of this Agreement.
"ALSS Platform" means the Selling Companies' confidential information,
Software, equipment, infrastructure, documentation and rights under license and
other third party contracts constituting and related to the ALSS servicing
platform or embodying the same. The material components and software modules of
the ALSS Platform are described on Sellers' Disclosure Schedule 4.02(m)(1).
"ALSS Platform Intellectual Property" means all Intellectual Property
constituting and related to the ALSS Platform.
"Ancillary Agreements" means the Retained Portfolio Subservicing Agreement,
the Services Agreement, the Intellectual Property Rights Agreement, the
Solicitation Rights Agreement, the Employee Lease, the License Agreement and the
Transitional Agreement.
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"Assignment of Mortgage Instrument" means a written instrument that, when
recorded in the appropriate office of the local jurisdiction in which the
related Mortgaged Property is located, will reflect the transfer of the Mortgage
identified therein from the transferor to the transferee named therein.
"Business" means the business of originating, marketing, purchasing,
selling, securitizing, servicing and/or subservicing residential mortgage loans
including the Servicing of the existing mortgage servicing rights portfolio
conducted by the Selling Companies. In the interests of clarity, the term
"Business" shall not in any way include or refer to the Excluded Assets or
Excluded Liabilities.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in Jacksonville, Florida or Seattle, Washington generally
are required or authorized by law or executive order to close.
"Certificate Insurer" means a provider of an insurance policy insuring
against certain specified losses or shortfalls with respect to certain
mortgage-backed securities.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor thereto.
"Compensation and Benefit Plans" means bonus, deferred compensation,
pension, retirement, profit-sharing, thrift, savings, employee stock ownership,
stock bonus, stock purchase, deferred and restricted stock, stock option,
employment, termination, severance, compensation, medical, health or other
plans, agreements, policies or arrangements maintained by or contributed to by
the Selling Companies that cover Prospective Employees.
"Control", "Controlling" or "Controlled" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise.
"Custodial Account" means all funds held or controlled by a Selling Company
with respect to any Mortgage Loan, including all principal and interest funds
and any other funds due Investors, buydown funds, suspense funds, funds for the
payment of taxes, assessments, insurance premiums, ground rents and similar
charges, funds for the payment of bankruptcy and fraud coverage, funds from
hazard insurance loss drafts and other mortgage escrow and impound amounts
(including interest thereon for the benefit of Mortgagors, if applicable).
"Custodial File" means, with respect to a Mortgage Loan, all of the
documents that must be maintained on file with a document custodian or trustee
under applicable Regulations.
"Damages" means any and all assessments, judgments, claims, liabilities,
losses, costs, damages or expenses (including without limitation exemplary
damages, punitive damages, interest, penalties and reasonable attorneys' fees,
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expenses and disbursements in connection with an action, suit or proceeding).
"Delivery Commitment" means the optional or mandatory commitment of a
Selling Company to sell a Warehouse Loan, Pipeline Loan or an interest in a
Warehouse Loan or a Pipeline Loan to another Person.
"Environmental Laws" means all domestic, federal, state and local laws,
regulations, rules and ordinances relating to pollution or protection of the
environment, including, without limitation, laws relating to releases or
threatened releases of Hazardous Substances into the environment (including,
without limitation, ambient air, surface water, ground water, land, surface and
subsurface strata) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, release, transport or handling of
Hazardous Substances.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"FHA" means Federal Housing Administration or any successor thereto.
"FHA Loans" means residential mortgage loans that are insured, or are
eligible and intended to be insured, by FHA.
"FHLMC" means Federal Home Loan Mortgage Corporation or any successor
thereto.
"FNMA" means Federal National Mortgage Association or any successor
thereto.
"Foreclosure" means the process culminating in the acquisition of title to
a Mortgaged Property in a foreclosure sale or by a deed in lieu of foreclosure
or pursuant to any other comparable procedure allowed under applicable
Regulations.
"Foreclosure Buyout Claims" means reimbursement claims for principal,
interest and/or other amounts paid by a Selling Company to GNMA in accordance
with applicable Regulations for the buyout of an FHA Loan or VA Loan subject to
Foreclosure.
"GAAP" means generally accepted accounting principles in the United States
which, unless otherwise indicated, are applied on a consistent basis.
"GNMA" means Government National Mortgage Association or any successor
thereto.
"Governmental Authority" means any Agency or other domestic or foreign
court, administrative agency, self-regulatory authority or commission or other
body acting in an adjudicative capacity or other federal, state or local
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governmental or self-regulatory authority or instrumentality.
"Hazardous Substances" means all substances defined as such, or regulated
as such, under any Environmental Law, including, but not limited to, petroleum,
asbestos or polychlorinated biphenyls.
"Hedging Assets" means all of the Selling Companies' interest rate swaps,
caps, floors, collars, options, futures and forward contracts, foreign exchange
contracts, currency swaps, principal only trades, treasury trades, or other
arrangements, in each case designed to alter the risks arising from fluctuations
in interest rates or currency values.
"HUD" means United States Department of Housing and Urban Development or
any successor thereto.
"Insurer" means (i) a Person who insures or guarantees all or any portion
of the risk of loss on any Mortgage Loan, including without limitation any
Agency and any provider of private mortgage insurance, standard hazard
insurance, flood insurance, earthquake insurance or title insurance with respect
to any Mortgage Loan or related Mortgaged Property or (ii) a Person who
provides, with respect to a Servicing Agreement or an applicable Regulation, any
fidelity bond, direct surety bond, letter of credit, other credit enhancement
instrument or errors and omissions policy or (iii) is a Certificate Insurer.
"Intellectual Property" means each of the following: (i) patents, patent
applications, patent disclosures and inventions (whether or not patentable and
whether or not reduced to practice) and any reissue, continuation,
continuation-in-part, revision, extension or reexamination thereof
(collectively, "Patents"); (ii) trademarks, service marks, trade dress, logos,
trade names and Internet domain names together with all goodwill associated
therewith, including, without limitation, the use of all translations,
adaptations, derivations and combinations of the foregoing (collectively,
"Marks"); (iii) copyrights and copyrightable works (including without
limitation, web sites) and all registrations, applications and renewals for any
of the foregoing (collectively, "Copyrights"); (iv) information not generally
known to the public or that would constitute a trade secret under the Uniform
Trade Secrets Act, and confidential information (including, without limitation,
know-how, research and development information, designs, plans, proposals,
technical data, financial, business and marketing plans, sales and promotional
literature, and customer and supplier lists and related information)
(collectively, "Trade Secrets"); (v) other intellectual property rights; (vi)
all copies and tangible embodiments of the foregoing (in whatever form or
medium), along with all income, royalties, damages and payments due or payable
after the Closing including, without limitation, damages and payments for past
or future infringements or misappropriations thereof; (vii) the right to ▇▇▇ and
recover for past infringements or misappropriations thereof; (viii) any defenses
related to any of the above; and (ix) any and all corresponding rights that, now
or hereafter, may be secured throughout the world.
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"Interest Rate" means the prime rate in the United States as published in
The Wall Street Journal on the date that the calculation of interest is to be
made on the amount specified. If more than one rate, or a range of rates, is so
published as the prime rate, the prime rate shall be the average of the rates
published.
"Investment Commitment" means the optional or mandatory commitment of a
Person to purchase a Warehouse Loan, a Pipeline Loan or an interest in a
Warehouse Loan or a Pipeline Loan owned or to be acquired by the Selling
Companies.
"Investor" means FHLMC, FNMA, GNMA, a State Agency, the Selling Companies
or an Affiliate thereof, a Private Investor or any other Person who owns or
holds Mortgage Loans, serviced or subserviced by the Selling Companies, pursuant
to a Servicing Agreement, as applicable. "IRS" means the Internal Revenue
Service of the United States of America or any successor agency or authority.
"Knowledge" means, with respect to each of Sellers and Buyer, the knowledge
of any of the persons whose names are set forth in Section 1.01 of their
respective Disclosure Schedules.
"Lease Period" has the meaning set forth in the Employee Lease.
"Liabilities" means any and all debts, losses, liabilities, offsets,
claims, damages, fines, obligations, payments and accounts payable (including,
without limitation, those arising out of any award, demand, assessment,
settlement, judgment or compromise relating to any Action), and accruals for
out-of-pocket costs and expenses (including, without limitation, reasonable
attorneys' fees and reasonable expenses incurred in investigating, preparing or
defending any Action).
"License" means any license, permit, franchise, approval, orders,
qualifications, waivers or other authorization of any Governmental Authority.
"Lien" means any lien, pledge, security interest, mortgage, deed of trust,
claim, encumbrance, easement, servitude, encroachment, charge or similar right
of any other Person of any kind or nature whatsoever.
"Material Adverse Effect" means:
(a)......With respect to the Business, a material adverse change in, or a
material adverse effect upon, the Purchased Assets or the results of operations
or financial condition of the Business, taken as a whole, excluding any effect
or change attributable to or resulting from (1) events, changes or trends in
economic, business or financial conditions, including interest rate conditions,
generally or relating to companies engaged in the mortgage banking business, (2)
changes in laws, regulations, interpretations of laws or regulations, GAAP or
regulatory accounting requirements applicable to mortgage banking companies or
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their holding companies, (3) actions, or effects of actions, taken by Sellers,
or any of the Selling Companies, either required by or contemplated in this
Agreement or with the prior written consent of Buyer and (4) any change in
national or international political or social conditions including, without
limitation, the engagement by the United States in hostilities, whether or not
pursuant to the declaration of a national emergency or war, or the occurrence of
any military or terrorist attack upon or within the United States, or any of its
territories, possessions or diplomatic or consular offices or upon any military
installation, equipment or personnel of the United States, provided, however,
that none of the changes or occurrences described in this clause (4) results in
the destruction or loss of use of the Purchased Assets; and
(b) With respect to either of Sellers or Buyer, a material impairment of
such Person's ability to perform its material obligations under this Agreement.
"Mortgage" means with respect to a Mortgage Loan, a mortgage, deed of trust
or other security instrument creating a Lien upon real property and any other
property described therein which secures a Mortgage Note, together with any
assignment, reinstatement, extension, endorsement or modification thereof.
"Mortgage Loan" means either a Warehouse Loan or Pipeline Loan or Serviced
Loan.
"Mortgage Loan Documents" means the Custodial File and all other documents
relating to Mortgage Loans required to document and service the Mortgage Loans
by applicable Regulations, whether on hard copy, microfiche or its equivalent or
in electronic format and, to the extent required by applicable Regulations,
credit and closing packages and disclosures.
"Mortgage Note" means, with respect to a Mortgage Loan, a promissory note
or notes, or other evidence of indebtedness, with respect to such Mortgage Loan
secured by a Mortgage or Mortgages, together with any assignment, reinstatement,
extension, endorsement or modification thereof.
"Mortgaged Property" means (i) the real property and improvements thereon,
(ii) the stock in a residential housing corporation and the lease to the related
dwelling unit or (iii) a manufactured home and, as applicable, the real property
upon which the home is situated, in each case that secures a Mortgage Note and
that are subject to a Mortgage.
"Mortgagor" means the obligor(s) on a Mortgage Note.
"Originator" means, with respect to any Mortgage Loan, the entity or
entities that (i) took the relevant Mortgagor's loan application, (ii) processed
the relevant Mortgagor's loan application or (iii) closed and/or funded such
Mortgage Loan.
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"Person" means any individual, bank, corporation, partnership, association,
limited liability company, business trust, unincorporated organization or
similar organization, whether domestic or foreign, or any Governmental
Authority.
"Previously Disclosed" by a party means information set forth in the
relevant corresponding section of its Disclosure Schedule; provided that
information which, on its face, is reasonably readily apparent to the reader
that it is related to another provision of this Agreement shall also be deemed
to be Previously Disclosed with respect to such other provision.
"Prior Servicer" means any party that was a servicer or subservicer of any
Mortgage Loan before a Selling Company or the current Servicer, as applicable,
became the servicer or subservicer of the Mortgage Loan.
"Private Investors" means Investors which are not Agencies.
"Prospective Employee" means each of the Selling Companies' employees who
are employed in the Business at the Closing Date, including any Leave Recipient,
but excluding those Employees whose names or positions are set forth in Section
2.01(c)(xii) of Sellers' Disclosure Schedule and those employees who the Buyer
may designate as Retained Employees as contemplated in Section 2.01(c)(xii) of
the Sellers' Disclosure Schedule.
"Purchase" means the purchase by Buyer of the Purchased Assets and the
Assumption of the Assumed Liabilities.
"Rating Agency" means any nationally recognized statistical credit agency
that at the time of any determination thereof has outstanding a rating on one or
more classes of mortgage-backed securities or asset-backed securities at the
request of any issuer of mortgage-backed securities or asset-backed securities.
"Regulation" means and includes, as of the time of reference, with respect
to the Mortgage Loans and the Servicing under the Servicing Agreements, all of
the following: (i) all contractual obligations of a Selling Company or any
Originator or Prior Servicer with respect to Servicing under any Servicing
Agreement, Mortgage Note, Mortgage and other Mortgage Loan Document, (ii) all
applicable federal, state and local legal and regulatory requirements (including
statutes, rules, regulations and ordinances) binding upon a Selling Company or
any Originator or Prior Servicer, (iii) all other applicable requirements and
guidelines of each governmental agency, board, commission, instrumentality and
other governmental or quasi-governmental body or office having jurisdiction,
including without limitation those of any Investor and any Insurer and (iv) all
other applicable judicial and administrative judgments, orders, stipulations,
awards, writs and injunctions.
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"REO" means any residential real property owned by a Selling Company
(whether for its own account or on behalf of an Investor, FHA or VA as a result
of a Foreclosure).
"Selling Companies Articles" means the Articles of Incorporation of HSL, as
amended, and the Certificate of Incorporation of HSI, as amended.
"Selling Companies By-laws" means the By-laws of HSL, as amended, and the
By-laws of HSI, as amended.
"Selling Subsidiaries" means any Subsidiary of HSL or HSI as Previously
Disclosed on Disclosure Schedule 1.01 by Sellers to Buyer other than the
Acquired Subsidiary, HomeSide Global MBS Manager, Inc. and HomeSide Mortgage
Securities, Inc.
"Serviced Loan" means a residential mortgage loan (i) that is evidenced by
a Mortgage Note and secured by a Mortgage, (ii) with respect to which a Selling
Company owns the Servicing as of the Closing Date and (iii) which is included in
the Retained Servicing Portfolio.
"Servicer" means the Person responsible for performing the Servicing
functions in connection with a Mortgage Loan in or related to the Retained
Servicing Portfolio.
"Servicing" means mortgage loan servicing, subservicing rights and master
servicing rights and obligations including, without limitation, one or more of
the following functions (or a portion thereof): (i) the administration and
collection of payments for the reduction of principal and/or the application of
interest on a mortgage loan; (ii) the collection of payments on account of taxes
and insurance; (iii) the remittance of appropriate portions of collected
payments; (iv) the provision of full escrow administration; (v) the pursuit of
foreclosure and alternate remedies against a related Mortgaged Property; (vi)
the administration and liquidation of REO, and (vii) the right to receive the
Servicing Compensation and any ancillary fees arising from or connected to the
Serviced Loans, earnings and other benefits of the related Custodial Accounts
and any other related accounts maintained by the Selling Companies pursuant to
applicable Regulations and Investor and Insurer requirements and, in each case,
all rights, powers and privileges incident to any of the foregoing, and
expressly includes the right to enter into arrangements with third parties that
generate ancillary fees and benefits with respect to the Serviced Loans.
"Servicing Agreement" means an agreement between an Investor and a Selling
Company pursuant to which a Selling Company owns the Servicing and services
Mortgage Loans in the Retained Servicing Portfolio.
"Servicing Compensation" means any servicing fees and any excess servicing
compensation which a Selling Company is entitled to receive pursuant to any
Servicing Agreement.
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"Software" means each of the following: computer programs, known by any
name, whether in use or under development, including all versions thereof, and
all related documentation, training manuals and materials, user manuals,
technical and support documentation, source code and object code, tools, program
files, data files, computer related data, field and data definitions and
relationships, data definition specifications, data models, program and system
logic, interfaces, program modules, routines, sub-routines, algorithms, program
architecture, design concepts, development tools, maintenance tools, system
designs, program structure, sequence and organizations, screen displays and
report layouts, and all other material related to the said computer programs.
"State Agency" means any state agency or other entity with authority to
regulate the mortgage-related activities of the Selling Companies or to
determine the investment or servicing requirements with regard to mortgage loan
origination, purchasing, servicing or master servicing performed by Seller.
"Subsidiary" means, for any Person, any other person which the initial
Person directly or indirectly Controls.
"Tax" means any federal, state, local, or foreign income, gross receipts,
gains, license, payroll, employment, excise, production, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Sec. 59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, occupancy, personal
property, sales, use transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto (and any penalty, fine or similar amounts related
to any information return or reporting obligation notwithstanding that no tax is
otherwise payable or such obligations are properly discharged), whether disputed
or not.
"Tax Returns" means all returns and reports required to be filed with
respect to Taxes.
"Third Party Consents" means any consent, authorization, approval, waiver,
order, license, certificate or permit or act of or from, or notice to any Rating
Agency, any party to any contract to which any Seller or Seller Subsidiary is a
party or by which any of their assets or properties are bound or affected, or
any other Person.
"VA" means the United States Department of Veterans Affairs and any
successor thereto.
"VA Loans" means residential mortgage loans that are guaranteed, or are
eligible and intended to be guaranteed, by VA.
"Warehouse Loan" means a mortgage loan that (i) is evidenced by a Mortgage
Note and secured by a first priority Mortgage on a one-to-four family
residential property (or a second priority mortgage loan that was originated
concurrently or in conjunction with a first priority mortgage loan) and (ii) is
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owned by a Selling Company at the time immediately prior to the Closing.
"WARN Act" means the Worker Adjustment and Retraining Notification Act of
1988, as amended.
(b) The following terms shall have the respective meanings set forth in the
relevant Section referred to below throughout this Agreement:
Acquired Accounts Receivable 2.01(a)
Acquired Cash and Equivalents 2.01(a)
Acquired Hedging Assets 2.01(a)
Acquired Intellectual Property 2.01(a)
Acquired Intellectual Property Licenses 2.01(a)
Acquired Mortgage Loan Documents 2.01(a)
Acquired Subsidiary 2.01(a)
Acquired Warehouse Loans 2.01(a)
Acquisition Proposal 5.09
Agreement Preamble
Applicable Law 4.02(g)
Assumed Liabilities 2.01(b)
Australia Specific ALSS Components 2.01(c)
Buyer Preamble
Buyer GL Accounts 5.12(c)
Buyer Indemnified Parties 10.01(a)
Buyer Financial Statements 4.03(d)
Cap 10.05(a)
Chosen Courts 11.07(b)
Closing 3.01
Closing Date 3.01
Closing Date Value 2.02
Closing Date Value Calculation Schedule 2.04(b)
Comparable Cash Compensation 6.01(a)
Confidentiality Agreement 5.02(c)
Correspondent Agreement 2.01(a)
Deductible 10.05(a)
Disclosure Schedule 4.01
Effective Time 3.01
Employee Lease Recitals
Estimated Purchase Price 2.02
Excluded Assets 2.01(c)
Excluded Liabilities 2.01(b)
Final Purchase Price 2.02
Fixed and Other Assets 2.01(a)
Franchise Premium 2.02
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HSI Preamble
HSL Preamble
HSR Act 4.02(c)
Indemnified Party 10.06
Intellectual Property Rights Agreement Recitals
Interim Settlement Amount 2.08
Interim Settlement Date 2.08
Key Outsourcing Contracts 2.01(a)
Lease Time Off Cash 6.01(g)
Leave Recipients 6.01(c)
License Agreement Recitals
Loan Application 2.01(a)
Other Assumed Liabilities 2.01(b)
Parent Preamble
Permitted Liens 4.02(d)
Pipeline Loans 2.01(a)
Pre-Closing Date Value 2.02
Pre-Closing Date Value Calculation Schedule 2.04(a)
Purchase Price Adjustment 2.02
Purchased Assets 2.01(a)
Regulatory Authority 4.02(f)
Representatives 2.04(e)
Restricted Business 5.10
Retail Contracts 2.01(a)
Retained Accounts Receivables 2.01(c)
Retained Advances 2.01(c)
Retained Cash and Equivalents 2.01(c)
Retained Hedging Assets 2.01(c)
Retained IP Assets 2.01(c)
Retained Mortgage Loan Documents 2.01(c)
Retained Portfolio Subservicing Agreement Recitals
Retained Real Estate 2.01(c)
Retained Servicing Portfolio 2.01(c)
Retained Warehouse Loans 2.01(c)
Seller GL Accounts 5.12(c)
Seller Indemnified Parties 10.01(b)
Sellers Preamble
Selling Companies Recitals
Services Agreement Recitals
Servicing Advances 2.01(c)
Servicing Purchase Agreements 2.01(a)
Settlement Date 2.05
Solicitation Rights Agreement Recitals
Specified Contracts 4.02(h)
Template Letters 2.01(c)
12
Third-Party Claim 10.06
Time Off Cash 6.01(g)
Transfer Taxes 9.02
Transferred Employee 6.01(a)
Transitional Agreement Recitals
1.02 Interpretation.
(a) The table of contents and headings contained in this Agreement
are for reference purposes only and do not limit or otherwise
affect any of the provisions of this Agreement.
(b) Whenever the words "include", "includes" or "including" are used
in this Agreement, they will be deemed to be followed by the
words "without limitation". Any singular term in this Agreement
will be deemed to include the plural, and any plural term the
singular. All pronouns and variations of pronouns will be deemed
to refer to the feminine, masculine or neuter, singular or
plural, as the identity of the person referred to may require.
(c) Whenever the words "herein" or "hereunder" are used in this
Agreement, they will be deemed to refer to this Agreement as a
whole and not to any specific Section.
(d) Whenever a dollar figure ($) is used in this Agreement, it will
mean United States dollars unless otherwise specified.
ARTICLE II
Purchase And Delivery of Purchased
Assets; Assumption of Assumed Liabilities
2.01 Delivery of Purchased Assets; Assumption of Assumed Liabilities.
(a) On the terms and subject to the conditions of this Agreement,
Sellers shall, at the Effective Time, sell, transfer, assign and
deliver, or cause to be sold, transferred, assigned and
delivered, to Buyer, all right, title and interest of the Selling
Companies in and to all of the Purchased Assets. As used herein:
"Purchased Assets" means all of the Selling Companies' business, properties
and assets, and rights of whatever kind and nature, real or personal, whether
owned, leased or licensed, or in which the Selling Companies otherwise have an
interest (but only to the extent of such interest) at the Effective Time (but
specifically excluding to the extent set forth therein the Excluded Assets (as
defined in subsection (c) below)) and shall include:
13
(i) all Acquired Warehouse Loans, where "Acquired Warehouse Loans"
means all Warehouse Loans owned by the Selling Companies other
than Retained Warehouse Loans;
(ii) all Pipeline Loans, where "Pipeline Loans" means each of those
pending mortgage loans to be secured by a first priority
mortgage lien on a one- to four-family residential property or,
in the case of a subordinate lien mortgage loan, a mortgage loan
to be entered into simultaneously with a first lien mortgage
loan for the purpose of purchasing or refinancing the purchase
of a one- to four-family residential property (e.g., a FNMA
80-10-10 loan), (i) with respect to which a Selling Company has
(a) issued a commitment or otherwise agreed with an applicant to
fund, (b) determined to fund, (c) committed to a specified
interest rate or (d) issued a commitment (including without
limitation bulk commitments and assignments of trades) or
otherwise agreed with a correspondent originator or purchaser to
purchase (including those mortgage loans that are pending with a
correspondent originator or purchaser and that otherwise meet a
Selling Company's acquisition criteria for such mortgage loans)
and (ii) which has not closed (or been purchased from the
correspondent) as of the Effective Time;
(iii) all Correspondent Agreements, where "Correspondent Agreement"
means any agreement between a Selling Company, on the one hand,
and a broker, correspondent, originator or purchaser of
residential mortgage loans on the other hand, pursuant to which
such broker, correspondent, originator or purchaser may sell
residential mortgage loans to such Selling Company or provide
application processing services in respect of Mortgage Loans;
(iv) the Retail Contracts, where "Retail Contracts" means the
agreements pursuant to which a Selling Company's direct
production business originates residential mortgage loans,
including all affinity channel contracts;
(v) the Servicing Purchase Agreements, where "Servicing Purchase
Agreements" means any agreement between a Selling Company on the
one hand and any other Person, on the other hand, pursuant to
which a Selling Company purchases Servicing from such Person and
includes any bulk purchase agreements, quarterly bulk purchase
agreements, co-issue agreements, PMSR flow agreements and other
related agreements;
(vi) the Acquired Accounts Receivable, where "Acquired Accounts
Receivable" means all those accrued interest and other accounts
14
receivable of the Selling Companies (other than Servicing
Advances) relating to the Business, the Purchased Assets or the
Assumed Liabilities, and all other accounts receivable not
otherwise identified as "Excluded" in Section 2.01(d) of the
Sellers' Disclosure Schedule as of the Effective Time but
including all other accounts receivable identified as "Purchased"
by Buyer in Section 2.01(d) of the Seller's Disclosure Schedule
as of the Effective Time.
(vii) the Acquired Intellectual Property where "Acquired Intellectual
Property" means the Intellectual Property owned by the Selling
Companies and which is used in the conduct of, or which relates
to, the Business, including the ALSS Platform Intellectual
Property and the Intellectual Property described on Sellers'
Disclosure Schedule other than the Retained IP Assets;
(viii) the Acquired Intellectual Property Licenses, where "Acquired
Intellectual Property Licenses" means those agreements granting
licenses to Intellectual Property or Software to a Selling
Company for use as part of the ALSS Platform or otherwise in
connection with the Business, including those agreements which
are listed in Section 2.01(a)(viii) of Sellers' Disclosure
Schedule; provided, however, that Buyer and Parent shall execute
the Intellectual Property Rights Agreement and the license and
other documents referred to in Section 5.07;
(ix) the Acquired Cash Equivalents, where "Acquired Cash and
Equivalents" means all cash and cash equivalent assets of the
Selling Companies (other than Retained Cash and Equivalents);
(x) the Fixed and Other Assets, where "Fixed and Other Assets" means
those assets constituting the specific contracts and agreements,
real and tangible personal property (including land, buildings,
leasehold interests, furniture, fixtures, office equipment,
telecommunications equipment and computer equipment), prepaid
expenses, programs, applications and data bases (whether
capitalized or non-capitalized), prospect lists, training
materials, procedure manuals, origination and servicing related
forms and documents and other assets related to the Business;
(xi) the Loan Applications, where "Loan Application" means an
application for a mortgage loan, to be secured by a first-lien
on a one- to four-family residential property, or, in the case
of a subordinate lien mortgage loan, a mortgage loan to be
entered into simultaneously with a first lien mortgage loan for
the purpose of purchasing or refinancing the purchase of a one-
15
to four-family residential property (e.g., a FNMA 80-10-10
loan), that has been taken or is being processed by a Selling
Company as of the Effective Time but that is not a Pipeline Loan
and has not, as of the Effective Time, resulted in a Mortgage
Loan;
(xii) the Acquired Mortgage Loan Documents, where "Acquired Mortgage
Loan Documents" means the Mortgage Loan Documents relating to
the Loan Applications, the Acquired Warehouse Loans and the
Pipeline Loans;
(xiii) the Acquired Hedging Assets, where "Acquired Hedging Assets"
means the Hedging Assets (other than Retained Hedging Assets)
used to hedge the interest rate risk associated with the
Pipeline Loans and Acquired Warehouse Loans, including all of
the Delivery Commitments and Investment Commitments;
(xiv) at the end of the Lease Period for each Prospective Employee,
any individual employment contracts with such Prospective
Employees;
(xv) the ALSS Platform;
(xvi) documentation, manuals, files, contractual rights and warranties
relating to the Purchased Assets;
(xvii) all of the stock of the Acquired Subsidiary and all rights to
the stock of the Acquired Subsidiary (all of such stock being
non-assessable), where "Acquired Subsidiary" means Stockton
Plaza Incorporated;
(xviii)the Key Outsourcing Contracts, where "Key Outsourcing
Contracts" means the contracts relating to performance of
Subservicing (other than the Retained Portfolio Subservicing
Agreement), including those contracts with LOGS, ZC Sterling and
Transamerica; and
(xix) all goodwill associated with the foregoing.
The foregoing enumeration of the Purchased Assets shall not be construed to
limit in any way the scope of the assets being purchased by the Buyer.
(b) On the terms and subject to the conditions of this Agreement, Buyer
shall, at the Effective Time, assume all the Assumed Liabilities. Buyer assumes
no Excluded Liability or any other liability of Selling Companies or any other
Person pursuant to this Agreement other than the Assumed Liabilities. As used
herein:
16
"Assumed Liabilities" means only the commitments and obligations of the
Selling Companies to be performed after the Effective Time, and the Liabilities
of the Selling Companies accruing or arising after the Effective Time with
respect to:
(i) any Purchased Assets listed in items (i) to (xviii) of the
definition of "Purchased Assets" in Section 2.01(a) above;
(ii) Prospective Employees (whether or not Transferred Employees but
other than those described in clause (ii)(B) of the definition
of "Excluded Liabilities"), including all obligations under the
individual employment contracts with such Prospective Employees
relating to employment on or after the Effective Time, all
severance obligations with respect to such Prospective
Employees, and any other liability, commitment or obligation of
the Selling Companies specifically agreed to be assumed under
Article VI hereof; and
(iii) the Other Assumed Liabilities, where "Other Assumed Liabilities"
means the liabilities, commitments and obligations of the
Selling Companies identified as liabilities assumed by Buyer in
Section 2.01(d) of Sellers' Disclosure Schedule;
but specifically excluding with respect to (i), (ii) and (iii) any liabilities,
commitments or obligations (a) for recourse, repurchase, indemnity or warranty
of the Selling Companies with respect to periods on or prior to the Closing
Date, (b) for indebtedness for borrowed money of the Selling Companies, and (c)
with respect to or giving rise to liens other than Permitted Liens (all of which
set forth in (a), (b) and (c) shall be Excluded Liabilities).
"Excluded Liabilities" means all Liabilities of the Selling Companies and
all other liabilities of the Selling Companies, whether known or unknown,
absolute or contingent, past, present, or future, other than Assumed
Liabilities, and shall include:
(i) the Selling Companies' obligations for funded debt or borrowed
money including any penalties or premiums paid or payable in
order to prepay or defease any such debt;
(ii) the Selling Companies' obligations to employees (A) who are not
Prospective Employees as set forth on Section 2.01 (c)(xii) of
Sellers' Disclosure Schedule or (B) who are Leave Recipients,
but do not become eligible to receive an offer pursuant to
Section 6.01 (c);
(iii) all tax liabilities of the Selling Companies (except to the
extent otherwise provided in Article IX hereof);
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(iv) all liabilities relating to Actions pending or threatened
against the Selling Companies or their assets prior to the
Effective Time;
(v) all environmental liabilities;
(vi) all obligations of the Selling Companies for payment of amounts
arising under its 2001 Retention Bonus Plan; and
(vii) all obligations of the Selling Companies under their existing
qualified and non-qualified health care, dental, disability,
life, 401(k) and other employee benefit plans except for
liabilities expressly assumed by Buyer hereunder.
The foregoing enumeration of the Excluded Liabilities shall not be
construed to limit in any way the scope of the liabilities being retained by the
Selling Companies.
(c) Notwithstanding subsections (a) and (b) of this Section 2.01, no
Excluded Assets shall be purchased or sold hereunder. As used
herein:
"Excluded Assets" means only the following:
(i) the Retained Servicing Portfolio, where "Retained Servicing
Portfolio" means all of the Servicing owned by the Selling
Companies;
(ii) the Retained Warehouse Loans, where "Retained Warehouse Loans"
means
(1) all Warehouse Loans that are over 30 days delinquent (as
defined in the ▇▇▇▇▇▇ ▇▇▇ Seller's Guide) as of the
Closing Date;
(2) all Warehouse Loans that have been delinquent (as defined
in the ▇▇▇▇▇▇ Mae Seller's Guide) for more than 30 days
at any time in the 12 months immediately prior to the
Closing Date;
(3) all Warehouse Loans that were purchased or originated
more than 60 days prior to the Closing Date;
(4) all Warehouse Loans that are owned by HomeSide Funding
Corporation and other Warehouse Loans related to the
Early Buyout Program as of the Closing Date; and
(5) any Warehouse Loans that are not eligible for sale to the
relevant Investor (the "scratch and dent loans");
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(iii) the Retained Mortgage Loan Documents, where "Retained
Mortgage Loan Documents" means the Mortgage Loan
Documents relating to the Mortgage Loans in the Retained
Servicing Portfolio and the Retained Warehouse Loans;
(iv) the Retained Hedging Assets, where "Retained Hedging
Assets" means the Hedging Assets used to hedge the
interest rate and currency risk associated with the
Retained Servicing Portfolio or any other Excluded Assets
or any Excluded Liabilities (including the medium term
notes of HSL);
(v) the Retained Accounts Receivable, where "Retained
Accounts Receivables" means those accrued interest and
other accounts receivable that are related to the
Retained Servicing Portfolio, the Retained Hedging
Assets, the Retained Warehouse Loans or the Retained Real
Estate (including those accounts receivable identified as
retained by the Selling Companies in Section 2.01(d) of
Sellers' Disclosure Schedule and including accounts
receivable with respect to Servicing ("Servicing
Advances")) and any accrued interest and other accounts
receivable that are assets of the Selling Companies
immediately prior to the Effective Time and that have not
been collected as of the 75th day after the Closing Date;
(vi) the Retained Cash and Equivalents, where "Retained Cash
and Equivalents" means the cash and cash equivalent
assets of the Selling Companies, related to the Retained
Servicing Portfolio and the Retained Hedging Assets as
well as excess cash above levels required for the
operation of the Business;
(vii) the Retained Advances, where "Retained Advances" means
those Advances related to the Retained Servicing
Portfolio and the Retained Warehouse Loans;
(viii) the assets relating to the Compensation and Benefit
Plans;
(ix) the stock of HSL, Mortgage Electronic Registration
Systems or any Subsidiary of HSL except the stock of the
Acquired Subsidiary;
(x) the Retained Real Estate, where "Retained Real Estate"
means:
(1) all real property acquired by the Selling
Companies as a result of a Foreclosure; and
19
(2) the vacant facilities (and any tangible assets,
including leasehold improvements, of such
facilities) located in Indianapolis, IN and
Glastonbury, CT;
(xi) any claims or causes of action that any Selling Company
or Parent may have against third parties arising with
respect to matters occurring before the Closing Date,
except any such claims or causes of action that are
included within the definition of Acquired Intellectual
Property;
(xii) the individual employment and ancillary agreements with
the employees listed in Section 2.01(c)(xii) of Sellers'
Disclosure Schedule;
(xiii) the Retained IP Assets where "Retained IP Assets" means
all Intellectual Property existing as of the Closing
Date, if any, owned or held by Parent in (i) the business
methods, business processes, business functionality, and
document and data formatting that are implemented in the
Australia Specific ALSS Components and (ii) in and to the
Template Letters. For purposes of this definition,
"Australia Specific ALSS Components" means components or
other elements of the ALSS Platform implementing
functionality for the Australia market that were added to
the ALSS Platform after Parent acquired the Selling
Companies. For purposes of this definition, "Template
Letters" means those template correspondences, including
letters, e-mail communications and other documents,
authored by or on behalf of Parent used by the ALSS
Platform in combination with specific loan information in
the servicing of Australian Loans; and
(xiv) the books and records of the Selling Companies.
(d) For illustrative purposes and to evidence the intent of the
parties as to the identity of the Purchased Assets, Excluded
Assets, Assumed Liabilities and Excluded Liabilities, Schedule
2.01(d) sets forth a trial balance of the foregoing to the
extent that they are reflected on a balance sheet under
generally accepted accounting principles as applied by the
Sellers as of September 30, 2001.
2.02 Consideration for Purchased Assets.
In consideration for the Purchased Assets, Buyer will assume the Assumed
Liabilities and will pay an amount (the "Purchase Price") equal to the Estimated
Purchase Price as subsequently adjusted by the Interim Settlement Amount and the
Purchase Price Adjustment. The Final Purchase Price will be paid as follows: (1)
at the Closing, Buyer will pay to Sellers the Estimated Purchase Price, and (2)
on each of the Interim Settlement Date and the Settlement Date, Buyer or
Sellers, as the case may be, will be entitled to the Interim Settlement Amount
20
and the Purchase Price Adjustment, respectively. All payments under this Section
2.02 will be paid by Sellers or Buyer, as the case may be, in immediately
available federal funds to an account designated by the applicable recipient of
such funds.
As used herein:
"Closing Date Value" and "Pre-Closing Date Value" have the meanings set
forth in Schedule 2.02.
"Estimated Purchase Price" means the sum of (1) the Pre-Closing Date Value
and (2) the Franchise Premium, calculated in the manner set forth in Schedule
2.02.
"Franchise Premium" means $25 million.
"Purchase Price Adjustment" means (w) the Estimated Purchase Price plus (if
applicable) (x) the Interim Settlement Amount, if such amount is to be paid by
Buyer to Sellers, minus (if applicable) (y) the Interim Settlement Amount, if
such amount is to be paid by Sellers to Buyer minus (z) the sum of (1) the
Closing Date Value and (2) the Franchise Premium, together with interest thereon
(after adjusting for any interest amount previously paid) payable at the
Interest Rate from and including the Closing Date to but excluding the
Settlement Date, calculated in the manner set forth in Schedule 2.02.
2.03 Proration of Expenses.
Except as otherwise specifically provided in this Agreement, it is the
intention of the parties hereto that Sellers shall operate for their own account
the Business, until the Effective Time, and that Buyer shall operate for its own
account the Business, after the Effective Time. Thus, except as otherwise
specifically provided in this Agreement, with respect to the Purchased Assets
and Assumed Liabilities, items of expense, including, but not limited to,
non-owner occupation fees, payment of amounts due under service contracts,
payments of rent, taxes, utilities and other amounts required to be paid by the
tenant under leases, and all personal property taxes applicable to the personal
property to be transferred hereunder, shall be prorated to the Effective Time
and reflected on the Pre-Closing Date Value Calculation Schedule and the Closing
Date Value Calculation Schedule. An estimated settlement or settlements of all
such prorated items shall be made in accordance with the procedures of Sections
2.02 and 2.04, which estimated settlement shall include reimbursement to the
Selling Companies for any security deposits theretofore made pursuant to any
lease which is assigned hereunder, as well as any security deposits made by the
Selling Companies in respect of Purchased Assets or Assumed Liabilities, all of
which security deposits shall be held, on and after the Closing Date, for the
benefit of Buyer. Sellers shall use commercially reasonable efforts to obtain
final bills for all items of expense being prorated pursuant to this Section
2.03 and any adjustments will be made in accordance with Schedule 2.02 and the
procedures of Section 2.05.
21
2.04 Calculation of Purchase Price.
(a) No later than ten Business Days prior to the Closing Date, Sellers
shall deliver, or cause to be delivered, to Buyer an unaudited schedule setting
out in reasonable detail the basis of the calculation of the Pre-Closing Date
Value, which calculation shall be as of the month-end for the month that is two
months prior to the month in which the Effective Time occurs (the "Pre-Closing
Date Value Calculation Schedule").
(b) No later than 120 days after the Closing Date, Sellers shall deliver,
or cause to be delivered, to Buyer an unaudited schedule setting out in
reasonable detail the calculation of the Closing Date Value, which calculation
shall be as of the Effective Time (the "Closing Date Value Calculation
Schedule").
(c) Unless Buyer delivers written notice to Sellers on or prior to the
later of (x) the 165th day following the Closing Date or (y) the 45th day after
Buyer's receipt of the Closing Date Value Calculation Schedule specifying in
reasonable detail the amount, nature and basis of all disputed items, Buyer
shall be deemed to have accepted and agreed to the Closing Date Value
Calculation Schedule, and such Closing Date Value Calculation Schedule shall be
deemed conclusive for purposes of determining the Final Purchase Price.
(d) In the event that Buyer and Sellers are unable to agree with respect to
any item on the Closing Date Value Calculation Schedule within 45 days of notice
of the dispute and the dispute involves either (i) the mathematical calculation
of the Closing Date Value or the Final Purchase Price or (ii) the appropriate
accounting treatment of any asset or liability, or item of income or expense,
that affects the calculation of the Closing Date Value, then Buyer and Sellers
will mutually agree to an independent public accounting firm, which will make a
determination of such dispute (but not as to any other matters) based solely
upon not more than two rounds of presentations by Buyer and Sellers, and not by
independent review. If Buyer and Sellers are unable to agree on the choice of
the independent accounting firm, the firm will be Ernst & Young LLP unless at
such time either Buyer or Sellers has a primary audit relationship with Ernst &
Young LLP, in which case a "big-five" accounting firm (or successor thereof)
selected by lot (after excluding any firm with which either Buyer or Sellers
have a primary audit relationship). The findings of such firm, which will not
exceed in amount the amount claimed by either party as to any matter in dispute,
shall be conclusive and binding upon Buyer and Sellers for purposes of this
Agreement. The fees and expenses of such firm will be borne 50% by Sellers and
50% by Buyer.
The provisions in this Section 2.04(d) relating to resolutions of disputes
by an accounting firm are not intended to and shall not be interpreted to
require that the parties refer to such a firm (i) any dispute arising out of a
breach by one of the parties of its obligations under the Agreement; (ii) any
dispute the resolution of which requires the construction or interpretation of
this Agreement or (iii) any other dispute other than (in the case of this clause
(iii)) a dispute related to the mathematical calculation of the Closing Date
22
Value or the Final Purchase Price or the accounting treatment of any asset or
liability, or item of income or expense, that affects the calculation of the
Closing Date Value.
(e) Buyer and Sellers agree that, in addition to their respective
obligations under Section 5.02(d), prior to the Settlement Date, each of them
and their attorneys, accountants, officers and other authorized representatives
(collectively, "Representatives") shall have any and all reasonable access that
they each reasonably believe is necessary to the books and records of the
Business, the Purchased Assets and the Assumed Liabilities to the extent they
relate to the calculations required or any dispute under this Section 2.04 (and
shall permit such Representatives to examine and copy such books and records to
the extent requested by such party provided that all such copies are treated
confidentially by such party and are only used for such purposes described in
this Section 2.04), and shall cause their respective officers and employees to
furnish all information requested by, and otherwise cooperate with each other
with respect to access to any books, records, information or other documents
related to the calculations required by, or any dispute under this Section 2.04.
2.05 Settlement Date Payments.
On a date (the "Settlement Date") within 5 days after the acceptance by
Buyer of the Closing Date Value Calculation Schedule (whether expressly or by
operation of Section 2.04(c)) or the resolution of any dispute pursuant to
Section 2.04(d), or such later date as the parties may agree, the following
actions shall be taken:
(a) If the Purchase Price Adjustment is a positive number, Sellers will pay
Buyer an amount equal to the Purchase Price Adjustment. If the Purchase Price
Adjustment is a negative number, Buyer will pay Sellers an amount equal to the
absolute value of the Purchase Price Adjustment.
(b) Each party shall take such other actions, and shall execute and deliver
such other instruments or documents, as shall be required in connection with the
determination and payment of the Final Purchase Price.
2.06 Allocation of Purchase Price.
Sellers and Buyer hereby agree to allocate the Final Purchase Price and the
Assumed Liabilities among the Purchased Assets in accordance with Section 1060
of the Code and file or cause to be filed in a timely fashion any information
that may be required pursuant to regulations promulgated under the Code.
2.07 No Offset.
Neither Sellers or any of their Affiliates, on the one hand, nor Buyer or
any of its Affiliates, on the other hand, shall have any set off or any other
similar rights with respect to (a) any of the funds received by such party
pursuant to this Agreement or (b) any other amounts claimed to be owed to the
23
other party or its Affiliates arising out of this Agreement or any other
agreement.
2.08 Interim Settlement.
Within ten (10) calendar days following the Closing Date, Sellers will
deliver to Buyer a good-faith estimate of the Closing Date Value, such estimate
to be calculated in the manner set forth in Schedule 2.02. On the basis of such
good-faith estimate of the Closing Date Value, and without being subject to any
challenge or dispute on the part of Buyer, and without any loss of Buyer's
rights under Section 2.04(d), the parties will determine whether Sellers or
Buyer is required to make a payment to the other. The party so required
hereunder to make a payment to the other shall pay, within five (5) Business
Days following the date on which such payment amount is determined (the "Interim
Settlement Date"), one hundred percent (100%) of such amount to be paid, plus
interest on the amount so paid at the Interest Rate from and including the
Closing Date to but excluding the date of payment (the "Interim Settlement
Amount"). The amounts, if any, required to be paid by either party under Section
2.05, including the interest payments thereunder, shall be adjusted accordingly
to take into account the interim settlement payment made under this Section
2.08.
2.09 Co-Issue.
Notwithstanding anything in this Agreement to the contrary, including
Article II, if by the tenth day prior to the Closing, the Seller and Buyer do
not reach an agreement (which they are not obligated to do) with respect to the
purchase and assumption by Buyer of the co-issue arrangements with Bank One,
Pulte and First Union (Wachovia), then each such co-issue arrangement as to
which such an agreement has not been reached shall not be part of the Purchase
in any way and the Seller shall retain all interests in, and liabilities related
to, any such co-issue arrangement, and Buyer shall administer each relevant loan
relating thereto for a $60 per loan set up fee and each relevant loan relating
thereto shall be subserviced by Buyer in accordance with the Retained Portfolio
Subservicing Agreement.
ARTICLE III
Closing, Transfers and Related Items
3.01 Closing and Closing Date.
Unless this Agreement shall have been terminated and the transactions
herein abandoned pursuant to Section 8.01, subject to the provisions of Article
VII, the closing (the "Closing") of the purchase and sale of Purchased Assets,
the assumption of the Assumed Liabilities and the payment of the amounts
required to be paid pursuant to Section 2.02 shall take place in Jacksonville,
Florida on (1) the first business day of the month following the month in which
the last of the conditions set forth in Article VII has been satisfied or waived
24
in accordance with the terms of this Agreement (other than those conditions to
be satisfied or waived on the Closing Date, unless the last of such conditions
is satisfied or waived less than ten business days prior to the end of a month,
in which event the Closing Date shall occur on the first business day of the
second succeeding month), or (2) such other date to which the parties may agree
in writing. The date on which the Closing occurs is herein called the "Closing
Date". The parties hereby agree that the effective time (the "Effective Time")
of Closing for all purposes shall be at the opening of business in New York City
on the Closing Date or such other time as shall be agreed to by the parties.
3.02 Assignment and Assumption Documents.
(a) On the Closing Date, (i) the Selling Companies and Buyer shall deliver
and Parent shall cause the Selling Companies to deliver a ▇▇▇▇ of sale and
instrument of assumption of liabilities substantially in the form attached
hereto as Exhibit F, (ii) the Selling Companies shall deliver and Parent shall
cause the Selling Companies to deliver to Buyer such other instruments of sale,
assignment, transfer and conveyance (including, if necessary, duly executed
powers of attorney to transfer all of the shares of stock of the Acquired
Subsidiary), and do such other acts as are reasonably necessary to effectuate
the sale, transfer, assignment and delivery to Buyer of the right, title and
interest of the Selling Companies in and to the Purchased Assets to be sold,
transferred, assigned and delivered to Buyer on such date pursuant to Section
2.01(a) free and clear of any Liens other than Permitted Liens except that
clause (a) of such definition shall not apply immediately prior to the Effective
Time and (iii) Buyer shall deliver to the Selling Companies such other
instruments of assumption, and do or cause to be done by third parties such
other acts as are reasonably necessary to effectuate the assumption by Buyer of
the Assumed Liabilities to be assumed by Buyer on such date pursuant to Section
2.01(b).
(b) Without limiting the foregoing, on or before the Closing Date, Sellers
shall, at their expense, promptly take each such action as may be necessary to
transfer all of the Selling Companies' right, title and interest in and to the
Acquired Warehouse Loans, including (i) endorsing or causing to be endorsed the
related Mortgage Notes to Buyer without recourse, (ii) preparing or causing to
be prepared Assignments of Mortgage Instruments, assigning the related Mortgages
from the Selling Companies to Buyer and preparing or causing to be prepared all
prior intervening Assignments of Mortgage Instruments as reasonably required by
Buyer and (iii) assigning nominal title to the other related Mortgage Loan
Documents to Buyer. To the extent required by applicable Regulations with
respect to Mortgage Loans, Sellers will, at their expense, record or cause the
recordation of the Assignments of Mortgage Instruments from the Selling
Companies to Buyer. In addition, Sellers will, at their expense, prepare and
record, or cause the preparation and recordation of, Assignments of Mortgage
Instruments from Buyer to the applicable Investor to the extent required by
applicable Regulations. Sellers shall provide to Buyer such recorded Assignments
of Mortgage Instruments as soon as practicable.
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3.03 Further Assistance and Assurances.
Sellers shall, at any time and from time to time, promptly, upon the
reasonable request of Buyer, execute, acknowledge, deliver or perform, all such
further acts, deeds, assignments, transfers, conveyances, and assurances as may
be required for the better vesting and conferring to Buyer of title in and to
the Purchased Assets and to effect the transactions contemplated by this
Agreement. Buyer shall, at any time and from time to time, promptly, upon the
reasonable request of Sellers, execute, acknowledge, deliver or perform, all
such further acts, deeds, assumption agreements, transfers and assurances as may
be required for the full assumption and transfer to Buyer of the Assumed
Liabilities and to effect the transactions contemplated by this Agreement. Each
party agrees that if it receives any payment or amount after the Closing Date to
which another party is entitled, the recipient shall promptly transfer such
payment or amount to the party so entitled. At the Effective Time, the Sellers
shall, and Parent shall cause the Selling Companies to, transfer and deliver
possession and control of the ALSS Platform to Buyer, including all copies of
source code and documentation and physical and electronic access to all systems.
3.04 Other Consents.
Sellers shall take all commercially reasonable action, at no cost to Buyer,
to obtain such other Third Party Consents as are necessary to permit the sale,
transfer, assignment and conveyance to Buyer of the Purchased Assets. Nothing in
this Agreement shall be construed as an attempt or agreement to assign any
Purchased Asset or Assumed Liability which is not capable of being validly
assigned, conveyed or transferred without the consent of a third party, unless
such consent shall have been obtained and remain in full force and effect at the
Closing. If such consent in respect of a Purchased Asset or an Assumed Liability
is not obtained prior to the Closing or does not remain in full force and effect
at the Closing, Buyer and Sellers will use reasonable efforts, at no cost to
Buyer, to enter into a mutually agreeable, reasonable and lawful arrangement,
including, subcontracting, sublicensing or subleasing, under which Buyer would
obtain the benefit and assume the obligations in respect thereto from and after
the Closing Date in accordance with this Agreement, and under which the Selling
Companies would enforce for the benefit of Buyer any and all rights of Buyer
against a third party thereto, with Buyer assuming the obligations to the same
extent as if they would have constituted an Assumed Liability.
ARTICLE IV
Representations and Warranties
4.01 Disclosure Schedules.
On or prior to the execution and delivery hereof, Sellers have delivered to
Buyer a schedule and Buyer has delivered to Sellers a schedule (respectively,
its "Disclosure Schedule") setting forth, among other things, items the
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disclosure of which is necessary or appropriate either in response to an express
disclosure requirement contained in a provision hereof or as an exception to one
or more representations or warranties contained in Section 4.02 or Section 4.03
or to one or more of the covenants contained in Article V; provided, however,
that the inclusion of an item in a Disclosure Schedule as an exception to a
representation, warranty or covenant will not be deemed an admission by a party
that such item represents a material exception or fact, event or circumstance or
that such item has had or is reasonably likely to result in a Material Adverse
Effect with respect to the disclosing party.
4.02 Representations and Warranties of Sellers.
Subject to Section 4.01 and except as Previously Disclosed, Sellers,
jointly and severally, represent and warrant to Buyer as follows:
(a) Organization, Standing and Authority.
(1) Parent has been duly organized and is an existing banking
corporation in good standing under the laws of Australia.
(2) HSL and HSI have been duly incorporated and are existing
corporations in good standing under the laws of the States of Florida and
Delaware, respectively. Each of the Selling Subsidiaries has been duly
incorporated or organized and is an existing corporation in good standing
under the laws of its respective jurisdiction of organization.
(3) Each of the Selling Companies has the requisite power and authority
to own its current assets and carry on its business as currently conducted,
and is duly qualified to do business in each jurisdiction where the
ownership or operation of its property and assets or the conduct of its
business requires such qualification except in those jurisdictions where
the failure to so qualify would not have a Material Adverse Effect.
(4) Parent owns beneficially all of the capital stock of HSI, free and
clear of all Liens. HSI owns of record and beneficially all of the capital
stock of HSL, free and clear of all Liens. HSI or another Selling
Subsidiary owns of record and beneficially all of the capital stock of each
Selling Subsidiary, free and clear of all Liens. There are no
subscriptions, options, warrants, calls, commitments, preemptive rights or
other rights of any kind outstanding for the purchase of, nor any
securities convertible or exchangeable for, any equity interests of HSI,
HSL or any Selling Subsidiary. There are no restrictions upon the voting of
the capital stock of HSI, HSL or any Selling Subsidiary. Other than HSL,
the Selling Subsidiaries, the Acquired Subsidiary, Homeside Global MBS
Manager, Inc., Homeside Mortgage Securities, Inc. and Mortgage Electronic
Registration Systems there are no Persons in which HSI, HSL or any Selling
27
Subsidiary owns, of record or beneficially, any direct or indirect equity
interest or other interest or right.
(5) HSL owns of record and beneficially all of the Shares of Capital
Stock of the Acquired Subsidiary and all such Shares have been duly and
validly authorized and issued and are fully paid and non-assessable.
(b) Corporate Authority. This Agreement and the transactions contemplated
hereby have been duly authorized by all necessary corporate action of each
Seller and this Agreement has been duly authorized, executed and delivered by
each Seller. This Agreement is a valid and legally binding obligation of each
Seller, enforceable in accordance with its terms (except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws of general applicability relating to or
affecting creditors' rights or by general equity principles). Each Seller has
the corporate power and authority to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions contemplated
hereby.
(c) Regulatory Approvals; No Conflicts.
(1) No consents or approvals of, or filings or registrations with, any
Governmental Authority or any third party are required to be obtained or
made by Sellers or any of the Selling Subsidiaries in connection with the
execution, delivery or performance by Sellers of this Agreement or to
consummate the transaction contemplated hereby, except for consents,
approvals, filings, applications, notices or registrations, and the
termination of any applicable waiting periods, (A) under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976 ("HSR Act"), (B) to
relevant state mortgage banking licensing or supervisory authorities, (C)
to the VA, FHA, FNMA, FHLMC, GNMA and HUD, (D) under any applicable foreign
laws or regulations or to any foreign Governmental Authority, (E) to the
Board of Governors of the Federal Reserve System or any other federal or
state bank regulatory agency, (F) as Previously Disclosed on Disclosure
Schedule 4.02(c)(1) and (G) Third Party Consents where the failure to
obtain such consents or approvals would not individually or in the
aggregate have a Material Adverse Effect on the Business or on Sellers. As
of the date hereof, Sellers have no Knowledge of any reason why the
approvals or consents set forth as conditions to closing in Sections
7.01(a) will not be received in a timely manner.
(2) Subject to receipt of the regulatory approvals referred to in the
preceding paragraph, and expiration of related waiting periods, required
filings under federal and state securities laws and the third party
consents or approvals referred to in the preceding paragraph, the
execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby do not and will not (A) constitute
a breach or violation of, or a default under, or give rise to any Lien, any
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acceleration of remedies or any right of termination under, any law, rule
or regulation or any judgment, decree, order, License, or contract,
agreement, mortgage, indenture or instrument of any of Sellers or any
Selling Subsidiary, or to which any of them or their properties is subject
or bound, (B) constitute a breach or violation of, or a default under, the
Selling Companies Articles or the Selling Companies By-Laws or the
corresponding governing documents of any of Sellers, or (C) require any
consent or approval under any such law, rule, regulation, judgment, decree,
order, License, contract, agreement, indenture or instrument.
(d) Title to and Sufficiency of Purchased Assets.
(1) Subject to the receipt of any Third Party Consents in connection
therewith, the sale and delivery to Buyer of the Purchased Assets pursuant
to the provisions of this Agreement will transfer to Buyer good and
marketable title to the respective assets (or, as to any leased property, a
valid leasehold interest), free and clear of any Liens (other than (A)
Liens that were Previously Disclosed; (B) mechanics', carriers', workmen's,
repairmen's or other like Liens arising or incurred in the ordinary course
of business and Liens for Taxes that are not due and payable or that may
thereafter be paid without penalty; and (C) Liens created by Buyer
(collectively, "Permitted Liens"). Other than persons having an interest in
Permitted Liens that have been Previously Disclosed, no person other than
Sellers and the Selling Subsidiaries has any interest in (i) any of the
Purchased Assets transferred to Buyer hereunder (provided that this
representation and warranty does not apply to Acquired Intellectual
Property, Acquired Intellectual Property Licenses and leases of real or
personal property) or (ii) Sellers' leasehold interest in any leases of
real or personal property included in the Purchased Assets transferred to
Buyer hereunder.
(2) Subject to the receipt of any required Third Party Consents, the
Purchased Assets together with Buyer's rights under the Acquired
Intellectual Property Licenses, and Ancillary Agreements are sufficient to
operate the Business as it is conducted as of the date hereof and to permit
Buyer to perform in the ordinary course of business its obligations under
the Ancillary Agreements consistent with the standards set forth therein.
(e) Litigation. Sellers have Previously Disclosed a true and complete list,
as of the date hereof, of all litigation, claims, actions, arbitrations or
investigations or other proceedings before any Governmental Authority pending
(or, to Sellers' Knowledge, threatened in writing) against the Selling Companies
with respect to the Business or relating to or involving any of the Purchased
Assets or Assumed Liabilities of the Selling Companies (except for prosecutions
of applications for registrations of intellectual property or similar rights).
To Sellers' Knowledge there does not exist any fact or circumstance that would
be reasonably expected to give rise to any such litigation, claims, actions,
arbitrations or investigations or other proceedings. Except for matters that
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would not reasonably be expected to have a Material Adverse Effect on the
Business or Sellers, no other litigation, claim, action, arbitration,
investigation or other proceeding before any Governmental Authority (except for
prosecutions of applications for registrations of intellectual property or
similar rights) is pending against the Selling Companies with respect to the
Business, or relating to or involving any of the Purchased Assets or Assumed
Liabilities of the Selling Companies and, to Sellers' Knowledge, no other such
litigation, claim, action, arbitration, investigation or other proceeding has
been threatened in writing nor, to Sellers' Knowledge, does there exist any fact
or circumstance that would be reasonably expected to give rise to any such
litigation, claims, actions, arbitrations or investigations or other
proceedings. In addition, except as Previously Disclosed, no other litigation,
claim, action, arbitration, investigation or other proceeding before any
Governmental Authority (except for prosecutions of applications for
registrations of intellectual property or similar rights) is pending against the
Acquired Subsidiary, or relating to or involving any of its assets or
liabilities and, to Sellers' Knowledge, no other such litigation, claim, action,
arbitration, investigation or other proceeding has been threatened in writing
nor, to Sellers' Knowledge, does there exist any fact or circumstance that would
be reasonably expected to give rise to any such litigation, claims, actions,
arbitrations or investigations or other proceedings.
(f) Regulatory Matters. None of Sellers or the Selling Companies is a party
to or is subject to any outstanding order, decree, agreement, memorandum of
understanding or similar supervisory arrangement with, or a commitment letter or
similar submission to, or extraordinary supervisory letter from, any federal or
state governmental agency or authority charged with the supervision or
regulation of banks and their holding companies, or mortgage banking (including,
without limitation, the Federal Reserve Board, the VA, FHA, FNMA, FHLMC, GNMA
and HUD) or the supervision or regulation of the Selling Companies (each, a
"Regulatory Authority") except any such regulatory action that would not have in
the aggregate a Material Adverse Effect on the Business or on Sellers.
(g) Compliance with Laws.
(1) The Business is being conducted in compliance with all applicable
federal, state, local and foreign statutes, laws, regulations, ordinances,
rules, judgments, orders or decrees applicable thereto ("Applicable Law")
except where any failure to comply with Applicable Law would not have in
the aggregate a Material Adverse Effect on the Business or on Sellers; and
(2) The Selling Companies hold all permits, licenses, authorizations,
orders and approvals of, and have made all filings, applications and
registrations with, all Governmental Authorities that are required in order
to own or lease the Purchased Assets and to conduct the Business in all
material respects as presently conducted; all such permits, licenses,
certificates of authority, orders and approvals are in full force and
effect and, to Sellers' Knowledge, no suspension or cancellation of any of
them has been threatened in writing.
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(h) Specified Contracts; Defaults.
(1) Sellers have Previously Disclosed (in the case of contracts
described in (i)-(iv) below) and have made available or Previously
Disclosed (in the case of contracts described in (v)-(x) below) the
following written contracts related to the Business in existence as of the
date hereof to which one or more of the Selling Companies is a party (the
"Specified Contracts"):
(i) any agreement, if (x) the performance remaining thereunder
involves aggregate consideration to or by a Selling Company in
excess of $100,000 per annum and (y) such agreement is not
cancelable, without material penalty, by the Selling Companies
on 180 days' or less notice;
(ii) any agreement which restricts or contains limitations on the
ability of any Selling Company to compete in any line of
business, to the extent that any such provisions would be
binding upon, or enforceable against, Buyer in its operation of
the Business or the use of the Purchased Assets after Closing;
(iii) any agreement with any of Sellers or their Affiliates (other
than the Selling Companies), on the one hand, and any of Sellers
and any of their Affiliates, on the other hand, relating to
services provided with respect to the Business or the Purchased
Assets other than in the ordinary course of their business;
(iv) any individual employment contracts binding on the Selling
Companies for aggregate payments to any Prospective Employee in
any calendar year in excess of $150,000;
(v) any mortgage, pledge, indenture or security agreement or similar
arrangement constituting a Lien upon the Purchased Assets;
(vi) any agreement for the sale or purchase of personal property
having a value individually, with respect to all sales or
purchases thereunder, in excess of $25,000;
(vii) any agreement for the sale or purchase of fixed assets or real
estate having a value individually, with respect to all sales or
purchases thereunder, in excess of $100,000;
(viii) any agreement involving Acquired Intellectual Property or
relating to the provision of data processing, network
communication or other technical services to or by the Selling
Companies;
(ix) all material Acquired Intellectual Property Licenses; and
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(x) other agreements.
(2) (i) Each Specified Contract is in full force and effect with
respect to the Selling Companies, as applicable, (ii) the
Selling Companies are not in default under any Specified
Contract in any material respect and (iii) there has not
occurred any event that, with the lapse of time or the giving of
notice or both, would constitute such a default except where any
failure to comply would not have in the aggregate a Material
Adverse Effect on the Business or on Sellers.
(i) No Brokers. No action has been taken by any Seller that would give rise
to any valid claim against any party hereto for a brokerage commission, finder's
fee or other like payment with respect to the transactions contemplated by this
Agreement, other than a fee to be paid to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Securities, Inc. and
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co. by Sellers.
(j) Liens for Taxes. There are no Liens for Taxes upon any of the Purchased
Assets nor, to Sellers' Knowledge, is any taxing authority in the process of
imposing any Lien for Taxes upon any of the Purchased Assets, except for Liens
for Taxes not yet due and payable.
(k) Real Property.
(1) Sellers have Previously Disclosed all real property and leasehold
estates owned by the Selling Companies and used in the Business as of the
date hereof. The Selling Companies have a valid, subsisting and enforceable
leasehold interest in all leasehold estates, and valid rights as lessees or
owners to all property of any kind or nature used by the Selling Companies
in the Business, in each case free and clear of all Liens, other than (A)
Permitted Liens, (B) subleases and similar agreements Previously Disclosed,
(C) easements, covenants, rights-of-way and other similar restrictions of
record which do not materially interfere with the Selling Company's use of
such property in the Business, (D) any conditions that may be shown by a
current, accurate survey or physical inspection of any real property made
prior to the Closing Date and (E) (i) zoning, building and other similar
restrictions, (ii) Liens that have been placed by any developer, landlord
or other third party on property over which the Selling Companies have
easement rights or on any leased property and subordination or similar
agreements relating thereto and (iii) unrecorded easements, covenants,
rights-of-way and other similar restrictions. Each Selling Company as
lessee has the right under valid leases to occupy, use, possess and control
all property leased by such Selling Company as now occupied, used,
possessed and controlled by such Selling Company.
(2) Each lease or agreement under which a Selling Company is a lessee
or lessor of any property, real or personal, is a valid and binding
agreement of such Selling Company, and no event has occurred and is
continuing which, with or without notice or lapse of time, would constitute
a material default or event of default by such Selling Company under any
32
such lease or agreement or, to Sellers' Knowledge, by any other party
thereto.
(l) Insurance. Sellers have Previously Disclosed all policies of insurance
relating to the Purchased Assets and the Business (other than title insurance
policies or insurance policies relating exclusively to mortgages or other loans
originated or serviced by the Selling Companies) that name any Selling Company
as an insured party thereunder. Except as Previously Disclosed, all such
policies are with reputable insurers against such risks and in such amounts as
the management of the Selling Companies reasonably has determined to be prudent
in accordance with industry practices. All such insurance policies are in full
force and effect, the Selling Companies are not in material default thereunder,
and all claims thereunder have been filed in due and timely fashion.
(m) ALSS Platform.
(1) Disclosure. All material Software systems and modules, and
telecommunications and computer equipment comprising the ALSS Platform, and
all Acquired Intellectual Property Licenses and service contracts related
thereto, have been Previously Disclosed in Section 4.02(m)(1) of the
Disclosure Schedule (except for generally available "shrinkwrap", over-the
counter, "clickwrap" and other similar licenses that are not enterprise
licenses).
(2) Rights to Use. The Selling Companies have sufficient Intellectual
Property rights to use all Third Party Software that is being used by the
Selling Companies related to the ALSS Platform as currently used by them in
connection with the Business by means of Acquired Intellectual Property
Licenses.
(3) Title. The Selling Companies have exclusive ownership and use of
the ALSS Platform in its entirety (i.e. , taken as a whole as currently
used by them in connection with the Business) which ownership and use are
free of all liens, encumbrances and claims including claims for
infringement except as Previously Disclosed concerning those ALSS Platform
components licensed to the Selling Companies by third Persons pursuant to
Acquired Intellectual Property Licenses.
(4) Noninfringement. The ALSS Platform as currently used by the Selling
Companies does not violate or infringe the Intellectual Property or
proprietary rights of any other Person except as Previously Disclosed. In
the three (3) years preceding this Agreement, there has not been any suit,
action or other proceeding, and to Sellers' Knowledge, no suit, action or
other proceeding is pending or threatened, against them concerning any
claim that the ALSS Platform infringes or violates the Intellectual
Property rights of any other Person, or that any of the Selling Companies
has breached any Acquired Intellectual Property License. No claim has been
asserted in writing against any of the Selling Companies that the ALSS
Platform infringes or violates the Intellectual Property rights of any
other Person, or that any of the Selling Companies has breached any
Acquired Intellectual Property License. There exists no event, condition or
33
occurrence which, with the giving of notice or lapse of time, or both,
would constitute a material breach by any of the Selling Companies, or to
Sellers' Knowledge, another Person, under any Acquired Intellectual
Property License. No party to any Acquired Intellectual Property License
has given any of the Selling Companies notice of its intention to cancel,
terminate or fail to renew any such Acquired Intellectual Property License.
To Sellers' Knowledge, no Person is infringing or violating any of the
Acquired Intellectual Property in the ALSS Platform.
(5) Trademarks. The ALSS Platform does not consist of or include any
Marks.
(6) Patents. Sellers do not own any right, title or interest in any
Patents covering any component of the ALSS Platform.
(7) Copyrights. Section 4.02(m)(7) of Sellers' Disclosure Schedule
contains a complete and accurate list and summary description of all
registered Copyrights owned by the Selling Companies that are part of the
ALSS Platform, which registrations are currently in compliance with all
formal legal requirements, and to Sellers' Knowledge, are valid and
enforceable, and are not subject to any maintenance fees or actions falling
due within ninety days after the date of Closing.
(8) Trade Secrets. The following representations are solely made for
Trade Secrets that are part of the ALSS Platform.
(i) The documentation relating to the ALSS Platform is current,
accurate and sufficient in detail and content to identify and
explain it and to allow its full and proper use.
(ii) Sellers have taken commercially reasonable precautions necessary
to protect the secrecy, confidentiality and value of the
Software in the ALSS Platform as a trade secret.
(iii) To Sellers' Knowledge, the Trade Secrets are not part of the
public knowledge or literature and have not been disclosed to
any Person (other than Parent, the Selling Companies and their
employees, counsel and other agents, and other Persons who are
bound by written confidentiality obligations to Sellers or have
otherwise been advised of their confidentiality obligations to
Sellers).
(iv) Since 1993, all employees hired and consultants engaged by
Sellers, and, to Sellers' Knowledge, all employees hired and
consultants engaged by the predecessors of the Selling
Companies, who had access to the Software in the ALSS Platform
have signed a confidentiality agreement in the Selling
Companies' standard form (for employees hired by and consultants
34
engaged by the Selling Companies), as certified by the Selling
Companies and delivered to Buyer, and except as disclosed in
Section 4.02(m)(8)(iv) of the Disclosure Schedule, the Selling
Companies are not aware of any breaches of any of such
agreements. To Sellers' Knowledge, the employment by the Selling
Companies of any of such employees and engagement of such
consultants, and their duties for the Selling Companies, do not
violate any non-disclosure or non-competition agreement between
an employee and a third party.
(9) Software. The following representations are solely made for
Software that is part of the ALSS Platform.
(i) Section 4.02(m)(9)(i) of Sellers' Disclosure Schedule lists all
third party Software ("Third Party Programs") currently used by
the Selling Companies as part of the ALSS Platform, and all
copies of such Third Party Programs are licensed to the Selling
Companies under valid written license agreements;
(ii) Copies of all the license, distribution and maintenance
agreements for the Third Party Programs have been provided by
Sellers to Buyer, except in respect of Third Party Programs that
are covered by shrinkwrapped, clickwrapped or similar agreements
for Third Party Programs software that have been purchased
off-the-shelf by the Selling Companies in order to be used by
the Selling Companies, and such license and distribution
agreements give the Selling Companies the right to grant
unlimited run-time licenses of the respective Third Party
Program;
(iii) Recipients of services utilizing the ALSS Platform do not have
access to or the right or ability to possess any object or
source code of the ALSS Platform, and no Person has been
provided with a copy of the object code of the ALSS Platform
Software (except as Section 4.02(m)(8)(iv) contemplates);
(iv) Except as disclosed in Section 4.02(m)(9)(iv) of Sellers'
Disclosure Schedule, all copies in all media of the source code
are currently stored only in Sellers' premises in San Antonio,
Texas and all files containing source code have been identified
to Buyer. To Sellers' Knowledge, the transaction contemplated by
this Agreement will not itself entitle any Person except for the
rights of Parent under the Intellectual Property Rights
Agreement to obtain a copy of the source code for the Software;
35
(v) Except as listed in Section 4.02(m)(9)(v) of Sellers' Disclosure
Schedule, there are no problems or defects in the ALSS Platform
Software--including bugs, logic errors or failures of the ALSS
Platform Software to operate as described in the related
documentation or specifications, or as otherwise warranted to
any third party, in each case that are specifically known by the
Selling Companies, and, except for such disclosed problems or
defects, the Software operates in accordance with its
specifications;
(vi) Section 4.02(m)(9)(vi) of Sellers' Disclosure Schedule
accurately describes the current material development plans and
schedule for the ALSS Platform Software and discloses and
describes all material internal plans and external commitments,
and commitments to Parent, to enhance or improve the ALSS
Platform Software, and all related budgets and schedules, and
except as disclosed in Section 4.02(m)(9)(vi) of Sellers'
Disclosure Schedule, all projects there described are not
materially over budget or behind schedule;
(vii) There are not now nor have there ever been any distributors,
sales agents, representatives or any other persons, including
VARs, OEMs or resellers, who have rights from Sellers under oral
or written agreements to market or license the ALSS Platform
Intellectual Property, or the Software in the ALSS Platform; and
(viii) Sellers have disclosed to Buyer all reports, analyses and
investigations performed by Sellers or consultants retained by
Sellers concerning the capacity of the ALSS Platform to be
extended to service additional mortgage loans and Sellers have
no reason to believe that the conclusions reflected in such
reports, analyses and investigations are inaccurate in any
material respect.
(n) Employee Benefit Plans.
(1) All Compensation and Benefit Plans, other than Compensation and
Benefit Plans that are not material, have been Previously
Disclosed in Section 4.02(n) of Sellers' Disclosure Schedule.
True and complete copies of all such Compensation and Benefit
Plans have been made available to Buyer.
(2) Neither the execution of this Agreement nor the consummation of
the Purchase will entitle any Prospective Employees to severance
pay or any increase in severance pay upon any termination of
employment after the date hereof, other than as set forth in
Section 4.02(n) of Sellers' Disclosure Schedule.
(3) None of the Compensation and Benefit Plans are "multiemployer
plans" within the meaning of section 3(37) of ERISA.
36
(o) Labor Matters. None of the Selling Companies is a party to or is
bound by any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization, nor is any Selling
Company the subject of a proceeding asserting that it has committed an unfair
labor practice (within the meaning of the National Labor Relations Act) or
seeking to compel any of the Selling Companies to bargain with any labor
organization as to wages or conditions of employment, nor is there any strike or
other labor dispute involving any of the Selling Companies pending or, to
Sellers' Knowledge, threatened in writing, nor do the Sellers have any Knowledge
of any activity involving employees of the Selling Companies seeking to certify
a collective bargaining unit or engaging in other organizational activity. The
Selling Companies are in material compliance with all applicable laws respecting
employment practices, terms and conditions of employment and wages and hours and
have not engaged in any unfair labor practices.
(p) Environmental Matters.
(1) To the Knowledge of Sellers, the Selling Companies are in
compliance in all material respects with all applicable Environmental
Laws.
(2) To the Knowledge of Sellers, the Selling Companies possess all
permits, licenses, registrations, identification numbers,
authorizations and approvals required under applicable Environmental
Laws for the operation of the Business as presently conducted.
(3) The Selling Companies have not received any written claim,
notice of violation or citation concerning any violation or alleged
violation of any applicable Environmental Law or any alleged liability
involving the presence of any hazardous substance pursuant to any
Environmental Law during the past seven years. To Sellers' Knowledge,
there have been no releases, spills and discharges of Hazardous
Substances that could reasonably be expected to require either
reporting or remediation, or to result in liability pursuant to any
Environmental Law on or underneath any Purchased Asset which is real
property owned or leased by any of the Selling Companies.
(4) There are no writs, injunctions, decrees, orders or judgments
outstanding, or any actions, suits, proceedings or investigations
pending or, to the Knowledge of Sellers, threatened in writing,
relating to compliance by the Selling Companies with any Environmental
Law.
(5) Notwithstanding any other representation and warranty in this
Section 4.02, the representations and warranties contained in this
Section 4.02(p) constitute the sole representations and warranties of
Sellers with respect to any Environmental Law.
37
(q) Mortgage Banking Representation.
(1) Advances and Accounts Receivable. Each Acquired Accounts
Receivable is a valid and subsisting amount owing to the Selling Companies,
is carried on the books of the Selling Companies at values determined in
accordance with GAAP and is not subject to any set-off or claim that could
be asserted against Buyer, and the Selling Companies have not received any
notice from an Investor, Insurer or other appropriate party in which the
Investor, Insurer or other party disputes or denies a claim by the Selling
Companies for reimbursement in connection with an Acquired Accounts
Receivable.
(2) Compliance. Each Acquired Warehouse Loan that is allocated to a
particular Investor in accordance with the standard secondary market
practices of the Selling Companies is eligible for sale under an Investment
Commitment or otherwise in the ordinary course of business. The
origination, sale, and servicing of the Acquired Warehouse Loans comply in
all material respects with Applicable Law and Regulations and Investor and
Insurer requirements.
(3) Mortgage Banking Qualification. HSL (together with each other
Selling Company that services or originates Mortgage Loans) (a) to the
extent required for the conduct of the Business, is approved (i) by HUD as
an approved mortgagee and servicer for FHA Loans, (ii) by VA as an approved
lender and servicer for VA Loans, (iii) by FNMA and FHLMC as an approved
seller/servicer of first lien residential mortgages and (iv) by GNMA as an
authorized issuer and approved servicer of GNMA-guaranteed mortgage-backed
securities, (b) has all other material certifications, authorizations,
licenses, permits and other approvals, including without limitation those
required by State Agencies, that are necessary to conduct the Business (or,
where legally permissible, any waiver of or exemption from any of the
foregoing by such Agency or State Agency) and (c) is in good standing under
all applicable federal, state and local laws and regulations thereunder as
a lender and servicer. None of Sellers or any Selling Company has received
any notice or information from any Governmental Authority that it intends
to terminate or restrict HSL's status (or that of any other Selling Company
that services or originates Mortgage Loans) as an approved participant in
its programs for which HSL or such Selling Company is as of the date hereof
registered, approved or authorized.
(4) No Recourse. Except with respect to the Warehouse Loans listed
in Schedule 4.02(q)(4), none of the Warehouse Loans provides for recourse
to the Selling Companies.
(r) Corporate Documents. The Selling Companies have made available to Buyer
true and complete copies of their amended charters and amended by-laws.
(s) Risk Management Instruments. All Acquired Hedging Assets were entered
into in accordance with all applicable laws, rules, regulations and regulatory
38
policies; and each of them constitutes the valid and legally binding obligation
of the Selling Companies, enforceable in accordance with its terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general equity
principles), and each is in full force and effect. Neither of the Selling
Companies, nor to Sellers' Knowledge any other party thereto, is in breach of
any of its obligations under any of the Acquired Hedging Assets.
(t) Warehouse Loans.
(1) Ownership. The Selling Companies are the only owners of, and have
valid title to, each Acquired Warehouse Loan, free and clear of all Liens,
except Permitted Liens.
(2) Collateral. Each Acquired Warehouse Loan is a first residential
mortgage loan, subject only to (i) the Lien of current real property taxes
and assessments, (ii) covenants, conditions and restrictions, rights of
way, easements and other matters of public record as of the date of
recording of the mortgage, (iii) such exceptions appearing of record which
are acceptable to mortgage lending institutions generally in the area
wherein the property subject to the mortgage is located or specifically
reflected in the appraisal to be obtained in connection with the
origination of the related Acquired Warehouse Loan and (iv) other matters
to which like properties are commonly subject which do not materially
interfere with the benefits of the security intended to be provided by such
mortgage.
(3) Payments/Defaults. There is no default, breach, violation or event
permitting acceleration existing under any Acquired Warehouse Loan. Selling
Companies have not waived any such default, breach, violation or event
permitting acceleration of any Acquired Warehouse Loan.
(4) No Waiver. No provision of any Acquired Warehouse Loan has been
waived, altered or modified in any respect, except by instruments or
documents identified in the file relating to such Acquired Warehouse Loan.
(5) No Defenses. To Sellers' Knowledge, no Acquired Warehouse Loan is
subject to any right of rescission, setoff, counterclaim or defense,
including the defense of usury and, to Sellers' Knowledge, the exercise of
any right under any Acquired Warehouse Loan will not render such Acquired
Warehouse Loan unenforceable in whole or in part or subject to any right of
rescission (other than the statutory right of rescission), setoff,
counterclaim or defense, including the defense of usury.
(6) Warehouse Loans in Force. No Acquired Warehouse Loan has been
satisfied or subordinated in whole or in part or rescinded (other than
pursuant to a statutory right of rescission) and no collateral securing an
Acquired Warehouse Loan has been released from the Lien of the related
39
mortgage in whole or in part.
(u) Origination of Second Mortgage Loans. None of the Selling
Companies originates any second mortgage loans except concurrently or in
conjunction with first priority mortgage loans.
(v) Financial Reports; No Material Adverse Effect.
(1) Sellers have Previously Disclosed the audited consolidated
financial statements for HSL for the fiscal year ended September 30, 2001
(the "HSL Financial Statements"). Each of the balance sheets contained in
the HSL Financial Statements (including the related notes and schedules
thereto) fairly presents in all material respects the consolidated
financial position of HSL as of its date, and each of the statements of
income and changes in shareholder's equity and cash flows or equivalent
statements contained in the HSL Financial Statements (including any related
notes and schedules thereto) fairly presents in all material respects the
consolidated results of operations, consolidated changes in shareholder's
equity and consolidated changes in cash flows, as the case may be, of HSL
for the periods to which they relate, in each case in accordance with GAAP
consistently applied during the periods involved.
(2) Since September 30, 2001, (A) the Selling Companies have
conducted their respective businesses in the ordinary course of their
business (excluding the incurrence of expenses related to this Agreement
and the transactions contemplated hereby), (B) the Selling Companies have
not incurred any material liability other than in the ordinary course of
their business and (C) no event has occurred or circumstance arisen that,
individually or taken together with all other facts, circumstances and
events, is reasonably likely to have a Material Adverse Effect on the
Business or on the Sellers.
(3) The Sellers are not aware of any fact or circumstance relevant
to them or any of the Selling Subsidiaries that would have a material
adverse effect on Buyer's ability to timely perform in all material
respects its material obligations under the Retained Portfolio Subservicing
Agreement and the Services Agreement other than the failure to receive any
relevant Third Party Consents in connection with the transactions
contemplated hereby.
(w) Non-ALSS Platform Intellectual Property. The following representations
are made solely with respect to the Software, Acquired Intellectual Property and
Acquired Intellectual Property Licenses that are not part of the ALSS Platform
(the "Non-ALSS IP Assets").
(1) All Software and Acquired Intellectual Property that is material
and/or that is the subject of a subsisting registration or issued
Patent or pending application for registration or issued Patent has been
Previously Disclosed. All Acquired Intellectual Property Licenses have been
40
Previously Disclosed (except for generally available "shrinkwrap",
over-the-counter, "clickwrap" and other similar licenses that are not
enterprise licenses).
(2) The Selling Companies have sufficient rights to use all Software,
Acquired Intellectual Property and Intellectual Property and Software
licensed under the Acquired Intellectual Property Licenses ("Licensed
Intellectual Property") as currently used by them in connection with the
Business.
(3) The Software and the Acquired Intellectual Property in the
Non-ALSS IP Assets, and the Selling Companies' use of the Software,
Acquired Intellectual Property and Licensed Intellectual Property as
currently used by them in connection with the Business, does not violate or
infringe the Intellectual Property or proprietary rights of any other
Person except as Previously Disclosed. Except as Previously Disclosed in
Section 4.02(w) of Sellers' Disclosure Schedule, in the three (3) years
preceding this Agreement, there has not been any suit, action or other
proceeding, and to Sellers' Knowledge, no suit, action or other proceeding
is pending against them concerning any claim that any of the Selling
Companies' use of the Software, Acquired Intellectual Property or Licensed
Intellectual Property as currently used by them in connection with the
Business infringes or violates the Intellectual Property rights of any
other Person, or that any of the Selling Companies has breached any
Acquired Intellectual Property License. No claim has been asserted in
writing against any of the Selling Companies that its use of the Software,
Acquired Intellectual Property or Licensed Intellectual Property as
currently used by them in connection with the Business infringes or
violates the Intellectual Property rights of any other Person, or that any
of the Selling Companies has breached any Acquired Intellectual Property
License.
(4) There exists no event, condition or occurrence which, with the
giving of notice or lapse of time, or both, would constitute a material
breach by any of the Selling Companies, or to Sellers' Knowledge another
Person, under any Acquired Intellectual Property License. No party to any
Acquired Intellectual Property License has given any of the Selling
Companies notice of its intention to cancel, terminate or fail to renew any
such Acquired Intellectual Property License.
(5) To Sellers' Knowledge, no Person is infringing or violating any
of the Selling Companies' intellectual property rights in the Software or
Acquired Intellectual Property in the Non-ALSS IP Assets.
(6) Trademarks.
(i) Section 4.03(w)(6)(i) of Sellers' Disclosure Schedule contains a
complete and accurate list and summary description of all
federally registered Marks, pending applications for Marks and
41
material unregistered Marks.
(ii) Except as set forth in Section 4.03(w)(6) of Sellers' Disclosure
Schedule, all Marks that have been registered with the United
States Patent and Trademark Office are currently in compliance
with all legal requirements relating thereto (including the
timely post-registrations filing of affidavits of use and
incontestability and renewal applications), and to the Sellers'
Knowledge are valid and enforceable and are not subject to any
maintenance fees or actions falling due within ninety (90) days
after the Closing Date.
(iii)All Internet domain names are subject to currently effective
Internet domain name registrations.
(iv) No ▇▇▇▇ has been or is now involved in any opposition or
cancellation or any other type of proceeding challenging the
Selling Companies' rights therein, and, to the Sellers'
Knowledge, no such action is threatened with the respect to any
of the Marks which action or proceeding would have a Material
Adverse Effect.
(7) Sellers have taken all commercially reasonable precautions
necessary to protect the secrecy, confidentiality and value of the Non-ALSS
IP Assets as a trade secret.
(8) All copies of Third Party Programs in the Non-ALSS IP Assets used
in the Business are licensed to the Selling Companies under valid written
license agreements.
(9) E-business.
(i) The Selling Companies' web sites are in substantial compliance
with all applicable regulations.
(ii) The Selling Companies have operated their web sites in
substantial conformance with their privacy policies.
(x) Top-Ten Investors. Section 4.02(x) of Seller's Disclosure Schedule sets
forth the ten largest Investors in terms of volume of Servicing on the basis of
unpaid principal balance and the percentage of the total volume of Servicing of
such Investors.
4.03 Representations and Warranties of Buyer.
Subject to Section 4.01 and except as Previously Disclosed, Buyer
represents and warrants to Sellers as follows:
42
(a) Organization, Standing and Authority. Buyer has been duly organized and
is existing in good standing as a federal savings association. Buyer has the
requisite power and authority to own its current assets and carry on its
business as currently conducted, and is duly qualified to do business in each
jurisdiction where the ownership or operation of its property and assets or the
conduct of its business requires such qualification.
(b) Corporate Authority. Buyer has full corporate power and authority to
execute and deliver the Agreement and to consummate the transactions
contemplated hereby and thereby and to perform its obligations hereunder and
thereunder. This Agreement and the transactions contemplated hereby have been
duly authorized by all necessary corporate action of Buyer and do not require
the approval of any shareholder or shareholders and this Agreement has been duly
authorized, executed and delivered by Buyer. This Agreement is a valid and
legally binding agreement of Buyer, enforceable in accordance with its terms
(except as enforceability may be limited by applicable bankruptcy, insolvency,
receivership, reorganization, moratorium, fraudulent transfer and similar laws
of general applicability relating to or affecting creditors' rights or by
general equity principles). Buyer has the corporate power and authority to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby.
(c) Regulatory Approvals; No Conflicts.
(1) No consents or approvals of, or filings with, any Governmental
Authority or any Third Party Consents are required to be obtained or made
by Buyer or any of its Affiliates in connection with the execution,
delivery or performance by Buyer of this Agreement or to consummate the
Purchase, except for consents, approvals, filings, applications, notices or
registrations, and the termination of any applicable waiting periods, (A)
under the HSR Act, (B) the VA, FHA, FNMA, FHLMC, GNMA and HUD, (C) to the
Office of Thrift Supervision, the Federal Deposit Insurance Corporation or
any other federal or state bank regulatory agency and (D) as Previously
Disclosed on Disclosure Schedule 4.03(c)(1). As of the date hereof, Buyer
or its Affiliates have no Knowledge of any reason why the approvals or
consents set forth as conditions to closing in Section 7.01(a) will not be
received in a timely manner.
(2) Subject to receipt of the regulatory approvals referred to in the
preceding paragraph and the expiration of the related waiting periods, and
the Third Party Consents or approvals referred to in the preceding
paragraph, the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby do not and will
not (A) constitute a breach or violation of, or a default under, or give
rise to any Lien, any acceleration of remedies or any right of termination
under, any law, rule or regulation or any judgment, decree, order,
ordinance, statute, governmental permit or license, or contract, agreement,
indenture or instrument of either of Buyer or of any of its Affiliates or
43
to which either of Buyer or any of its Affiliates or their properties is
subject or bound, (B) constitute a breach or violation of, or a default
under, its charter or by-laws, or (C) require any consent or approval under
any such law, rule, regulation, judgment, decree, order, ordinance,
statute, governmental permit or license, contract, agreement, indenture or
instrument.
(d) Financial Reports; No Material Adverse Effect. Buyer has delivered to
Sellers Buyer's annual report on Form 10-K for the fiscal year ended 2000 and
its quarterly report on Form 10-Q for the period ended September 30, 2001 (the
financial statements contained therein, the "Buyer Financial Statements"). Each
of the balance sheets contained in Buyer Financial Statements (including the
related notes and schedules thereto) fairly presents in all material respects
the consolidated financial position of Buyer as of its date, and each of the
statements of income and changes in shareholders' equity and cash flows or
equivalent statements contained in Buyer Financial Statements (including any
related notes and schedules thereto) fairly presents in all material respects
the consolidated results of operations, consolidated changes in shareholders'
equity and consolidated changes in cash flows, as the case may be, of Buyer for
the periods to which they relate, in each case in accordance with GAAP
consistently applied during the periods involved and, in the case of the
unaudited interim statements, subject to normal year-end audit adjustments.
(e) No Material Adverse Effect. Since September 30, 2001, through the date
hereof no event has occurred or fact or circumstance arisen that, individually
or taken together with all other events, facts, or circumstances, is reasonably
likely to have a Material Adverse Effect with respect to Buyer.
(f) Litigation; Regulatory Action. No litigation, claim, action,
arbitration, investigation or other proceeding before any Governmental Authority
is pending against Buyer or any of its Affiliates and, to the best of Buyer's
Knowledge, no such litigation, claim, action, arbitration, investigation or
other proceeding has been threatened in writing except where such litigation,
claim, action, arbitration, investigation, or other proceeding would not have a
Material Adverse Effect on Buyer.
(g) Regulatory Action. Neither of Buyer nor any of its Affiliates or
properties is a party to or is subject to any order, decree, agreement,
memorandum of understanding or similar supervisory arrangement with, or a
commitment letter or similar submission to, or extraordinary supervisory letter
from a Regulatory Authority, nor has either of Buyer or any of its Affiliates
been advised by a Regulatory Authority that such agency is contemplating issuing
or requesting (or is considering the appropriateness of issuing or requesting)
any such order, decree, agreement, memorandum of understanding, commitment
letter, supervisory letter or similar submission except where any failure to
comply would not have in the aggregate a Material Adverse Effect on Buyer.
(h) Compliance with Laws. Buyer and its Affiliates are in compliance with
all applicable federal, state, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders or decrees applicable to them or to the
44
employees conducting such businesses, including the Equal Credit Opportunity
Act, the Fair Housing Act, the Community Reinvestment Act, the Home Mortgage
Disclosure Act and all other applicable fair lending laws and other laws
relating to discriminatory business practices, except where any failure to
comply would not have in the aggregate a Material Adverse Effect on Buyer.
(i) No Brokers. No action has been taken by Buyer that would give rise to
any valid claim against any party hereto for a brokerage commission, finder's
fee or other like payment with respect to the transactions contemplated by this
Agreement, other than a fee to be paid to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ by Buyer.
(j) Banking Regulation. Buyer is an "insured depository institution" as
defined in the Federal Deposit Insurance Act and applicable regulations
thereunder. Buyer and each of its Affiliates that is a depository institution
has a rating of "Satisfactory" or better under the Community Reinvestment Act as
of the date hereof.
(k) Financing. Buyer has, or will have on the Closing Date, sufficient
cash, available lines of credit or other sources of immediately available funds
to enable it to pay the Purchase Price hereunder and to pay any other amounts to
be paid by it under this Agreement.
4.04 No Other Representations or Warranties.
Except for the representations and warranties expressly contained in this
Article IV, none of Sellers, the Selling Subsidiaries, Buyer or any other Person
has made or makes any other express or implied representation or warranty,
either written or oral, on behalf of any Seller, Selling Subsidiary or Buyer.
ARTICLE V
Covenants
5.01 Conduct of Business.
From the date hereof until the Closing Date, except (i) as contemplated by
this Agreement, (ii) as Previously Disclosed, (iii) as required by law, (iv) in
the ordinary course of the Business, or (v) to the extent that Buyer provides
prior written consent to do otherwise, which consent may not be unreasonably
withheld:
(a) Sellers shall use commercially reasonable efforts to (i) maintain the
Selling Companies' corporate existence in good standing, (ii) maintain the
general character of the Business and conduct the Business in a commercially
reasonable manner, (iii) maintain proper business and accounting records
relative to the Business, (iv) use commercially reasonable efforts to preserve
relationships with customers, suppliers, Investors and Insurers of the Business,
45
(v) maintain the Purchased Assets in good condition and repair, ordinary wear
and tear excepted, (vi) maintain procedures for protection of the Acquired
Intellectual Property, and (vii) maintain presently existing insurance coverages
with respect to the Purchased Assets and the Business;
(b) Sellers shall not permit any Selling Company to:
(i) enter into any Specified Contract, relating to the Business
(other than those contemplated by this Agreement or related
to Excluded Assets or Excluded Liabilities) or terminate or
amend or modify in any material respect any such existing
Specified Contracts;
(ii) enter into or amend or renew any individual employment
agreements with any Prospective Employee;
(iii) grant any salary or wage increase or increase any employee
benefit for any Prospective Employee (including incentive
or bonus payments) other than regularly scheduled salary or
wage increases of up to 4% in aggregate amount from those
existing on the date hereof, except in either case (A) to
satisfy Previously Disclosed contractual obligations
existing as of the date hereof, (B) for agreements,
arrangements, grants or awards to newly hired employees
consistent with past practice, (C) as a result of any
change or modification of any benefit plan of Parent not
related solely to the Selling Companies, or (D) for
incentive bonus awards payable in December 2001 for
performance associated with the fiscal year 2001;
(iv) sell, transfer, assign or otherwise dispose of or encumber
any of the Purchased Assets in one transaction or a series
of related transactions having a value in excess of
$100,000;
(v) cancel any debt or waive or compromise any claim or right
relating to the Business in one transaction or a series of
related transactions having a value in excess of $250,000;
(vi) make any capital expenditure or commitment relating to the
Business in excess of (A) $100,000 per project or related
projects or (B) $1,000,000 in the aggregate other than
expenditures necessary to maintain in good repair existing
assets;
(vii) except with respect to endorsements of negotiable
instruments in the ordinary course of their business
consistent with past practice or, with respect to their
mortgage banking business, the ordinary course of business
in accordance with past practice, incur, assume or
guarantee or otherwise become responsible for any
indebtedness for borrowed money which will constitute an
46
Assumed Liability as of the Closing Date;
(viii) issue, sell or agree to issue or sell (a) any shares of
the capital stock of the Acquired Subsidiary or (b) any
securities convertible into, or options with respect to, or
warrants to purchase or rights to subscribe for, any Shares
of the capital stock of the Acquired Subsidiary;
(ix) enter into any joint venture, partnership or other similar
arrangement, form any other new material arrangement for
the conduct of its business or purchase any material assets
or securities of any Person;
(x) purchase new mortgage servicing rights or sell mortgage
servicing rights except (a) pursuant to contractual
commitments in place on the date hereof (including co-issue
commitments/agreements), (b) other purchases not to exceed
in the aggregate more than $2.5 billion in outstanding
principal amount of loans over any calendar month or (c)
sales of servicing provided that the Selling Companies
comply with the procedures in Section 8.4 of the Retained
Portfolio Subservicing Agreement as if such provision were
operative and in effect;
(xi) terminate, cancel or amend any material insurance coverage
maintained by Sellers or Selling Subsidiaries with respect
to the assets or activities of the Business which is not
replaced by an adequate amount of insurance coverage at
reasonable cost;
(xii) merge or consolidate with or into any other Person or
permit any other Person to merge or consolidate with or
into it;
(xiii) transfer, mortgage, encumber or otherwise dispose of any
of the Pipeline Loans or Warehouse Loans other than in the
ordinary course of business;
(xiv) except for residential mortgage loans or commitments for
residential mortgage loans that have been previously
approved by Sellers prior to the date of this Agreement (a)
make or acquire any residential mortgage loan or issue a
commitment for any residential loan except for residential
mortgage loans and commitments that are made or acquired in
the ordinary course of business consistent with past
practice and with an individual principal balance of
$3,000,000 or less; or (b) take any action that would
result in any discretionary releases of collateral or
47
guarantees or otherwise restructure any loan or commitment
for any loan with a principal balance in excess of
$3,000,000;
(xv) except as necessary in order to comply with Regulations or
the requirements of this Agreement or in response to
competitive or market conditions in order to preserve the
value of its franchise, make any material changes in its
policies and practices with respect to (a) underwriting,
pricing, originating, acquiring, servicing, or buying or
selling rights to service loans or (b) hedging the
Warehouse Loans or Pipeline Loans;
(xvi) make any changes to its accounting methods, practices or
policies, except as may be required under law, rule,
regulation or GAAP, in each case as concurred in by
Seller's independent public accountant;
(xvii) settle any action filed or otherwise instituted against
it, the Purchased Assets or the Business if such settlement
would contain any relief against the Purchased Assets or
the Business other than monetary damages; or
(xviii) agree to do any of the foregoing.
(c) Notwithstanding the preceding provisions of this Section 5.01, during
the period from the date hereof to the Closing Date, Sellers and the Selling
Subsidiaries may sell or transfer, or enter into one or more agreements to sell
or transfer, any asset of the Selling Companies, except for the Purchased
Assets; provided, however, that any sale of mortgage servicing rights must
comply with the procedures in Section 8.4 of the Retained Portfolio Subservicing
Agreement as if such provision were operative and in effect. From the date
hereof to the Closing Date, the officers of the Selling Companies shall confer
on a regular basis with Buyer as to the Business, and report periodically on the
general status of the ongoing operations thereof.
5.02 Access; Confidentiality.
(a) Sellers agree to permit Buyer and its Representatives to have, during
the period from the date hereof to the Closing Date, reasonable access to the
premises, books and records relating to the Business and to records and
documentation of the ALSS Platform and other systems, during normal business
hours. Sellers agree to make available to Buyer upon reasonable advance notice
and during normal business hours, the employees of the Selling Companies
involved in the conduct of the Business and the operation of the ALSS Platform
and other systems, as Buyer may reasonably request, provided that such
availability shall not unreasonably interfere with the normal operations of the
Selling Companies. Sellers shall furnish Buyer with such financial and
operational data and other information relating to the Business as Buyer shall
from time to time reasonably request and shall reasonably cooperate with Buyer
with respect to Buyer's need to plan for and coordinate the integration of the
48
Purchased Assets and to prepare to undertake its obligations under the Ancillary
Agreements.
(b) Buyer agrees that it will not, and will cause its Representatives not
to, use any information obtained pursuant to this Section 5.02 (as well as any
other information obtained prior to the date hereof in connection with the
entering into of this Agreement) for any purpose unrelated to the consummation
of the transactions contemplated by this Agreement. Subject to the requirements
of applicable law, and other exceptions set forth in the Confidentiality
Agreement, Buyer will keep confidential, and will cause its Representatives to
keep confidential, all information and documents obtained pursuant to this
Section 5.02 (as well as any other information obtained prior to the date hereof
in connection with the entering into of this Agreement) unless such information
(1) was already known to such party, (2) becomes available to such party from
other sources not known by Buyer to be bound by a confidentiality obligation,
(3) is disclosed with the prior written approval of Sellers or (4) is or becomes
readily ascertainable from published information or trade sources. In the event
that this Agreement is terminated or the transactions contemplated by this
Agreement will otherwise fail to be consummated, Buyer will promptly cause all
copies of documents or extracts thereof containing information and data as to
Sellers, any Selling Subsidiary or the Acquired Subsidiary to be returned to
Sellers at Buyer's expense, or (at Sellers' option) confirm in writing to
Sellers that they have completely destroyed all such copies, documents,
extracts, information and data.
(c) In addition to the confidentiality arrangements contained in this
Agreement, all information provided or obtained in connection with the
transactions contemplated by this Agreement (including pursuant to clause (a)
above) will be held by Buyer in accordance with and subject to the terms of the
Confidentiality Agreement, dated October 2, 2001, between Buyer and Parent (the
"Confidentiality Agreement"). In the event of a conflict or inconsistency
between the terms of this Agreement and the Confidentiality Agreement, the terms
of this Agreement will govern.
(d) Buyer agrees that following the Closing Date, Sellers and their
Representatives shall have reasonable access, during normal business hours, to
the documentation, manuals, files and other information or data of the Business
to the extent they relate to the Purchased Assets or Assumed Liabilities during
the period prior to the Closing Date (but subject to the provisions and
limitations of the Intellectual Property Rights Agreement regarding access to
the ALSS Platform) (and shall permit such Persons to examine and copy such
documentation, manuals, files and other information or data to the extent
reasonably requested by such party), and shall cause the officers and employees
of the Business to furnish (to Sellers or any of their Affiliates, or any
regulator of Sellers or any of their Affiliates) all information reasonably
requested by, and otherwise cooperate with (including, without limitation,
causing employees to assist Sellers or any of their Affiliates by requiring such
employees to avail themselves for trial, depositions, interviews and other
Action-related litigation endeavors) Sellers or any of their Affiliates with
respect to the Business, Purchased Assets or Assumed Liabilities, in connection
49
with regulatory compliance, indemnification claim verification, pending or
threatened litigation, financial reporting and tax matters (including financial
and tax audits and tax contests) and other similar business purposes. During the
period required under the longer of Buyer's record retention policy or Seller's
record retention policy, Buyer shall not destroy or dispose of or permit the
destruction or disposition of any such documentation, manuals, files and other
information or data except as it relates to the ALSS Platform without first
offering, in writing, at least sixty (60) days prior to such destruction or
disposition to surrender them to Seller. Anything foregoing to the contrary not
withstanding, Buyer shall not be required to disclose or deliver trade secrets
or other confidential information regarding the ALSS Platform Software or
Acquired Intellectual Property unless required by the Intellectual Property
Rights Agreement or the Services Agreement or required by law or legal
proceedings and under the type of protection provisions in the Intellectual
Property Rights Agreement.
(e) Sellers agree that following the Closing Date, Buyer and its
Representatives shall have reasonable access, during normal business hours, to
the books, records, documentation, manuals, files and other information or data
of the Selling Companies to the extent they relate to the Business or Purchased
Assets or Assumed Liabilities during the period prior to the Closing Date (and
shall permit such Persons to examine and copy such books, records,
documentation, manuals, files and other information or data of the Selling
Companies to the extent reasonably requested by such party), and shall cause the
officers and employees of the Selling Companies to furnish (to Buyer or any of
its Affiliates, or any regulator of Buyer or any of its Affiliates) all
information reasonably requested by, and otherwise cooperate with (including,
without limitation, causing employees to assist Buyer or any of its Affiliates
by requiring such employees to avail themselves for trial, depositions,
interviews and other Action-related litigation endeavors) Buyer with respect to
the Business, Purchased Assets or Assumed Liabilities, in connection with
regulatory compliance, indemnification claim verification, pending or threatened
litigation, financial reporting and tax matters (including financial and tax
audits and tax contests) and other similar business purposes. During the period
required under the longer of Buyer's record retention policy or Seller's record
retention policy, Sellers shall not destroy or dispose of or permit the
destruction or disposition of any such books, records, documentation, manuals,
files and other information or data without first offering, in writing, at least
sixty (60) days prior to such destruction or disposition to surrender them to
Buyer.
5.03 Taking of Necessary Action.
(a) Both Sellers and Buyer will cooperate and use their respective
commercially reasonable efforts to prepare all documentation, to effect all
filings and to obtain all permits, consents, approvals and authorizations of all
third parties and Governmental Authorities necessary to consummate the
transactions contemplated by this Agreement. Each of Sellers and Buyer will have
the right to review in advance, and to the extent practicable each will consult
with the other with respect to, all material written information submitted to
any third party or any Governmental Authority in connection with the
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transactions contemplated by this Agreement, in each case subject to applicable
laws relating to the exchange of information. In exercising the foregoing right,
each of the parties hereto agrees to act reasonably and as promptly as
practicable. Each of Buyer and Sellers commits to submit all required
applications or notices to the appropriate Governmental Authorities within 15
Business Days of the date of this Agreement. Each party hereto agrees that it
will consult with the other party hereto with respect to the obtaining of all
material permits, consents, approvals and authorizations of all third parties
and Governmental Authorities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep the other
party appraised of the status of material matters relating to completion of the
transactions contemplated hereby. To the extent necessary, Buyer and Sellers
shall cause their respective Affiliates to take any action necessary in
connection with the foregoing.
(b) Each party agrees, upon request, to furnish the other party with all
information concerning itself, its Subsidiaries, directors, officers and
stockholders and such other matters as may be reasonably necessary or advisable
in connection with any filing, notice or application made by or on behalf of
such other party or any of its Subsidiaries to any third party or Governmental
Authority.
(c) Each party shall designate a person to act as that party's
representative for purposes of coordinating with the other party in connection
with activities and conduct necessary or appropriate to effect the closing of
the transaction contemplated by this Agreement, the transition the Business from
the Selling Companies to Buyer, to prepare for the performance of the Ancillary
Agreements and to communicate concerning Buyer's rights under the Solicitation
Rights Agreement. The Sellers initially designate ▇▇▇▇▇ ▇▇▇▇▇ as the
representative of each of them. Buyer initially designates ▇▇▇▇▇ ▇▇▇▇▇▇▇ as its
representative. The representatives shall meet or otherwise communicate with
each other on a regular basis.
5.04 Disclosure.
Except as contemplated by the terms of this Agreement or as may otherwise
be required by law, neither Sellers nor Buyer, nor any of their respective
Affiliates, will disclose to any Person not a party hereto (other than
Affiliates and Representatives, who shall be bound by this provision) the terms
of this Agreement. Sellers and Buyer agree to consult with each other prior to
issuing any press release relating to the transactions contemplated by this
Agreement. Sellers will not make or deliver any written communication with
borrowers or other customers of the Selling Companies or with Prospective
Employees or Leave Recipients related to the transactions contemplated hereby
without the prior consent of Buyer which consent shall not be unreasonably
withheld.
5.05 Missing Mortgage Loan Documents.
Sellers agree, at their own expense, to use commercially reasonable efforts
before the Closing Date to obtain any Mortgage Loan Documents for any Acquired
Warehouse Loan that is missing and must be obtained by the Selling Companies
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pursuant to the applicable Regulations. To the extent any such missing document
is not obtained by the Selling Companies by the Closing Date, Buyer agrees, at
its own expense, to use commercially reasonable efforts to obtain such document
from and after the Closing Date.
5.06 Post-Closing Collection of Certain Receivables.
(a) Buyer shall use commercially reasonable efforts in accordance with
applicable Regulations and with at least the same level of diligence as Buyer
would exercise for its own account to collect the Retained Accounts Receivable
on behalf of Sellers and the Selling Companies. Such collection effort shall be
made by Buyer without cost to Sellers or any of their Affiliates. To aid Buyer
in its collections efforts, Sellers shall compile and deliver to Buyer a list of
all relevant Retained Accounts Receivable as soon as practicable after the
Closing Date.
(b) Buyer shall remit to Sellers or the Selling Subsidiaries all amounts
received with respect to Retained Accounts Receivable during a month by no later
than the 10th day of the following month, in one or more remittances. Upon
receipt of any such amounts by Buyer and prior to the remittance of such amounts
to Sellers, Buyer shall place such amounts in an interest bearing account, and
any interest earned thereon shall be for the benefit of Sellers. With each such
remittance Buyer shall deliver a report with respect to the status of the
Retained Accounts Receivable in form reasonably satisfactory to Sellers. Sellers
and their accountants and other advisors shall be given full access at all
reasonable times to all books and records necessary to perform an audit
regarding Buyer's collections with respect to the Retained Accounts Receivable.
5.07 Granted Licenses.
(a) Effective upon Closing, ___ Buyer grants Parent and its Affiliates
(including the Selling Companies) a royalty-free right and license to use the
Marks identified in Schedule 4.02(w) nonexclusively in North America solely for
the purpose of the Selling Companies' servicing the Retained Servicing Portfolio
and in connection with HomeSide Mortgage Securities Trust 2001-1 and its issued
securities. Such license will be coterminous with the Retained Portfolio
Subservicing Agreement and the term of the issued securities, as the case may
be. Buyer and Parent shall enter into a Trademark License Agreement effective on
the Closing Date on such terms as well as other terms mutually agreeable between
them.
5.08 Insurance Matters.
Buyer acknowledges and agrees that no policy of insurance relating to the
Purchased Assets or the Business will be transferred or assigned pursuant to
this Agreement (other than title insurance policies or policies relating
exclusively to individual Acquired Warehouse Loans that may be transferred or
assigned pursuant to Section 3.02), and that from and after the Closing, Buyer
52
bears the entire, subject to Article X hereof, risk of loss related to the
Purchased Assets and the Business.
5.09 No Solicitation.
Prior to the Closing only, each of Sellers and the Selling Subsidiaries
shall immediately cease and cause to be terminated any activities, discussions
or negotiations commenced prior to the date of this Agreement with any parties
other than Buyer with respect to the sale of the Business as a whole. Nothing in
this provision shall prohibit the sale of the Retained Servicing Portfolio
provided that the Selling Companies comply with the procedures of Section 8.4 of
the Retained Portfolio Subservicing Agreement as if such provisions were
operative and in effect.
5.10 Non-Competition Agreement.
(a) For a period of three (3) years following the Closing Date, Sellers
shall not, and shall not permit any of their Affiliates to, in any state in the
United States (i) directly or indirectly, either as a principal, partner, agent,
manager, stockholder, director, officer or in any other capacity, enter into a
business that competes in the mortgage software business in the United States
(the "Restricted Business") on a de novo basis; provided, however, that
ownership of less than 5% of the voting stock of any corporation engaged in the
Restricted Business shall not constitute a violation hereof or (ii) acquire or
enter into an agreement to acquire or merge or consolidate with any corporation
or other business entity whose primary business on a consolidated or combined
basis with all its Affiliates is the Restricted Business.
(b) For a period of three (3) years following the Closing Date, Buyer shall
not, and shall not permit any of its Affiliates to, offer services by means of
the ALSS Platform or any modification thereof in Australia or New Zealand.
5.11 Non-Solicitation of Employees.
(a) For the period from the Closing Date until the third anniversary of the
end of the Lease Period, neither Sellers nor any of their Affiliates shall,
directly or indirectly solicit for employment, retain as an independent
contractor or consultant, induce to terminate employment with Buyer or otherwise
interfere with Buyer's employment relationship with any Prospective Employee
located in San Antonio, Texas as of the date of this Agreement; provided,
however, that this Section 5.11 shall not apply (a) if any such employee has
been terminated by Buyer or any of its Affiliates for any reason, or by the
Selling Companies during the Lease Period at Buyer's request or (b) if such
employee is hired by a Seller or any of its Affiliates as a result of a general
solicitation for employment in newspaper advertisements or other periodicals of
general solicitation not specifically targeted to employees of Buyer or (c) if
Buyer indicates by written consent that this Section 5.11 shall not apply to a
specific employee.
53
(b) In the event that this Agreement is terminated pursuant to Article
VIII, Buyer and its Affiliates will not, without Sellers' prior written consent:
(a) for a period of three years from the date of termination of this Agreement
(other than pursuant to any general solicitations for employment in newspaper
advertisements or other periodicals of general circulation or through
recruitment firms not specifically targeted to employees of any Selling Company;
provided, however, that Buyer will not instruct any recruiting firm to
specifically recruit employees of any Selling Company), directly or indirectly
solicit for employment any person who is then employed by any Selling Company
holding the title of vice president or higher or (b) use any material,
information or document obtained in connection with the entering into of this
Agreement directly or indirectly to solicit any customer or supplier of any
Selling Company. The preceding sentence shall not prohibit Buyer from employing
any such person to whom an offer of employment may have been extended by Buyer
prior to the date hereof. Notwithstanding the foregoing, in the event that this
Agreement is terminated pursuant to Article VIII as a result of a willful breach
by Sellers, the restrictions set forth in clause (a) of the first sentence of
this Section 5.11(b) shall terminate on January 2, 2003.
5.12 Transitional Matters.
(a) Each of the parties acknowledges and agrees that the transition of the
Business from the Selling Companies to Buyer will require that certain
transactions and relationships will need to be entered into, restructured and
reorganized in connection with the transition of the Business from the Selling
Companies to Buyer. The parties agree that prior to the Closing Date, the
parties shall cooperate with each other to identify all such transactions and
relationships and negotiate in good faith to enter into a mutually acceptable
Transitional Agreement effective as of the Closing Date, which agreement shall
provide for all such transactions and relationships as are reasonably necessary
to provide,
(i) for (A) the operation of the Business and use of the Purchased
Assets by Buyer, (B) the operation and use of the Excluded Assets
by Sellers and the Selling Subsidiaries and (C) the separation of
the Business, the Purchased Assets and the Assumed Liabilities
from Parent and its Affiliates (including the Selling Companies),
in each case during the period commencing on and after the
Closing Date and ending no later than the one year anniversary of
the Closing Date or such longer period as the parties may agree,
including the following:
(1) the transitioning of the financial systems, assets and hedging
valuation systems, asset management systems, payroll and employee benefits
systems and any other applicable business operating systems;
(2) the provision of rights of access (provided that access to the ALSS
Platform shall be governed and limited by the Intellectual Property Rights
54
Agreement and the Services Agreement) to the Parent and its Affiliates to
Intellectual Property currently owned (or licensed) by the Selling
Companies (and included in the Purchased Assets) and used by Parent or the
Selling Companies in the ordinary course of their business, or required by
the Selling Companies for the operation and use of the Excluded Assets or
Excluded Liabilities; provided, that access to the ALSS Platform and other
Software shall be governed solely by the Intellectual Property Rights
Agreement and the Services Agreement and, provided further, anything
foregoing to the contrary notwithstanding, Buyer shall not be required to
disclose or deliver trade secret or confidential information regarding the
ALSS Platform, Software or Acquired Intellectual Property unless required
by the Intellectual Property Rights Agreement, the Services Agreement or
required by law or legal proceedings and under the type of protective
provisions in the Intellectual Property Rights Agreement.
(3) the provision of rights of access (to the extent not covered by
the Intellectual Property Rights Agreement) to Buyer to Intellectual
Property currently owned (or licensed) by Parent (or the Selling Companies)
and used by the Selling Companies in connection with the Purchased Assets
or Assumed Liabilities;
(4) moving corporate records related to the Selling Companies; and
(5) the provision of office space, computer equipment and supplies
sufficient to enable the Selling Companies to complete any transition
services; and
(ii) for such services and facilities as Sellers and Selling
Subsidiaries may require to monitor compliance with, and
implementation of the Subservicing Agreement, during its term,
including the provision of office space, computer equipment and
supplies sufficient to enable Sellers to monitor compliance with
the Retained Portfolio Subservicing Agreement throughout its term.
(b) In addition to the matters to be identified pursuant to paragraph
(a) of this Section 5.12, the Transition Agreement shall specifically
provide for the transactions and matters outlined in Section 5.12 of
Sellers' Disclosure Schedule.
(c) For the purpose of facilitating the transition of the financial
system, on or prior to the 15th day prior to the Closing Date, the Selling
Companies shall create on their general ledger, a separate general ledger
company ("GL Company"), as well as accounts for such GL Company ("Buyer GL
Accounts"), which accounts shall be duplicative of the Selling Companies'
own accounts ("Seller GL Accounts") and are intended to be used by the
Buyer in the operation of the Business, the Purchased Assets and the
Assumed Liabilities from and after the Closing Date. From and after the
creation of the Buyer GL Accounts, until Closing, the Selling Companies
shall maintain such accounts (as duplicate entries on the books of the
Selling Companies in the name of the GL Company). From and after Closing
55
until the completion of the transition of the financial system of the
Selling Companies, the Buyer shall operate the Business by recording
entries using the Buyer GL Accounts, and shall maintain on behalf of the
Selling Companies, the Seller GL Accounts on its general ledger.
(d) The party receiving service under the Transitional Agreement shall
pay to the party providing service the costs incurred by such providing
party. Services provided under the Transitional Agreement shall be
performed at the same standard as the providing party performs such service
for its own account.
5.13 MSR Purchases by Buyer. From and after January 1, 2002 to the
Closing Date, any purchases by Buyer of mortgage servicing rights or the
purchase of any business principally engaged in the Servicing of FNMA,
FHLMC or GNMA residential mortgage loan servicing rights shall comply with
the procedures in Section 8.4 of the Retained Portfolio Subservicing
Agreement as if such provision were operative and in effect.
5.14 Damage or Deterioration of ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇.
Prior to the Closing, Sellers and the Selling Companies shall maintain
all existing insurance policies in respect of ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇. In the
event of any damage to ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇ that results in a recovery under
such insurance policies prior to the Closing, Sellers and the Selling
Companies shall transfer the proceeds thereof to Buyer and, for purposes of
Article II, the Closing Date Value of ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇ shall not reflect
any changes arising out of, or in connection with, such damage to the
extent covered by insurance or condemnation proceeds.
ARTICLE VI
Employee Matters
6.01 Employees and Service Crediting.
(a) Offer of Employment with Buyer. Within 90 days after the Closing
Date, but in no event later than the date that is 20 days before the end of
the Lease Period, Buyer shall make a written offer of employment to each
Prospective Employee and, subject to subsection (c) below, to each Leave
Recipient, which offer shall include (i) total cash compensation until
December 31, 2002 that is Comparable Cash Compensation, where "Comparable
Cash Compensation" means cash compensation that in the aggregate is
comparable to the total cash compensation (including, but not limited to,
short-term and long-term bonus opportunities and commission/incentives
opportunities) provided by the Selling Companies to the relevant employee
as of the Closing, and (ii) the covenant of Buyer set forth in subsections
6.01(d)(ii), 6.01(e), 6.01(f) and 6.01(g) below. The Selling Companies
shall cooperate with and use reasonable efforts to assist Buyer in its
efforts to secure reasonably satisfactory employment arrangements with the
56
Prospective Employees. Each Prospective Employee who does not reject an
offer of employment with Buyer shall become an employee of Buyer on the
last day of the employee leasing period, if any, with respect to such
Prospective Employee, in the Employee Lease (the "Lease Period"), and shall
be referred to herein as a "Transferred Employee".
(b) Adjustment of Prospective Employees for Subsequently Hired
Employees. Prior to the Closing Date, the Selling Companies shall furnish
to Buyer an updated list of all Prospective Employees as of a date that is
approximately 30 days prior to the Closing, which list shall indicate each
Prospective Employee's prior service, projected to the Closing Date.
(c) Special Provisions for Leave Recipients.
(1) With respect to any Prospective Employee who is not actively
at work on the Closing Date as a result of short-term disability
leave, or other approved personal leave (including, without
limitation, military leave with reemployment rights under federal law
and leave under the Family Medical Leave Act of 1993) (collectively,
the "Leave Recipients") Buyer will explain to Leave Recipients Buyer's
intention to make an offer of employment in the manner required by
Section 6.01(a) contingent on such Prospective Employee's return to
active status at the termination of such disability or approved leave
of absence, respectively, provided that he or she returns to active
service before the later of (A) the end of the Lease Period or (B) the
date such employee's reemployment rights expire under applicable laws
or under the Compensation and Benefit Plans.
(2) When the Leave Recipient returns to active status pursuant to
the terms of clause (1) above, such Leave Recipient shall be
considered a Transferred Employee (as defined above) and the following
provisions shall apply: (A) the Leave Recipient shall become eligible
for coverage and benefits under all employee benefit plans or programs
maintained by Buyer under the same terms and conditions that apply to
other Transferred Employees; and (B) the Leave Recipient's period of
leave shall be treated as a period of service under the employee
benefit plans and programs of Buyer to the same extent as if the Leave
Recipient had received benefits under a similar plan or was subject to
a similar policy of Selling Companies except to the extent such
service credit will result in duplication of benefits to the Leave
Recipient.
(d) Buyer Benefit Obligation.
(i) Buyer shall establish and maintain, until at least December
31, 2002, employee benefit plans, programs, policies and
arrangements for Transferred Employees which provide benefits
to the Transferred Employees that are no less favorable in
the aggregate to those provided to them under the applicable
Compensation and Benefit Plans in effect on the Closing Date.
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(ii) Notwithstanding the above aggregation, (A) Buyer shall accept
assignment, and assume, from Sellers, all agreements to which
any Prospective Employee is a party and (B) Buyer shall
provide severance pay and benefits pursuant to the severance
terms set forth in Section 6.01(d) of Sellers' Disclosure
Schedule, to Prospective Employees whose employment becomes
terminated under circumstances set forth therein from the
Closing Date until July 1, 2003.
(e) Recognition of Service. For purposes of eligibility, vesting,
vacation entitlement and severance benefits and benefit accrual for sick
leave under all employee compensation and benefit plans of Buyer, each
Transferred Employee shall receive full credit from Buyer for all prior
service properly credited under the Compensation and Benefit Plans;
provided, however, that for purposes of Buyer's cash balance pension plan,
each Transferred Employee shall receive such prior service credit only for
the period between the Closing Date and the end of the Lease Period. The
schedule of service provided by Sellers prior to the end of the Lease
Period may be conclusively relied upon by Buyer in crediting service in
accordance with this Section 6.01(b).
(f) Welfare Plans and Other Unfunded Plans. Buyer shall offer coverage
under employer-sponsored medical and dental plans and agree to cause each
of such medical and dental plans that provides coverage to a Transferred
Employee to (A) waive any pre-existing conditions, waiting periods and
actively at work requirements under such plans, and (B) cause such plans to
honor any expenses (including any expenses paid for purposes of satisfying
applicable deductibles, co-insurance and maximum out-of-pocket limits)
incurred by the Transferred Employees and their beneficiaries under similar
plans of the Selling Companies during the portion of the calendar year
prior to the Closing Date for purposes of satisfying applicable deductible
and maximum out-of-pocket expenses under Buyer's plans.
(g) Time Off. On the Closing Date, the Selling Companies shall pay out
to each Prospective Employee an amount in cash equal to the time off
benefits earned but not yet used by such employee as of the Closing Date,
if any. In addition, the Selling Companies shall pay out to each
Prospective Employee an amount in cash equal to the time off benefit earned
but not used during the Lease Period, if any (the "Lease Time Off Cash").
Buyer shall reimburse the Selling Companies pursuant to the Employee Lease
for the Lease Time Off Cash as part of the Base Fee (as defined in Section
3.1(a) of the Employee Lease). Buyer shall waive any service requirements
or other applicable internal guidelines, to allow Transferred Employees to
take unpaid time off from Buyer up to the number of days represented by the
Lease Time Off Cash, beginning immediately after the end of the Lease
Period, subject to a department manager's request to meet reasonable
business needs.
(h) WARN Act and Health Care Continuance Requirements. Buyer shall be
responsible for providing or discharging any and all notifications,
benefits, and liabilities to Transferred Employees and Governmental
58
Authorities required by the WARN Act or by any other applicable law
relating to plant closings or employee separations or severance pay that
are first required to be provided or discharged on or after the Closing
Date, including pre-closing notice or liabilities if actions by Buyer on or
after the Closing Date result in a notice requirement or liability under
such laws. Upon Buyer's reasonable request, during the Lease Period Selling
Companies shall provide any notification described under the WARN Act to
any Prospective Employees identified by Buyer, in order to attempt to
minimize Buyer's liability under the first sentence of this subsection. All
employees involuntarily separated from employment by any of the Selling
Companies within 90 days of the Closing Date, the involuntary separation of
whom could result in a notice requirement covered by this Section, shall be
identified on a schedule to be prepared by the Selling Companies and
submitted to Buyer on the Closing Date. Buyer and the Selling Companies
shall cooperate with each other to provide timely notice, if required, to
any Governmental Entity of the consummation of this Agreement and the
related transfer of employees. The Selling Companies shall retain the
obligations with respect to COBRA continuation coverage for all Prospective
Employees who are not Transferred Employees.
ARTICLE VII
Conditions To The Closing
7.01 Conditions to Each Party's Obligation to Effect the Purchase.
The respective obligations of each of Sellers and Buyer to consummate
the Purchase are subject to the fulfillment or written waiver, at or prior
to the Closing Date, of each of the following conditions:
(a) Regulatory Approvals. All Governmental Authority approvals
required to consummate the transactions contemplated hereby will have been
obtained and will remain in full force and effect and all statutory waiting
periods in respect thereof will have expired, unless the failure to obtain
any such approval is not reasonably likely to have a Material Adverse
Effect on the Business.
(b) No Injunction. No Governmental Authority of competent jurisdiction
will have enacted, issued, promulgated, enforced or entered any statute,
rule, regulation, judgment, decree, injunction or other order (whether
temporary, preliminary or permanent) which is in effect and prohibits
consummation of the transactions contemplated by this Agreement as a whole.
(c) Certain Representations. The representation and warranty of
Sellers set forth in Section 4.03(v)(3) shall be true and correct as of the
Closing Date.
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7.02 Conditions to Obligation of Buyer.
The obligations of Buyer to consummate the Purchase are also subject
to the fulfillment or written waiver, at or prior to the Closing Date, of
each of the following conditions:
(a) Representations and Warranties. The representations and warranties
of Sellers set forth in this Agreement will be true and correct as of the
date of this Agreement and as of the Closing Date as though made on and as
of the Closing Date (except that representations and warranties that by
their terms speak as of the date of this Agreement or some other date will
be true and correct as of such date only) and Buyer will have received
certificates, dated the Closing Date, signed on behalf of each of Sellers
to such effect; provided, however, that for purposes of determining the
satisfaction of this condition, no effect shall be given to any exception
or qualification in such representations and warranties relating to
materiality or a Material Adverse Effect; and provided further that, for
purposes of this condition, such representations and warranties (other than
the representations and warranties in Section 4.02(b), which shall be true
in all respects) shall be deemed to be true and correct in all respects
unless the failure of such representations and warranties to be so true and
correct, individually or in the aggregate, results or would reasonably be
expected to result in a Material Adverse Effect on Sellers or on the
Business.
(b) Performance of Obligations of Sellers. Sellers will have performed
in all material respects all obligations required to be performed by them
under this Agreement at or prior to the Closing Date and Buyer will have
received certificates, dated the Closing Date, signed on behalf of each of
Sellers to such effect.
(c) Third Party Consents. All consents or approvals of all Persons,
other than Governmental Authorities, required for or in connection with the
execution, delivery and performance of this Agreement (including
consummation of the Purchase) will have been obtained and will be in full
force and effect, unless the failure to obtain any such consent or approval
is not reasonably likely to have a Material Adverse Effect on the Business;
provided, however, that all consents and approvals listed on Exhibit
7.02(c) and all consents and approvals with respect to agreements listed on
Exhibit 7.02(c) must be obtained and in full force and effect.
7.03 Conditions to Obligations of Sellers.
The obligations of Sellers to consummate the Purchase are also subject
to the fulfillment or written waiver, at or prior to the Closing Date, of
each of the following conditions:
(a) Representations and Warranties. The representations and warranties
of Buyer set forth in this Agreement will be true and correct as of the
date of this Agreement and as of the Closing Date as though made on and as
of the Closing Date (except that representations and warranties that by
their terms speak as of the date of this Agreement or some other date will
60
be true and correct as of such date only) and Sellers will have received a
certificate, dated the Closing Date, signed on behalf of Buyer to such
effect; provided, however, that for purposes of determining the
satisfaction of this condition, no effect shall be given to any exception
or qualification in such representations and warranties relating to
materiality or a Material Adverse Effect; and provided further that, for
purposes of this condition, such representations and warranties (other than
the representations and warranties in Section 4.03(b), which shall be true
in all respects) shall be deemed to be true and correct in all respects
unless the failure of such representations and warranties to be so true and
correct, individually or in the aggregate, results or would reasonably be
expected to result in a Material Adverse Effect on Buyer.
(b) Performance of Obligations of Buyer. Buyer will have performed in
all material respects all obligations required to be performed by it under
this Agreement at or prior to the Closing Date and Sellers will have
received a certificate, dated the Closing Date, signed on behalf of Buyer
to such effect.
(c) Third Party Consents. All consents or approvals of all Persons,
other than Governmental Authorities, required for or in connection with the
execution, delivery and performance of this Agreement (including
consummation of the Purchase) will have been obtained and will be in full
force and effect, unless the failure to obtain any such consent or approval
is not reasonably likely to have a Material Adverse Effect on the Business;
provided, however, that all consents and approvals listed on Exhibit
7.02(c) and all consents and approvals with respect to agreements listed on
Exhibit 7.02(c) must be obtained and in full force and effect.
ARTICLE VIII
Termination
8.01 Termination.
This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time prior to the Closing Date:
(a) Mutual Consent. By the mutual written consent of Sellers and
Buyer.
(b) Breach. By Sellers or Buyer, by written notice, in the event of
either: (1) a breach by the other party of any representation or warranty
contained herein, which breach cannot be cured or which has not been cured
within 30 days after the giving of written notice to the breaching party of
such breach, or (2) a breach by the other party of any of the covenants or
agreements contained herein, which breach cannot be cured or which has not
been cured within 30 days after the giving of written notice to the
breaching party of such breach, provided that such breach (whether under
(1) or (2)) would be reasonably likely, individually or in the aggregate
with other breaches, to result in a Material Adverse Effect.
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(c) Delay. By Sellers or Buyer, by written notice, in the event that
the Purchase is not consummated by the first day of the month after the
month in which the six-month anniversary of execution of this Agreement
occurs, except to the extent that the failure of the Purchase then to be
consummated arises out of or results from the action or inaction of the
party seeking to terminate pursuant to this Section 8.01(c).
(d) No Approval. By Sellers or Buyer, by written notice, in the event
the approval of any Governmental Authority required for consummation of the
transactions contemplated hereby will have been denied by final
nonappealable action of such Governmental Authority or if such Governmental
Authority will have issued an order, decree or ruling or taken any other
action in effect permanently restraining, enjoining or otherwise
prohibiting consummation of the transactions contemplated by this
Agreement, and such order, decree, ruling or other action will have become
final and nonappealable, unless the failure to obtain any such approval is
not reasonably likely to have a Material Adverse Effect on the Business.
8.02 Effect of Termination and Abandonment.
In the event of termination of this Agreement and the abandonment of
the Purchase pursuant to this Article VIII, no party to this Agreement will
have any liability or further obligation to any other party to this
Agreement, except (a) for obligations arising under Sections 5.02(b),
5.02(c), 5.04 and 5.11(b), this Section 8.02 and Article XI and (b) that
termination will not relieve a breaching party from liability for any
willful breach of this Agreement giving rise to such termination.
ARTICLE IX
Tax Matters
9.01 Cooperation.
Buyer shall provide Sellers and their designees with such assistance
as may reasonably be requested by Sellers or any such designee in
connection with the preparation of any Tax Return, audit or judicial or
administrative proceeding or determination relating to Taxes with respect
to the Purchased Assets for periods prior to Closing, including, without
limitation, access to the books and records that relate to the Purchased
Assets, and the assistance of the officers and employees of Buyer and their
respective Affiliates.
9.02 Transfer Taxes.
All stamp, transfer, excise, documentary, sales, use, registration and
other such taxes and fees (including any penalties and interest) incurred
in connection with this Agreement and the transactions contemplated hereby
(collectively, the "Transfer Taxes") shall be split evenly between Buyer
and Seller. Buyer shall properly file on a timely basis all necessary tax
62
returns and other documentation with respect to, any Transfer Tax and
provide to Sellers evidence of filing and payment of all Transfer Taxes.
ARTICLE X
Indemnification
10.01 Indemnification Not Subject to Limitations.
Without regard to the DeMinimis Liability Restriction (as hereinafter
defined), the Deductible (as hereinafter defined), the Cap (as hereinafter
defined) or the periods of survival set forth in and applicable to certain
of the other provisions of this Article X, from and after the Closing Date:
(a) Sellers shall jointly and severally indemnify and hold harmless
Buyer and its Affiliates, each of their respective directors, officers,
employees and agents, and each of the respective heirs, executors,
successors and assigns of any of the foregoing (collectively, the "Buyer
Indemnified Parties") from and against any and all Liabilities incurred by
or asserted against any of Buyer Indemnified Parties in connection with or
arising from:
(i) any breach of any representation, warranty or agreement made
by, or on behalf of, Sellers under Section 2.02
(Consideration for Purchased Assets), Section 2.03 (Proration
of Expenses), Section 2.04 (Calculation of Purchase Price),
Section 2.05 (Settlement Date Payment), Section 2.06
(Allocation of Purchase Price), Section 2.07 (No Offset),
Section 2.08 (Interim Settlement), Section 2.09 (Co-Issue),
Section 4.02(d) (Title to and Sufficiency of Purchased
Assets) (but in the case of Section 4.02(d)(2), only for
breaches arising within one year of the Closing Date),
Section 4.02(m) (ALSS Platform), Section 4.02(j) (Liens for
Taxes), Section 4.02(t)(1) (Warehouse Loans Ownership),
Section 4.02(v)(3) (Financial Reports; No Material Adverse
Effect) (but in the case of Section 4.02(v)(3), only for
breaches arising within one year of the Closing Date),
Article VI (Employee Matters) and Article IX (Tax Matters) of
this Agreement;
(ii) any Tax or Lien for Taxes imposed upon any of the Excluded
Assets, any of the Excluded Liabilities or the Business, the
Purchased Assets or the Assumed Liabilities for any period on
or prior to the Closing Date and any audit or judicial or
administrative proceedings or determinations relating to such
Taxes or such Liens;
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(iii) any litigation, claims, actions, arbitrations or investigations
or other proceedings before any Governmental Authority pending or
threatened as of the Closing Date against the Selling Companies, Purchased
Assets or Assumed Liabilities;
(iv) any Excluded Liabilities; or
(v) any Excluded Assets;
provided, however, there shall be excluded from the indemnification
obligation any Liabilities resulting from a fact or circumstance which
constitutes a breach by Buyers of any representation, warranty or agreement
set forth in this Agreement.
(b) Buyer shall indemnify and hold harmless Sellers and Sellers'
Affiliates, each of their respective directors, officers, employees and
agents, and each of the respective heirs, executors, successors and assigns
of any of the foregoing (collectively, the "Seller Indemnified Parties")
from and against any and all Liabilities incurred by or asserted against
any of Seller Indemnified Parties in connection with or arising from:
(i) any breach of any representation, warranty or agreement made
by, or on behalf of, Buyer under Section 2.02 (Consideration
for Purchased Assets), Section 2.03 (Proration of Expenses),
Section 2.04 (Calculation of Purchase Price), Section 2.05
(Settlement Date Payment), Section 2.06 (Allocation of
Purchase Price), Section 2.07 (No Offset), Section 2.08
(Interim Settlement), Section 2.09 (Co-Issue), Article VI
(Employees) and Article IX (Tax Matters) of this Agreement;
(ii) any Tax or Lien for Taxes imposed upon any of the Purchased
Assets, any of the Assumed Liabilities or the Business for
any period after the Closing Date and any audit or judicial
or administrative proceedings or determinations relating to
such Taxes or such Liens;
(iii) any Assumed Liabilities;
(iv) any Purchased Assets; or
(v) the operation of the Business or the Purchased Assets from
and after the Closing Date.
provided, however, there shall be excluded from the indemnification
obligation any Liabilities resulting from a fact or circumstance which
constitutes a breach by Sellers of any representation, warranty or
agreement set forth in this Agreement.
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10.02 Indemnification Subject to Limitations.
Subject to the De Minimis Liability Restriction (as hereinafter
defined), the Deductible (as hereinafter defined), the Cap (as hereinafter
defined) and the periods of survival set forth below and applicable to the
indemnification obligations of Sellers and Buyer under this Section 10.02,
from and after the Closing Date:
(a) Sellers shall jointly and severally indemnify and hold harmless
Buyer Indemnified Parties from and against any and all Liabilities incurred
by or asserted against any of Buyer Indemnified Parties in connection with
or arising from:
(i) any breach of any representation, warranty or agreement made
by, or on behalf of, Sellers under this Agreement other than
those specifically referred to in Section 10.01(a)(i); or
(ii) the operation or ownership of the Business or the Purchased
Assets on or prior to the Closing Date.
(b) Buyer shall indemnify and hold harmless Seller Indemnified Parties
from and against any and all Liabilities incurred by or asserted against
any of Seller Indemnified Parties in connection with or arising from any
breach of any representation, warranty or agreement made by, or on behalf
of, Buyer under this Agreement other than those specifically referred to in
Section 10.01(b)(i).
10.03 Survival Periods.
The obligations to indemnify and hold harmless any party pursuant to
Section 10.02(a) or 10.02(b) shall terminate on June 30, 2003. The
obligations to indemnify and hold harmless any party pursuant to Section
10.01(a) and 10.01(b) shall survive indefinitely.
10.04 Miscellaneous.
(a) After the Closing, and except for any claims made under Sections
5.02(b), (c), (d), (e), 5.04, 5.05, 5.06, 5.07, 5.08, 5.10, 5.11, 5.12 and
5.13 and Article IX, and the Ancillary Agreements, the indemnification
expressly provided in this Article X shall be the sole and exclusive remedy
for any matter arising out of or relating to this Agreement or the
transactions contemplated hereby by any party. Nothing herein shall
preclude a party hereto from applying to a court for equitable relief to
enforce its rights under this Agreement.
(b) Each indemnitee under this Article X shall use its reasonable
efforts to mitigate Liabilities for which it seeks or reasonably
anticipates seeking indemnification hereunder.
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(c) For purposes of determining whether a breach of a representation
or warranty in this Agreement has occurred for purposes of this Article X
no effect shall be given to any exception or qualification relating to
materiality or Material Adverse Effect.
(d) In calculating any amount of Liabilities payable to Sellers or
Buyer under this Article X, the indemnifying party shall receive credit for
(1) any reduction in tax liability of the Indemnified Party (as defined
herein) as a result of the facts giving rise to the claim for
indemnification, (2) any insurance recoveries offsetting the amount of loss
and (3) any recoveries from third parties pursuant to indemnification or
otherwise with respect thereto. Any party receiving indemnity shall assign
to the indemnifying party all of its claims for recovery against third
parties as to such Liabilities whether by insurance coverage, contribution
claims, subrogation or otherwise.
10.05 De Minimis Liability, Deductible and Cap.
(a) Sellers shall not have any Liability whatsoever under Section
10.02(a) for any individual Liability that is less than $25,000 (the "De
Minimis Liability Restriction"). Sellers shall not have any liability
whatsoever under Section 10.02(a) for any Liability until the aggregate of
all Liabilities for which Sellers would be liable under Section 10.02(a)
exceeds on a cumulative basis an amount equal to $3,500,000 (the
"Deductible"), and then only to the extent of any such excess. The maximum
liability of Sellers (collectively) under Section 10.02(a) shall be equal
to $125,000,000 (the "Cap").
(b) Buyer shall not have any Liability whatsoever under Section
10.02(b) for any individual Liability that is less than $25,000. Buyer
shall not have any liability whatsoever under Section 10.02(b) for any
Liability until the aggregate of all Liabilities for which Buyer would be
liable under Section 10.02(b) exceeds on a cumulative basis an amount equal
to the Deductible, and then only to the extent of any such excess. The
maximum liability of Buyer under Section 10.02(b) shall be equal to the
Cap.
10.06 Third-Party Claims.
If a claim by a third party (a "Third-Party Claim") is made against a
Seller Indemnified Party or Buyer Indemnified Party (collectively, an
"Indemnified Party"), and if such Indemnified Party intends to seek
indemnity with respect thereto under this Article X, such Indemnified Party
shall promptly notify in writing the indemnifying party of such claims;
provided, that, that failure to promptly notify the indemnifying party will
not relieve the indemnifying party of any liability it may have to the
indemnified party, except to the extent that the indemnifying party
demonstrates that the defense of such Third-Party Claim is prejudiced by
the indemnified party's failure to give notice within such time period. The
indemnifying party shall have 30 days after receipt of such notice to
undertake, conduct and control, through counsel of its own choosing and at
its own expense, the settlement or defense thereof, and the Indemnified
Party shall cooperate with it in connection therewith; provided that the
indemnifying party shall permit the Indemnified Party to participate in
such settlement or defense through counsel chosen by such Indemnified
Party, provided that the fees and expenses of such counsel shall be borne
66
by such Indemnified Party. If the indemnifying party so chooses to assume
the defense it shall do so promptly and diligently. So long as the
indemnifying party is reasonably contesting any such claim in good faith,
the Indemnified Party shall not pay or settle any such claim.
Notwithstanding the foregoing, the Indemnified Party shall have the right
to pay or settle any such claim, provided that, in such event, it shall
waive any right to indemnity therefor by the indemnifying party. If the
indemnifying party does not notify the Indemnified Party in writing within
30 days after the receipt of the Indemnified Party's written notice of a
claim of indemnity hereunder that it elects to undertake the defense
thereof, the Indemnified Party shall have the right to contest, settle or
compromise the claim but shall not thereby waive any right to indemnity
therefor pursuant to this Agreement. The indemnifying party shall not,
except with the written consent of the Indemnified Party, enter into any
settlement unless (A) there is no finding or admission of any violation of
Applicable Law, (B) the sole relief provided is monetary damages that are
paid in full by the indemnifying party, (C) the indemnified party or its
Affiliates shall have no liability with respect to any compromise or
settlement of such Third-Party Claim, and (D) the compromise or settlement
provides to all indemnified parties and their Affiliates and agents an
unconditional release from all liability with respect to such Third-Party
Claim or the facts underlying such Third-Party Claim. With respect to any
Third-Party Claim subject to indemnification under this Article X, (i) both
the Indemnified Party and the indemnifying party, as the case may be, shall
keep the other party reasonably informed of the status of such Third-Party
Claim and any related proceedings at all stages thereof, (ii) the parties
agree to render to each other such assistance as they may reasonably
require of each other and to cooperate in good faith with each other in
order to ensure the proper and adequate defense of any Third-Party Claim
and (iii) with respect to any Third-Party Claim subject to indemnification
under this Article X, the parties agree to cooperate in such a manner as to
preserve in full (to the extent possible) the confidentiality of all
confidential information and the attorney-client and work-product
privileges.
ARTICLE XI
General Provisions
11.01 .Notices.
All notices and other communications required or permitted to be given
hereunder shall be in writing and shall be deemed given if delivered
personally, transmitted by facsimile (and telephonically confirmed), mailed
by registered or certified mail with postage prepaid and return receipt
requested, or sent by commercial overnight courier, courier fees prepaid,
to the parties at the following addresses:
(a) if to Buyer, to it at:
Washington Mutual Bank, FA
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Senior Vice President
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
Washington Mutual Bank, FA
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Senior Vice President and
Associate General Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ White & ▇▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to Sellers, to them at:
HomeSide Lending, Inc.
Office of the CEO
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
National Australia Bank Limited
Legal Department, ▇▇▇▇▇ ▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇
Attention: ▇▇▇▇▇ Krasnostein, Esq.
Group General Counsel
Facsimile: ▇▇-▇-▇▇▇▇-▇▇▇▇/4906
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and
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
or to such other Person or address as either party shall specify by notice
in writing to the other party in accordance with this Section 11.01. All
such notices or other communications shall be deemed to have been received
on the date of the personal delivery or facsimile transmission (with
telephone confirmation) or on the third Business Day after the mailing or
dispatch thereof; provided that notice of change of address shall be
effective only upon receipt.
11.02 Amendment and Modification; Waiver.
(a) This Agreement and the Disclosure Schedules hereto may not be
amended except by an instrument or instruments in writing signed and
delivered on behalf of each of the parties hereto.
(b) At any time prior to the Closing Date, any party hereto which is
entitled to the benefits hereof may, by an instrument in writing, (i)
extend the time for the performance of any of the obligations or other acts
of the other party, (ii) waive any inaccuracy in the representations and
warranties of the other party contained herein or in any schedule hereto or
in any document delivered pursuant hereto and (iii) waive compliance with
any of the agreements of the other party or conditions contained herein.
Any agreement on the part of a party hereto to any such extension or waiver
shall be valid if set forth in an instrument in writing signed and
delivered on behalf of such party.
11.03 Entire Agreement.
This Agreement (including the Disclosure Schedules and Exhibits (but
excluding the Ancillary Agreements)) constitute the entire agreement and
supersede all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof.
11.04 Fees and Expenses.
Except as otherwise expressly provided herein, Sellers shall be
responsible for all transfer and recording fees, costs with respect to
delivery of the custodial and other loan files and mortgage servicing
records relating to the Acquired Warehouse Loans and the Pipeline Loans and
other related costs incurred by Sellers in their performance of their
obligations under this Agreement, together with fees of Sellers' document
custodian, attorneys and accountants. Buyer shall pay all data processing
costs incurred by Buyer in connection with this Agreement, and other
related costs of Buyer in its performance of its obligations under this
69
Agreement, together with fees of Buyer's attorneys and accountants.
11.05 Third Party Beneficiaries.
Nothing in this Agreement, express or implied, is intended to confer
upon any Person (including, without limitation, employees of Sellers or
Investors) other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations or liabilities under or by reason
of this Agreement.
11.06 Assignment; Binding Effect.
This Agreement shall not be assigned by any of Sellers or (until
payment of the Final Purchase Price) Buyer hereto without the prior written
consent of the other parties; provided, however, that this Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns, and provided further that
Buyer shall have the right to assign to a Subsidiary of Buyer, Buyer's
right hereunder to purchase any Purchased Assets so long as (a) Buyer
irrevocably and unconditionally guarantees all of the obligations of such
Subsidiary hereunder and (b) such assignment shall not affect Buyer's
obligations hereunder, delay the Closing, adversely affect Buyer's ability
to consummate the transaction contemplated hereby or otherwise adversely
affect any interest (economic, tax, regulatory or otherwise) of Sellers in
this Agreement.
11.07 Governing Law.
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of New York applicable to agreements made and to
be performed entirely within the State of New York, without regard to the
conflicts of law principles of the State of New York.
(b) Each party hereto agrees that it will bring any action or
proceeding in respect of any claim arising out of or related to this
Agreement or the transactions contemplated hereby or thereby exclusively in
the United States District Court for the Southern District of New York or
the Supreme Court of the State of New York for New York County (the "Chosen
Courts") and solely in connection with claims arising under this Agreement
or the transactions contained in or contemplated by this Agreement (1)
irrevocably submits to the exclusive jurisdiction of the Chosen Courts, (2)
waives any objection to laying venue in any such action or proceeding in
the Chosen Courts, (3) to the fullest extent permitted by law, waives any
objection that the Chosen Courts are an inconvenient forum or do not have
jurisdiction over any party hereto and (4) agrees that service of process
upon such party in any such action or proceeding will be effective if
notice is given in accordance with Section 11.01.
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11.08 Waiver of Jury Trial.
Each party hereto acknowledges and agrees that any controversy which
may arise under this Agreement is likely to involve complicated and
difficult issues, and therefore each such party hereby irrevocably and
unconditionally waives any right such party may have to a trial by jury in
respect of any litigation directly or indirectly arising out of or relating
to this Agreement, or the transactions contemplated by this Agreement. Each
party certifies and acknowledges that (a) no representative, agent or
attorney of any other party has represented, expressly or otherwise, that
such other party would not, in the event of litigation, seek to enforce the
foregoing waiver, (b) each party understands and has considered the
implications of this waiver, (c) each party makes this waiver voluntarily,
and (d) each party has been induced to enter into this Agreement by, among
other things, the mutual waivers and certifications in this Section 11.08.
11.09 Counterparts.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, and all of which together shall
constitute one and the same instrument.
11.10 Severability.
The provisions of this Agreement will be deemed severable and the
invalidity or unenforceability of any provision will not affect the
validity or enforceability of the other provisions hereof. If any provision
of this Agreement, or the application thereof to any person or entity or
any circumstance, is found by a court or other Governmental Authority of
competent jurisdiction to be invalid or unenforceable, (a) a suitable and
equitable provision will be substituted therefor in order to carry out, so
far as may be valid and enforceable, the intent and purpose of such invalid
or unenforceable provision and (b) the remainder of this Agreement and the
application of such provision to other persons, entities or circumstances
will not be affected by such invalidity or unenforceability, nor will such
invalidity or unenforceability affect the validity or enforceability of
such provision, or the application thereof, in any other jurisdiction.
11.11 Affiliates of Buyer.
To the extent that this Agreement obligates any Affiliate of Buyer
either to take or to refrain from taking certain actions, Buyer shall cause
such Affiliate to comply with such covenant.
* * *
[The next page is a signature page.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed on their behalf by their respective officers hereunto duly
authorized.
Sellers:
NATIONAL AUSTRALIA BANK LIMITED
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Head of Investments and
Advisory
HOMESIDE INTERNATIONAL, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
HOMESIDE LENDING, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chairman and Chief Executive
Officer
Buyer:
WASHINGTON MUTUAL BANK, FA
By: /s/ ▇▇▇▇▇ ▇. TALL
------------------------------------------
Name: ▇▇▇▇▇ ▇. Tall
Title: Vice Chair
72
▇▇▇▇ OF SALE AND INSTRUMENT OF ASSUMPTION OF LIABILITIES
--------------------------------------------------------
This ▇▇▇▇ OF SALE AND INSTRUMENT OF ASSUMPTION OF LIABILITIES (this
"Agreement"), made and entered into as of __________ __, 2002, by and
between HomeSide International, Inc., a Delaware corporation ("HSI"),
HomeSide Lending, Inc., a Florida corporation ("HSL"), [other Selling
Subsidiaries] (the "Selling Subsidiaries", and together with HSI and HSL,
the "Assignors") and Washington Mutual Bank, FA, a federal savings
association ("Buyer" or "Assignee").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Asset Purchase/Liability Assumption
Agreement, dated as of December 10, 2001 (the "Purchase Agreement"), by and
among Buyer, Assignee and Assignors, among other things, Assignee has
agreed to purchase from Assignors and Assignors have agreed to sell,
transfer, assign, convey, and deliver to Assignee, all of their right,
title and interest in certain of their assets, properties and business and
Assignee has agreed to assume certain of Assignors' liabilities upon the
terms and conditions set forth in the Purchase Agreement;
NOW, THEREFORE, pursuant to the Purchase Agreement and the assignment
described above and in consideration of the premises set forth therein and
for other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, Assignors and Buyer hereby agree as follows:
Section 1. Conveyance and Assignment of the Purchased Assets.
--------------------------------------------------------
(a) In accordance with all the terms and conditions of the Purchase
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Assignors by this Agreement
hereby sell, convey, assign, transfer and deliver to, and vest in Assignee,
its successors and assigns, to have and to hold forever, effective as of
the date hereof, all of the right, title and interest, legal and equitable,
of Assignors in and to the Purchased Assets.
(b) Assignors hereby authorize Assignee to take any appropriate or
reasonable action to protect the right, title and interest hereby conveyed
in connection with the Purchased Assets hereby sold, assigned, transferred,
conveyed and delivered to Assignee in the name of Assignors or Assignee or
any other name (but for the benefit of Assignee and its successors and
assigns) against each and every person or persons whomsoever claiming or
asserting any claim against any or all of the same.
Section 2. Assumption of Liabilities.
-------------------------
(a) In partial consideration for the foregoing sale, conveyance,
assignment, transfer and delivery of the Purchased Assets on the date
hereof, and for other good and valuable consideration, the receipt and
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sufficiency of which are hereby acknowledged, Assignee, by this Agreement,
hereby assumes, becomes responsible for and agrees to pay and hold
Assignors harmless from and against the Assumed Liabilities.
(b) The assumption by Assignee of the Assumed Liabilities shall not be
construed to defeat, impair or limit in any way any rights and remedies of
Assignee to contest or dispute the validity or amount thereof.
Section 3. Power of Attorney. Each Assignor hereby constitutes and
----------------- appoints Assignee, its successors and
assigns, the true and lawful attorney of Assignor with full power of
substitution in the name and stead of such Assignor, but on behalf and for
the benefit and at the expense of Assignee, its successors and assigns, to
demand and receive any and all of the Purchased Assets assigned by such
Assignor of Assignee pursuant to this Agreement and to give receipts and
releases for and in respect of the same or any part thereof, to endorse any
claim or right of any kind in respect thereof and to do all acts and things
in relation to the above-mentioned Purchased Assets which Assignee, its
successors or assigns, may deem desirable, such Assignor hereby declaring
that the foregoing powers are coupled with an interest and are not
revocable and shall not be revoked by such Assignor for any reason
whatsoever.
Section 4. Further Assurances. Assignors shall, at any time and from
------------------- time to time, promptly, upon the
reasonable request of Assignee, execute, acknowledge, deliver or perform,
all such further acts, deeds, assignments, transfers, conveyances, and
assurances as may be required for the better vesting and conferring to
Assignee of title in and to the Purchased Assets, to effect the
transactions contemplated by this Agreement. Assignee shall, at any time
and from time to time, promptly, upon the reasonable request of the
Assignors, execute, acknowledge, deliver or perform, all such further acts,
deeds, assumption agreements, transfers, and assurances as may be required
for the full assumption and transfer to the Assignee of the Assumed
Liabilities, to effect the transactions contemplated by this Agreement.
Section 5. Notices. All notices and other communications required or
------- permitted to be given hereunder shall be in
writing and shall be deemed given if delivered personally, transmitted by
facsimile (and telephonically confirmed), mailed by registered or certified
mail with postage prepaid and return receipt requested, or sent by
commercial overnight courier, courier fees prepaid, to the parties at the
following addresses:
(a) if to Assignee, to them at:
Washington Mutual Bank, FA
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Senior Vice President
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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with copies to:
Washington Mutual Bank, FA
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Senior Vice President and
Associate General Counsel
Facsimile: (▇▇▇)▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ White & ▇▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to Assignors, to them at:
HomeSide Lending, Inc.
Office of the CEO
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
National Australia Bank Limited
Legal Department, ▇▇▇▇▇ ▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇
Attention: ▇▇▇▇▇ Krasnostein, Esq.
Group General Counsel
Facsimile: ▇▇-▇-▇▇▇▇-▇▇▇▇/4906
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and
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
or to such other Person or address as either party shall specify by notice
in writing to the other party in accordance with this Section 5. All such
notices or other communications shall be deemed to have been received on
the date of the personal delivery or facsimile transmission (with telephone
confirmation) or on the third Business Day after the mailing or dispatch
thereof; provided that notice of change of address shall be effective only
upon receipt.
Section 6. Governing Law. This Agreement shall be governed by and
-------------- construed in accordance with the laws of
the State of New York applicable to agreements made and to be performed
entirely within the State of New York, without regard to the conflicts of
law principles of the State of New York.
Section 7. Succession and Assignment. This Agreement shall be binding
------------------------- upon and inure to the benefit
of the parties named herein and their respective successors and permitted
assigns. No party may assign either this Agreement or any of its rights,
interests, or obligations hereunder without the prior written approval of
the other party, provided, however, that Buyer may assign this Agreement or
any of its rights, interests or obligations hereunder to an Affiliate
without the prior written approval of the Assignors, provided that with
respect to this Agreement Sellers shall only be obligated to the original
Buyer and Assignee and Assignors continue to interact for all purposes of
this Agreement solely with the original Assignee.
Section 8. Counterparts. This Agreement may be executed in two or more
------------ counterparts, all of which shall be
considered one and the same agreement, and shall become effective when one
or more such counterparts have been signed by each of the parties and
delivered to the other party.
Section 9. Conflicts. In the event that the terms of this Agreement
---------
and the terms of the Purchase Agreement are inconsistent or otherwise
conflict, the terms of the Purchase Agreement shall be deemed to be
controlling.
Section 10. Definitions. Capitalized terms used, but not defined
-----------
herein shall have those meanings assigned to them in the Purchase
Agreement.
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IN WITNESS WHEREOF, the parties hereto have duly executed or caused
this Agreement to be duly executed on the date first above written.
HOMESIDE INTERNATIONAL, INC.
By: ____________________________________
Name:
Title:
HOMESIDE LENDING, INC.
By: ____________________________________
Name:
Title:
WASHINGTON MUTUAL BANK, FA
By: ____________________________________
Name:
Title: