EXECUTION COPY
ASSET PURCHASE AGREEMENT
AND
PLAN OF REORGANIZATION
BETWEEN
IMC MORTGAGE COMPANY
MORTGAGE AMERICA, INC.
AND
THE SHAREHOLDERS OF
MORTGAGE AMERICA, INC.
DECEMBER 14, 1996
TABLE OF CONTENTS
FACTUAL BACKGROUND
ARTICLE 1
CERTAIN DEFINITIONS
ARTICLE 2
PURCHASE AND SALE OF ASSETS
Page
----
2.1 Assets to be Transferred............................................................. 8
2.2 Excluded Assets...................................................................... 10
2.3 Assumption of Liabilities............................................................ 11
ARTICLE 3
PURCHASE PRICE - PAYMENT WITH EXCHANGE SHARES
3.1 Purchase Price....................................................................... 13
3.2 Payment of Purchase Price............................................................ 13
3.3 Matched Payment...................................................................... 14
3.4 Base Payment ....................................................................... 14
3.5 Contingent Payment................................................................... 14
3.6 Prorations........................................................................... 17
3.7 Other Payments and Adjustments....................................................... 18
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF MAI AND SHAREHOLDERS
4.1 Organization......................................................................... 18
4.2 Capitalization....................................................................... 18
4.3 Subsidiaries of the MAI; Nature of Business.......................................... 19
4.4 Authority; No Violation.............................................................. 19
4.5 Consents and Approvals............................................................... 20
4.6 Financial Statements................................................................. 20
4.7 Undisclosed Liabilities.............................................................. 20
4.8 No Material Adverse Change........................................................... 21
4.9 Legal Proceedings.................................................................... 21
i
4.10 Material Contracts................................................................... 21
4.11 Taxes................................................................................ 22
4.12 ERISA................................................................................ 23
4.13 Ownership of Property................................................................ 24
4.15 Brokers and Finders.................................................................. 25
4.16 Insurance............................................................................ 25
4.17 Mortgage Banking Licenses and Qualifications......................................... 26
4.18 Loan Portfolio....................................................................... 26
4.19 Enforceability....................................................................... 26
4.20 Title to Certain Mortgage Loans...................................................... 27
4.21 No Recourse.......................................................................... 27
4.22 Compliance........................................................................... 27
4.23 Investor Commitments................................................................. 28
4.24 Custodial Accounts................................................................... 28
4.25 Accounts Receivable.................................................................. 28
4.26 Data Processing...................................................................... 28
4.27 Inquiries............................................................................ 28
4.28 Representations...................................................................... 29
4.29 Advances............................................................................. 29
4.30 Pools................................................................................ 29
4.31 Commercial Mortgages................................................................. 29
4.32 No Tax-Sharing Agreements............................................................ 29
4.33 No Intercompany Accounts............................................................. 29
4.34 MAI Employees........................................................................ 30
4.35 Conduct Prior to Closing............................................................. 30
4.36 MAI's and Shareholders' Investment Intention/Restricted Securities................... 32
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
5.1 Organization......................................................................... 33
5.2 Authority; No Violation.............................................................. 34
5.3 Brokers and Finders.................................................................. 34
5.4 Buyer's Review of Seller's Schedules................................................. 35
ARTICLE 6
COVENANTS
6.1 Filings and Consent.................................................................. 35
6.2 Press Releases....................................................................... 35
6.3 Employment Agreements................................................................ 36
ii
6.4 Marketing of Competing Products...................................................... 36
6.5 Leases............................................................................... 36
6.9 Confidentiality...................................................................... 37
ARTICLE 7
FURTHER COVENANTS OF MAI AND SHAREHOLDERS
7.1 Access to Information and Records....................................................... 37
7.2 Bank Accounts........................................................................... 37
7.3 Conduct of Business Pending the Closing................................................. 38
7.4 Change of Corporate Name................................................................ 39
7.5 Consents................................................................................ 39
7.6 Other Action............................................................................ 39
7.7 Disclosure.............................................................................. 39
ARTICLE 8
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
8.1 Representations and Warranties True on the Closing Date................................. 40
8.2 Compliance With Agreement............................................................... 40
8.3 Absence of Litigation................................................................... 40
8.4 Consents and Approvals.................................................................. 40
8.5 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Waiting Period........................................................ 40
8.6 NASDAQ Requirement for Shareholder Approval.......................................... 41
ARTICLE 9
CONDITIONS PRECEDENT TO MAI'S OBLIGATIONS
9.1 Representations and Warranties True on the Closing Date.................................. 41
9.2 Compliance With Agreement................................................................ 41
9.3 Absence of Litigation.................................................................... 41
9.4 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Waiting Period......................................................... 41
ARTICLE 10
CLOSING
10.1 Documents to be Delivered by MAI and Shareholders....................................... 42
10.2 Documents to be Delivered by Buyer...................................................... 43
ARTICLE 11
iii
TERMINATION
11.1 Right of Termination Without Breach..................................................... 44
11.2 Termination for Breach............................................................... 44
ARTICLE 12
MAI'S PLAN OF REORGANIZATION AND LIQUIDATION
12.1 Plan of Reorganization............................................................... 45
12.2 Shareholders' Investment Intent...................................................... 46
12.3 Termination of MAI Business Operations............................................... 46
12.4 Immediate Partial Liquidation Distribution........................................... 46
12.5 Buyer's Temporary Operation of MAI's Business Pending License Transfer............... 46
12.6 MAI's Assignment to Shareholders of Agreement Upon MAI Liquidation................... 47
12.7 Appointment of Shareholders' Agent................................................... 47
12.8 Tax-free Exchange for Seller......................................................... 48
ARTICLE 13
INDEMNIFICATION
13.1 Indemnification...................................................................... 49
ARTICLE 14
POST-CLOSING COVENANTS
14.1 Personnel Matters.................................................................... 50
14.2 Shareholder Cooperation.............................................................. 50
14.3 Board of Directors................................................................... 50
14.4 Guaranties........................................................................... 51
14.5 Auto Business; Right of First Refusal................................................ 51
ARTICLE 15
AMENDMENTS
15.1 Amendment, Extension and Waiver...................................................... 51
ARTICLE 16
MISCELLANEOUS
16.1 Survival............................................................................. 52
16.2 Expenses............................................................................. 52
iv
16.3 Entire Agreement..................................................................... 52
16.4 Parties in Interest.................................................................. 52
16.5 Assignment........................................................................... 52
16.6 Setoff............................................................................... 53
16.7 Notices.............................................................................. 53
16.8 Captions............................................................................. 54
16.9 Counterparts......................................................................... 54
16.10 Governing Law........................................................................ 55
16.11 No Third Party Beneficiaries......................................................... 55
v
ASSET PURCHASE AGREEMENT
AND
PLAN OF REORGANIZATION
THIS ASSET PURCHASE AGREEMENT AND PLAN OF REORGANIZATION (the
"Agreement"), dated as of December 14, 1996, is made by and between IMC MORTGAGE
COMPANY, a Florida corporation ("Buyer"), MORTGAGE AMERICA, INC., a Michigan
corporation ("MAI"), and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇ AND ▇▇▇▇▇▇
▇▇▇▇▇▇ (individually "Shareholder" and together, jointly and severally, the
"Shareholders") (MAI and Shareholders, together, jointly and severally, are
sometimes referred to as "Seller") and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, as agent for the
Shareholders (the "Shareholder Agent").
FACTUAL BACKGROUND
A. MAI is engaged in the mortgage banking and brokerage business (the
"Business") and the automobile finance business (the "Auto Business").
The Shareholders own all the issued and outstanding shares of capital
stock in MAI.
B. Buyer desires to purchase all of the Business and substantially all of
the assets of MAI (the "Acquisition").
C. In consideration for the sale of the assets of MAI, MAI shall receive
fully paid, nonassessable, common stock, $.01 par, of Buyer ("Common
Stock"). MAI intends to distribute the Stock to the Shareholders, in
connection with MAI's liquidation following the sale.
▇. ▇▇▇ has certain non-transferable licenses and permits necessary or
useful in connection with the operation of the Business. To the extent
Buyer does not have such licenses and permits, Buyer shall immediately
apply for them. In the event, and to the extent that MAI's
non-transferable licenses and permits are required for Buyer to
continue operation of the Business, Buyer shall operate the Business
under a temporary management agreement with MAI until such licenses
and permits are obtained.
F. This Agreement is intended to be a Plan of Reorganization within the
meaning of Section 368(a)(1)(C) of the Internal Revenue Code of 1986,
as amended.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, agreements, representations and warranties herein contained, and
intending to be legally bound, the parties hereto do hereby agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
For the purpose of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires, (i) the terms defined in this
Article have the meanings assigned to them in this Article and include the
plural as well as the singular and (ii) all accounting terms not otherwise
defined herein have the meanings assigned under GAAP.
Acquisition -- As defined in the Introduction.
Affiliate -- With respect to any Person, any Person directly or
indirectly controlling, controlled by, or under common control with such other
Person. For purposes of this definition, "control" (including with correlative
meaning, the terms "controlled by" and "under common control with,") as used
with respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through ownership of voting securities, by contract or
otherwise.
Affiliated Group -- Any affiliated group within the meaning of Code
Section 1504 or any similar group defined under a similar provision of state,
local or foreign law, including any consolidated, unitary or combined group of
companies.
Agency -- FHA, VA, GNMA, FNMA, FHLMC or a State Agency, as applicable.
Agreement -- As defined in the Factual Background.
Audited Financial Statements -- As defined in Section 4.6.
Auto Business -- As defined in the Introduction.
Balance Sheet -- The statement of financial condition forming a part of
the Interim Financial Statements.
Base Payment -- Delivery by Buyer to MAI of certain Exchange Shares
pursuant to Section 3.4 as part of the Purchase Price.
Base Payment Amount -- As defined in Section 3.4.
Business -- As defined in the Introduction, and includes MAI's
Conforming Business and Non-Conforming Business.
Business Days -- Any day on which the New York Stock Exchange is open
for trading.
2
Business Pipeline -- The sum of all Conforming Mortgage Loans and
Non-Conforming Mortgage Loans of MAI in the process of being closed by MAI for
which credit approval has already been obtained from the Investor or for which
MAI has general credit authority from the Investor without the need for a
loan-by-loan approval where MAI has formally or informally advised the Borrower
that it will make the loan and which have arisen in the ordinary course of MAI's
business, consistent with MAI's past practices, as shown on MAI's regularly
prepared reports.
Buyer -- As defined in the Introduction.
Buyer Schedule -- The disclosure schedule delivered by Buyer to Sellers
in connection with the Acquisition.
Closing -- The closing with respect to the Acquisition as defined in
preamble to Article 10.
Closing Balance Sheet -- The balance sheet of MAI as of December 31,
1996.
Closing Date -- The date and time of Closing as defined in the preamble
to Article 10.
Closing Tangible Net Worth -- The amount equal to the amount included
under shareholder's equity on the Closing Balance Sheet minus the amount of all
intangible assets on the Closing Balance Sheet and minus any amount attributable
to (i) MAI's ownership of Common Stock and (ii) any Excluded Assets and directly
related Liabilities retained by MAI.
Code -- The Internal Revenue Code of 1986, as amended.
Common Stock -- As defined in the Factual Background section.
Conforming Business -- The Conforming Mortgage Loan origination and
brokerage business conducted by MAI.
Conforming Mortgage Loan -- A Mortgage Loan which is an FHA Loan, a VA
Loan or a loan eligible to be sold to FNMA or FHLMC.
Contingent Payment -- As defined in Section 3.2(d).
Contingent Payment Amount -- As defined in Section 3.5(a).
Conventional Loan -- Any Mortgage Loan which (a) is a first lien on a
"single family" residence, (b) is neither insured by FHA nor guaranteed by VA,
(c) has a loan-to-value ratio of 95% or less at the time of origination,
(d) matures in 30 years or less, (e) bears a market yield at the time of
origination, and (f) satisfies all requirements for sale to FNMA and FHLMC.
3
Effective Time -- January 1, 1997 at 12:01 a.m.
Employment Agreements -- As defined in Section 6.3.
Encumbrance -- Any lien, pledge, security interest, claim, charge,
easement, limitation, commitment, restriction or encumbrance of any kind or
nature whatsoever.
ERISA -- As defined in Section 4.12(b).
Environmental Claim -- Civil, criminal, administrative action, claim or
other proceeding relating to Environmental Laws.
Environmental Laws -- As defined in Section 4.14.
Exchange Shares -- Shares of Common Stock delivered by Buyer to MAI as
partial payment of the Purchase Price.
Excluded Assets -- As defined in Section 2.2.
Executives -- As defined in Section 6.3.
FHA -- Federal Housing Administration.
FHA Loans -- Mortgage Loans which satisfy all applicable rules and
requirements to be insured by FHA and which are insured by FHA.
FHLMC -- Federal Home Loan Mortgage Corporation.
Financial Statements -- As defined in Section 4.6.
FNMA -- Federal National Mortgage Association.
GAAP - - Generally accepted accounting principles as used in the United
States of America.
GNMA -- Government National Mortgage Association.
GNMA Securities -- GNMA mortgage-backed certificates.
HUD -- United States Department of Housing and Urban Development.
Independent Accounting Firm -- Any "Big Six" accounting firm or its
successor.
4
Inquiry -- As defined in Section 4.27.
Interim Financial Statements -- As defined in Section 4.6.
Investor -- Any Person who owns or holds Mortgage Loans, or servicing
rights to Mortgage Loans, pursuant to Mortgage Servicing Agreements or who is a
party to an Investor Commitment.
Investor Commitment -- The commitment of a Person to purchase a
Mortgage Loan.
Investor Programs -- Mortgage participation, whole-loan sales, pooling
and servicing programs.
IRS -- Internal Revenue Service.
Lease Agreements -- As defined in Section 6.5.
Liability -- As defined in Section 2.3(a).
Licenses -- As defined in Section 4.17.
Loan Property -- Any property in which MAI holds a mortgage lien or
security interest.
Loss -- Any claim, liability, loss, cost, clean up cost or
reimbursement, damage, penalty, fine, obligation, deficiency or expense of any
kind whatsoever (including, without limitation, reasonable attorneys',
accountants', consultants' or experts' fees, and disbursements including but not
limited to court costs and reasonable costs of investigation incurred in
defending against or settling any such claim, liability, loss, cost, damage or
expense, or any amounts paid in connection with the investigation, defense or
settlement thereof, whether or not arising out of third party claims and
including costs and expenses incurred on appeal or in connection with any
bankruptcy or insolvency proceeding).
Matched Payment -- Delivery by Buyer to MAI of number of Exchange
Shares as equals the number of Matched Shares acquired as part of Purchased
Assets, as partial payment of the Purchase Price.
Matched Shares -- The shares of Common Stock owned by MAI prior to the
Closing Date and constituting part of the Purchased Assets.
Material Adverse Effect -- Adverse effect on the business, condition
(financial or otherwise), results of operations, properties, assets or prospects
of a Person with an economic effect, individually or in the aggregate, of
$50,000 or more.
5
Mortgage Loan -- Any closed residential mortgage loan whether or not
such mortgage is included in a securitized portfolio, as evidenced by notes or
other evidences of indebtedness duly secured by mortgages or deeds of trust.
Non-Conforming Business -- The Non-Conforming Mortgage Loan origination
and brokerage business conducted by MAI.
Non-Conforming Mortgage Loan -- A Mortgage Loan which does not satisfy
the requirements for being an FHA Loan, VA Loan or Conventional Loan.
Operating Property -- As defined in Section 4.14.
Owned Real Property -- As defined in Section 2.2(b).
Person -- Any individual, corporation, company, partnership (limited or
general), joint venture, association, trust or other entity, including
governmental and quasi-governmental bodies.
Plans -- As defined in Section 4.12(a).
Pooling -- Aggregation of two or more Mortgage Loans that have been
pledged or granted to secure mortgage-backed securities or participation
certificates.
Purchased Assets -- As defined in Section 2.1.
Purchase Price -- As defined in Section 3.1.
Registration Rights Agreement -- The Registration Rights Agreement of
even date herewith, in the form attached hereto as Exhibit 10.1(k).
Regulations -- (i) Federal, state and local laws, rules and
regulations, (ii) the responsibilities and obligations set forth in any
agreement between MAI and an Investor or private mortgage insurer and (iii) the
laws, rules, regulations, guidelines, handbooks and other requirements of an
Investor, Agency, private mortgage insurer, Public Housing Programs or Investor
Programs, with respect to the origination, insuring, purchase, sale, or filing
of claims in connection with a Mortgage Loan.
Schedule -- The disclosure schedule delivered by Sellers to Buyer in
connection with the Acquisition.
Seller(s) -- As defined in the Introduction.
Shareholders' Agent -- As defined in the Introduction.
6
Servicing Released Loans -- As defined in Section 4.21.
Single Employer Plan -- Any employee pension benefit plan (as that term
is defined in Section 3(2) of ERISA) maintained or contributed to by any entity
which would be deemed a "single employer" with MAI under Section 4001 of ERISA.
State Agency -- Any state agency with authority to regulate the
business of MAI, determine the investment requirements with regard to loans
originated or purchased by MAI, or originate or purchase mortgage loans, or
otherwise participate in or promote mortgage lending.
Subsidiary -- A company is a Subsidiary of another company if 50% or
more of its outstanding voting securities are owned by such other company.
Tangible Net Worth -- The amount equal to the amount included under
Shareholders' equity on MAI's balance sheet minus (i) the amount of all
intangible assets, (ii) the amount attributable to MAI's ownership of Common
Stock, and (iii) the amount of all Excluded Assets on the Balance Sheet.
Tax Affiliate -- A Person is a Tax Affiliate of another Person if they
are both members of the same Affiliated Group.
Taxes -- As defined in Section 4.11(d).
Tax Return -- As defined in Section 4.11(e).
VA -- Veterans Administration.
VA Loans -- Mortgage Loans which satisfy all applicable rules and
regulations to be guaranteed by VA and which are guaranteed by VA.
Warehouse Loans -- Mortgage Loans held by MAI for sale and pledged to
secure borrowings by MAI.
7
ARTICLE 2
PURCHASE AND SALE OF ASSETS
2.1 Assets to be Transferred
Subject to the terms and conditions of this Agreement, on the Closing
Date (as hereinafter defined) Shareholders shall cause MAI to, and MAI shall
sell, transfer, convey, assign and deliver to Buyer (or upon Buyer's request, to
one or more wholly-owned subsidiaries of Buyer as designated by Buyer), and
Buyer shall purchase and accept all of the business, rights, claims and assets
(of every kind, nature, character and description, whether real, personal or
mixed, whether tangible or intangible, whether accrued, contingent or otherwise,
and wherever situated) of MAI, together with all rights and privileges
associated with such assets and with the business of MAI, other than the
Excluded Assets (as hereinafter defined) (collectively, the "Purchased Assets").
The Purchased Assets shall include, but not be limited to, the following:
(a) Leased Real Property. All of the leases of real property
with respect to real property leased by MAI, including the
leases (the "Real Property Leases") described in Schedule
with respect to the real property described thereon (the
"Leased Real Property").
(b) Personal Property. All machinery, equipment, tools,
supplies, spare parts, furniture and all other personal
property (other than personal property leased pursuant to
Personal Property Leases as hereinafter defined) owned,
utilized or held for use by MAI on the Closing Date,
including, without limitation, the personal property
described on Schedule 2.1(b).
(c) Mortgage Loan Inventory. All of MAI's Mortgage Loans
(including loans which have closed but not funded),
including the Mortgage Loans and Warehouse Loans Described
in Schedule 2.1(c).
(d) Work in Process. All loan applications and loans in process.
(e) Personal Property Leases. All of MAI's rights and interests
as lessee under all leases of machinery, equipment,
vehicles, furniture and other personal property leased by
MAI, including all such leases (the "Personal Property
Leases") described in Schedule 2.1(e).
(f) Trade Rights. All of MAI's interest in any Trade Rights. As
used herein, the term "Trade Rights" shall mean and include:
(i) all trademark rights, business identifiers, trade dress,
service marks, trade names, and brand names, all
registrations thereof and applications therefor and all
goodwill associated with the foregoing, including the name
"Mortgage America" and "Alternative Lending Mortgage Corp.";
(ii) all copyrights, copyright registrations and copyright
applications, and all other rights associated with the
foregoing and the underlying works of ownership; (iii) all
patents and patent applications and all international
proprietary rights associated therewith; (iv) all contracts
8
or agreements granting any right, title, license or
privilege under the intellectual property rights of any
third party; (v) all inventions, mask works and mask
work registrations, know-how, discoveries, improvements,
designs, trade secrets, shop and royalty rights, employee
covenants and agreements respecting intellectual property
and non-competition and all other types of intellectual
property; and (vi) all claims for infringement or breach
of any of the foregoing.
(g) Contracts. All of MAI's rights in, to and under all
contracts, Mortgage Commitments, Investor Commitments,
Investor Programs and pending mortgage applications
(hereinafter "Contracts") of MAI. To the extent that any
Contract for which assignment to Buyer is provided herein is
not assignable without the consent of another party, this
Agreement shall not constitute an assignment or an attempted
assignment thereof if such assignment or attempted
assignment would constitute a breach thereof. Each
Shareholder, MAI and Buyer agree to use their reasonable
best efforts (without any requirement on the part of Buyer
to pay any money or agree to any change in the terms of any
such Contract) to obtain the consent of such other party to
the assignment of any such contract to Buyer in such
assignment. If any such consent shall not be obtained, each
Shareholder and MAI agrees to cooperate with Buyer in any
reasonable arrangement designed to provide for Buyer the
benefits intended to be assigned to Buyer under the relevant
Contract, including enforcement at the cost and for the
account of Buyer of any and all rights of MAI against the
other party thereto arising out of the breach or
cancellation thereof by such other party or otherwise. If
and to the extent that such arrangement cannot be made,
Buyer, upon notice to MAI, shall have no obligation pursuant
to Section 2.3(a) or otherwise with respect to any such
Contract and any such Contract shall not be deemed to be a
Purchased Asset hereunder.
(h) Computer Software. All computer source codes, programs and
other software of MAI, including all machine readable code,
printed listings of code, documentation and related property
and information of MAI.
(i) Literature. All sales literature, promotional literature ,
catalogs and similar materials of MAI.
(j) Records and Files. All records, files, invoices, customer
lists, blueprints, specifications, designs, drawings,
accounting records, business records, operating data and
other data of MAI, provided that MAI and Shareholders shall
have reasonable access, and the right to copy, such records
for tax and other bona fide purposes.
(k) Notes and Accounts Receivable. All notes, drafts and
accounts receivable of MAI relating to the Mortgage Loans
and Warehouse Loans, including, without limitation, those
described in Section 2.1(k) of the Schedule.
(l) Licenses; Permits. All licenses, permits and approvals of
MAI, to the extent transferable, including, without
limitation, the licenses set forth on Schedule 2.1(k).
9
(m) Corporate Name. The name "Mortgage America" and all rights
to use or allow others to use such name and the related
goodwill.
(n) General Intangibles. All prepaid items, all causes of action
arising out of occurrences before or after the Closing, and
other intangible rights and assets.
(o) Trade Secrets. All know-how, research data, business methods
and trade secrets.
(p) Matched Shares. The Matched Shares.
(q) Telephone Numbers. All telephone numbers.
2.2 Excluded Assets
The provisions of Section 2.1 notwithstanding, MAI shall not sell,
transfer, assign, convey or deliver to Buyer, and Buyer shall not purchase or
accept the following assets of MAI (collectively the "Excluded Assets"):
(a) Auto Business Assets. The Auto Business and assets of MAI
directly used in the Auto Business and liability arising out
of or related to the Auto Business, provided that such Auto
Business assets must be wholly separate and unrelated to,
and unnecessary for, the business of purchasing,
originating, servicing and selling Conventional Mortgage
Loans, Conforming Loans, and/or Non-Conforming Loans and
MAI's related business activities.
(b) Owned Real Property. All of the real estate, including
fixtures, buildings, improvements and all appurtenant
rights, which are owned in fee simple by MAI (the "Owned
Real Property").
(c) Cash and Cash Equivalents. All cash and cash equivalents.
(d) Consideration. The consideration delivered by Buyer to MAI
pursuant to this Agreement.
(e) Tax Credits and Records. Federal, state and local income and
franchise tax credits and tax refund claims and associated
returns and records and any available Michigan Single
Business Tax refunds. Buyer shall have reasonable access to
such returns and records and may make excerpts therefrom and
copies thereof.
(f) Corporate Franchise. MAI's franchise to be a corporation,
its certificate of incorporation, corporate seal, stock
books, minute books and other corporate records having
10
exclusively to do with the other corporate organization and
capitalization of MAI. Buyer shall have reasonable access to
such books and records and may make excerpts therefrom and
copies thereof.
Notwithstanding the foregoing, in no event shall the net fair market
value of the Excluded Assets (over related indebtedness which is not assumed by
Buyer) exceed ten percent (10%) of the fair market value of the Base Payment.
2.3 Assumption of Liabilities
(a) Liabilities to be Assumed. As used in this Agreement, the
term "Liability" shall mean and include any direct or indirect indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost, expense,
obligation or responsibility, fixed or unfixed, known or unknown, asserted or
unasserted, liquidated or unliquidated, secured or unsecured. Subject to the
terms and conditions of this Agreement on the Closing Date, Buyer shall assume
and agree to perform and discharge the following, and only the following
Liabilities of MAI (collectively the "Assumed Liabilities"):
(i) The accounts payable and accrued Liabilities
relating to Buyer's operation of the Purchased Assets which accrue
following the Effective Time, including costs and expenses arising
after the Effective Time (including, but not limited to, regulatory
audit fees until Buyer terminates the temporary management agreement
with MAI, if any, under Section 12.5 hereof) related to Mortgage Loans
which have not closed at the Effective Time or to Mortgage Loans which
have closed, but not funded at the Closing.
(ii) MAI's Liabilities arising from and after the
Effective Time under and pursuant to the contracts listed in Section
4.10 of the Schedule; provided, however, that in no event shall such
Liabilities, when added to all other Liabilities of MAI, exceed the Net
Book Value of the Tangible Purchased Assets.
(iii) MAI's Warehouse Line of Credit with respect to
Mortgage Loans constituting Purchased Assets, provided that the
indebtedness on any loan shall not exceed the Fair Market Value of such
loan. (Buyer agrees to repay such Warehouse Line of Credit within 20
days following Closing.)
The Contracts described in subsection 2.3(a)(ii) above are hereinafter
collectively described as the "Assumed Contracts."
(iv) The obligation to pay a commission to a loan
officer with respect to the premium received, if any, upon sale of a
Mortgage Loan (not the commission paid at Closing) in the event the
Mortgage Loan is sold after the Effective Date.
(v) MAI obligations to its employees for accrued
vacation and sick leave, accrued on MAI's December 31, 1996 financial
statements.
11
(vi) Past service credit for vesting in MAI's 401K
retirement plan applicable to MAI's employees so that such employees
will, the full extent permitted by applicable law and internal revenue
service regulations, receive full credit for time employed with MAI in
computing time under Buyer's similar plans.
(b) Liabilities Not to be Assumed. Except as and to the extent
specifically set forth in Section 2.3(a), Buyer is not assuming any Liabilities
of MAI and all such Liabilities shall be and remain the responsibility of MAI.
Notwithstanding the provisions of Section 2.3(a), Buyer is not agreeing to
perform and discharge and MAI shall not be deemed to have transferred to Buyer
the following Liabilities of MAI (which list of specific liabilities shall not
be deemed to suggest that liabilities not listed are being assumed):
(i) Certain Contracts. The Liabilities of MAI under and pursuant
to any contracts with Investors for refunds or guarantees
related to Mortgage Loans, including prepayment refund
obligations and refunds to Investors upon default by
borrower or prepayment.
(ii) Taxes Arising from Transaction. Any taxes applicable to,
imposed upon or arising out of the sale or transfer of the
Purchased Assets to Buyer and the other transactions
contemplated by this Agreement, including but not limited to
any income, transfer, sales, use, gross receipts or
documentary stamp taxes or unemployment taxes.
(iii) Income and Franchise Taxes. Any Liability of MAI for
Federal income taxes and any state or local income, profit
or franchise taxes (and any penalties or interest due on
account therefor).
(iv) Insured Claims. Any Liability of MAI insured against, to the
extent such Liability is or will be paid by an insurer.
(v) Litigation Matters. Any Liability with respect to any
action, suit, proceeding, arbitration, investigation or
inquiry, whether civil, criminal or administrative ("Litigat
on"), whether or not described in Schedule 4.9.
(vi) Infringements. Any Liability to a third party for
infringement of such third party's Trade Rights.
(vii) Transaction Expenses. All Liabilities incurred by MAI in
connection with this Agreement and the transactions
contemplated therein.
(viii) Liability for Breach. Liabilities of MAI for any breach or
failure to perform any of MAI's covenants and agreements
contained in, or made pursuant to, this Agreement, or, prior
to the Closing, any other contract, whether or not assumed
hereunder,
12
including any breach arising from assignment of contracts
hereunder without consent of third parties.
(ix) Liabilities of Affiliates. Liabilities of MAI to its present
or former Affiliates.
(x) Pre-Closing Operating Expenses. MAI's operating expenses
(including, without limitation, payroll, rent and utilities)
incurred before, or relating to the period prior to, the
Closing Date.
(xi) Excluded Assets. Any Liabilities of MAI relating to the
Excluded Assets, including, without limitation, the Owned
Real Property and the Auto Business.
(c) Net Worth. Notwithstanding anything in this Article 2 to
the contrary, the parties intend for the sum of the Purchased Assets and
Liabilities to be zero. The parties will adjust first Assumed Liabilities and
Assumed then Excluded Assets in order to affect that intent. When all accounting
of such Assets, Excluded Asset and Assumed Liabilities has been completed,
but in no event later than June 1, 1997, the Buyer and MAI will make such
adjustments between them as is necessary to take account of matters not
known or not accurately accounted for at Closing, in order to achieve that
balance between Assets and Assumed Liabilities.
ARTICLE 3
PURCHASE PRICE - PAYMENT WITH EXCHANGE SHARES
3.1 Purchase Price
The purchase price (the "Purchase Price") for the Purchased Assets
shall be (i) the assumption by Buyer of the Assumed Liabilities, (ii) the
Matched Payment, (iii) the Base Payment and (iv) the Contingent Payment.
3.2 Payment of Purchase Price
The Purchase Price shall be paid by Buyer to MAI as follows:
(a) Assumption of Liabilities. At the Closing, Buyer shall
assume the Assumed Liabilities.
(b) Matched Payment. At the Closing, the Buyer shall deliver
Exchange Shares to MAI representing the Matched Payment.
13
(c) Base Payment. At the Closing, Buyer shall deliver 975,000
Exchange Shares representing the Base Payment.
(d) Contingent Payment. As soon as reasonably practical
following the Closing of Buyer's books relating to the
Post-Closing MAI Business Unit (as defined below) for the
period ending December 31, 1999 (but in no event later than
June 30, 2000), Buyer shall deliver to MAI, or its
Shareholders, as assignee of MAI pursuant to MAI's Plan of
Liquidation, the Exchange Shares, if any, representing the
Contingent Payment as provided in Section 3.5 below.
3.3 Matched Payment
The Matched Payment shall be paid by Buyer to MAI in Exchange Shares
equal in number to the number of Matched Shares acquired by Buyer as part of the
Purchased Assets.
3.4 Base Payment
The Base Payment shall be 975,000 Exchange Shares.
3.5 Contingent Payment
(a) The Contingent Payment Amount shall be the amount, if any,
by which the following exceeds an agreed amount of $19.5 million:
7.5 multiplied by the percentage equal to Buyer's Effective
After-Tax Value (as defined below).
(i) fifty percent (50%) of the average annual
Post-Closing MAI Business Unit's Adjusted Pre-tax Net Income (as
defined below) for the three fiscal years ending December 31, 1999,
calculated according to GAAP;
plus
(ii) one percent (1%) of an amount equal to the
average annual Post-closing MAI Business Unit's gross production
during the three fiscal years ending December 31, 1999 of (x)
Non-Conforming Mortgage Loans and (y) Conforming Mortgage Loans,
provided that any included Conforming Mortgage Loan had an average fair
market value at the time originated, of not less than 103% of par,
based upon the prevailing price available based on the average price
paid by Buyer or its affiliates to unrelated third party mortgage
originators at the time for similar Conforming Mortgage Loans.
(b) Buyer's Effective After-Tax Value. For the purposes of the
foregoing calculation, Buyer's Effective After-Tax Value for a given year shall
be the percentage equal to 100%
14
less the effective combined average federal and state income tax rate
(including all taxes in the nature of an income tax) actually paid each
year by Buyer, expressed as a percentage of pre-tax income. For example,
if Buyer's effective federal and state average tax is 40% of the pre-tax
income, then the Effective After-Tax Value shall be 60%.
(c) Post-Closing MAI Business Unit. For the purpose of the
calculation, "Post-Closing MAI Business Unit" shall mean the separate business
unit of the Buyer comprised of the Purchased Assets and identifiable business
operations and p ersonnel acquired by Buyer from MAI pursuant to this
Acquisition. The Buyer shall cause the Post-Closing MAI Business Unit to be a
separate Division or other separate business unit or subsidiary of Buyer (or its
Affiliate) following the ▇▇▇▇▇▇▇.▇▇ Closing, Buyer shall enter into employment
agreements with certain officers and managers of MAI, pursuant to Section
6.3 hereof, providing for them to manage the Post-Closing MAI Business Unit,
subject to the normal oversight of responsibilities of the Buyer's Board of
Directors former MAI executives shall direct the day-to-day operations of the
Post-Closing MAI Business Unit, subject to an annual budget and business plan
approved by Buyer's Board of Directors and senior executives. Buyer shall
separately track the performance of, and account for, the Post-Closing MAI
Business Unit as a separate profit and expense center. The Post-Closing MAI
Business Unit shall bear an imputed interest expense on the capital used to
finance its Warehouse Mortgage Loans at the prevailing market rate available to
third parties of the size and condition of the Post-Closing MAI Business Unit on
a stand-alone basis, not to exceed LIBOR plus 225 basis points (calculated on a
floating rate basis). In the event Buyer securitizes a Mortgage Loan generated
by the Post-Closing MAI Business Unit or in the unlikely event Buyer desires to
hold such Mortgage Loan for its own account as an investment, then for the
purpose of calculating the Post-Closing MAI Business Unit's operating income
with respect to such mortgage loan, the Post-Closing MAI Business Unit shall
be deemed to have sold the loan to Buyer at the prevailing average price being
paid at the time by Buyer (or its Affiliates) to third parties for similar
Mortgage Loans at similar volumes. In the event a Mortgage Loan generated by
the Post-Closing MAI Business Unit is sold to a third party, then for the
purpose of calculating the Post-Closing MAI Business Unit's operating income
with respect to such Mortgage Loan, the Post-Closing MAI Business Unit shall
be deemed to have sold the loan at the actual price paid for the loan by the
third party. To the extent general overhead and administrative expenses are
attributed to the Post-Closing MAI Business Unit, for the purpose of
calculating the Post-Closing MAI Business Unit's operating income, the Post-
Closing MAI Business Unit shall not be charged more general overhead and
administrative expense, in the aggregate, than the Post-Closing MAI Business
Unit could have purchased such services from independent third parties if the
Post-Closing MAI Business Unit was an independent, stand-alone business.
Therefore, the business operation of the Post-Closing MAI Business Unit will
include future growth and development of the Business being acquired in this
Acquisition, but not Buyer's other existing operations or future acquisition by
Buyer. Parties acknowledge that Buyer's other business units will compete with
the Post-Closing MAI Business Unit.
15
(d) Payment in Exchange Shares. The Contingent Payment, if
any, shall be payable by Buyer to MAI (or MAI's shareholders under MAI's Plan of
Reorganization) in Exchange Shares. The number of Exchange Shares to be
delivered as the Contingent Payment shall be calculated by dividing the
Contingent Payment Amount, if any, by the higher of the following: (i) $18.00
per share of Stock (adjusted for stock splits or stock dividends), or (ii) the
average of the closing price for Buyer's shares of Stock quoted on NASDAQ for
each of the twenty (20) Business Days immediately preceding the last day of the
thirty-sixth (36th) month following the Closing Date.
(e) Maximum Limit on Contingent Payment. Notwithstanding the
foregoing, the maximum number of Exchange Shares paid as the Contingent Payment
shall not exceed 99% of the number of Exchange Shares constituting the Matched
Payment and the Base Payment, adjusted for all stock splits and stock dividends.
Moreover, in the event the Contingent Payment, combined with the Base Payment
and Matched Payment exceed the maximum amount of shares permitted to be issued
under NASDAQ rules (in the opinion of Buyer's counsel), then Buyer shall pay the
maximum number of Exchange Shares permitted to be paid under NASDAQ rules with
the balance paid in cash.
(f) Not Dependent Upon Employment Agreement. MAI's right to
receive the Contingent Payment is not dependent upon the Executives fulfilling
their obligations under their respective Employment Agreements.
3.6 Other Payments and Adjustments
MAI may elect to make certain distributions of intangible assets and/or
award certain stock options to certain of its employees prior to Closing with
Buyer's consent not to be unreasonably withheld (the "Recognition Payments"). To
the extent the Recognition Payments have post Closing economic and/or tax
effects, Buyer, MAI and the Shareholders agree to make such adjustments as are
appropriate so that the economic and tax benefits & detriments of any such
Recognition Payments remain with Seller and are neutral to Buyer from all
economic, GAAP and tax standpoints.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF MAI AND SHAREHOLDERS
MAI and Shareholders, jointly and severally, make the following
representations and warranties to Buyer, each of which is true and correct on
the date hereof, shall be unaffected by any investigations heretofore or
hereafter made by Buyer, or any knowledge of Buyer other than as specifically
disclosed in the Disclosure Schedule delivered to Buyer at the time of execution
of this Agreement, and shall survive the Closing of the transactions provided
for herein:
16
4.1 Organization
(a) MAI is a corporation duly organized, validly existing and
in good standing under the laws of the State of Michigan with full corporate
power and authority to carry on its business as now conducted, to own the
properties and assets that it now owns, and to lease the properties and assets
that it now leases, and is duly licensed and qualified to do business and is in
good standing in each state or jurisdiction where its ownership or leasing of
property or assets or the conduct of its business requires such licensing or
qualification.
(b) MAI and Shareholders have heretofore delivered to Buyer
accurate and complete copies of the articles of incorporation and by-laws of
MAI, as in effect on the date thereof. Such articles and by-laws are in full
force and effect, and have not been subsequently amended, and MAI is not in
violation of any of the provisions thereof.
4.2 Capitalization
The authorized capital stock of MAI consists of 50,000 shares of Common
Stock, 5,747 shares of which are validly issued and outstanding, fully paid,
nonassessable, free of preemptive rights. There are no other classes of
securities of MAI authorized or outstanding. The Shareholders together own all
the issued and outstanding shares of common stock of MAI. The record and
beneficial stock ownership is set forth below:
=============================================================================================================================
Stock Number % of Total
Name Certificate No. of Shares Shares
-----------------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 4 5,000 87
-----------------------------------------------------------------------------------------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇ above shares held
jointly with ▇▇▇▇▇▇
▇▇▇▇▇▇
-----------------------------------------------------------------------------------------------------------------------------
▇▇▇ ▇▇▇▇▇▇▇ 5 575 10
-----------------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ 6 172 3
=============================================================================================================================
Neither MAI nor any of its Affiliates has or is bound by any
outstanding subscriptions, options, warrants, calls, commitments, agreements or
other rights of any character calling for the purchase or issuance of any shares
of Common Stock or any securities representing the right to purchase or
otherwise receive any shares of Common Stock. There are no outstanding or
authorized stock appreciation, phantom stock or similar rights with respect to
MAI. There are no voting trusts, proxies, or other agreements or understandings
with respect to the voting of the capital stock of MAI.
17
4.3 Subsidiaries of the MAI; Nature of Business
MAI does not own any equity interest, directly or indirectly, in any
Subsidiary, except as set forth in Section 4.3 of the Schedule.
4.4 Authority; No Violation
(a) MAI and Shareholders have full power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed by MAI
and all Shareholders and, assuming this Agreement constitutes a valid and
binding obligation of Buyer, constitutes a valid and binding obligation of MAI
and Shareholders enforceable against MAI and Shareholders in accordance with its
terms.
(b) Neither the execution and delivery of this Agreement by
MAI and Shareholders nor the consummation by MAI and Shareholders of the
transactions contemplated hereby, nor compliance by MAI and Shareholders with
any of the terms or provisions hereof, will (i) conflict with or result in a
breach of any provision of the articles of incorporation or by-laws of MAI, (ii)
violate any statute, code, ordinance, rule, Regulation, judgment, order, writ,
decree or injunction applicable to Shareholders or MAI or any of their
respective properties or assets, or (iii) violate, conflict with, result in a
breach of any provisions of, constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, result in
the termination of, accelerate the performance required by, or result in a right
of termination or acceleration or the creation of any Encumbrance upon any of
the respective properties or assets of Shareholders or MAI under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other instrument, or obligation to which
Shareholders or MAI is a party, or by which Shareholders, MAI or any of their
respective properties or assets may be bound or affected except for such
violations, conflicts, breaches and defaults which either individually or in the
aggregate would not have a Material Adverse Effect on MAI.
4.5 Consents and Approvals
Except as set forth in Section 4.5 of the Schedule, no consents,
permits, authorizations or approvals of, or filings or registrations with, any
governmental or regulatory authorities, government sponsored agencies or
corporations or other third parties are necessary to be obtained or made by
Shareholders or MAI in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
4.6 Financial Statements
MAI has previously delivered to Buyer copies of (i) the audited
financial statements of MAI for each of the years in the three-year period ended
December 31, 1995 (the "Audited Financial Statements"), together with reports on
all such audited financial statements by MAI's independent
18
accountants, and (ii) the unaudited interim financial statements of MAI dated
October 31, 1996 (the "Interim Financial Statements") (the Audited Financial
Statements and the Interim Financial Statements are collectively referred to
herein as the "Financial Statements"), copies of which are attached hereto as
part of Schedule . The Audited Financial Statements have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered by such statements and fairly present the financial position of MAI as
of the respective dates thereof, the results of its operations and the changes
in its financial position for the respective periods covered thereby. The
Interim Financial Statements have been prepared from the books and records of
MAI in accordance with the requirements of GAAP.
4.7 Undisclosed Liabilities
As of the date of this Agreement, MAI does not have any liabilities or
obligations of any nature, whether accrued, absolute, contingent or otherwise,
asserted or unasserted, known or unknown, whether or not required to be shown on
a balance sheet prepared in accordance with GAAP (collectively, "Liabilities"),
except for (i) liabilities and obligations stated or adequately reserved against
on the Balance Sheet dated October 31, 1996, and (ii) obligations to close Non-
Conforming Mortgage Loans and Conforming Mortgage Loans for which commitments
already have been made, and (iii) obligations arising from warranties with
respect to Mortgage Loans sold before the Effective Date, which liabilities are
expressly retained by MAI. Prior to Closing, MAI shall have paid or otherwise
satisfied all MAI's Liabilities, except liabilities accrued on the financial
statements, not exceeding the amount of such accruals.
4.8 No Material Adverse Change
Since October 31, 1996, MAI has not suffered any Material Adverse
Effect nor taken any of the actions specified in Section (a) - (r).
4.9 Legal Proceedings
Except as described in Schedule , neither Sellers, MAI nor any of MAI's
directors or officers is party to any and there are no legal, administrative,
arbitral or other proceedings, claims, actions or governmental investigations of
any nature pending, nor to the best knowledge of MAI or Shareholders,
threatened, against or affecting MAI or any of its respective assets or business
or challenging the validity or propriety of the transactions contemplated by
this Agreement. MAI is not subject to any order, judgment, injunction, rule or
decree.
4.10 Material Contracts
Section of the Schedule is a complete and accurate list of the
following contracts, agreements, and other written or oral arrangements (or
group of related written or oral arrangements) (hereinafter collectively
referred to as "arrangements"), to which MAI is a party on the date hereof:
19
(a) any arrangement with any employee, agent or independent
contractors involved in the origination of mortgage loans for MAI;
(b) any arrangement (including the lease of real or personal
property from or to third parties) providing for lease payments in excess of
$5,000 per annum or in excess of $10,000 for the remaining term of the
arrangement;
(c) any arrangement in which MAI is participating as a general
partner or joint venturer;
(d) any arrangement which shall survive the Closing (other
than recourse servicing) under which MAI has created, incurred, assumed, or
guaranteed (or may create, incur, assume, or guarantee) indebtedness for
borrowed money (including capitalized lease obligations) involving more than
$5,000;
(e) any arrangement concerning confidentiality or
noncompetition;
(f) any arrangement between any Shareholder and MAI or any of
the Affiliates;
(g) any arrangement pursuant to which MAI or any Shareholder
has promised to pay, or loan any amount to, or sold, transferred or leased any
property or assets to or from, any Person in their capacity as an officer,
director or other employee of MAI;
(h) any arrangement requiring MAI to pay severance or similar
payments as a result of the transactions contemplated hereby;
(i) any other arrangement which will survive the Closing not
entered into in the ordinary course of business; or
(j) any power of attorney or similar arrangement.
MAI has delivered to Buyer a correct and complete copy of each written
arrangement listed in Section 4.10 of the Schedule. With respect to each
arrangement so listed: (A) the arrangement is in full force and effect; (B)
neither Shareholders nor MAI is in breach or default, and no event has occurred
which with notice or lapse of time or both would constitute a breach or default
by Shareholders or MAI, or permit termination, modification, or acceleration
against Shareholders or MAI under the arrangement applicable to it; (C) neither
Shareholders nor MAI has repudiated or waived any material provision of any such
arrangement; (D) no other party to any such arrangement is in default in any
respect thereunder; and (E) no consent is required under any arrangement for MAI
to enter into and perform this Agreement and the transactions contemplated
herein. With respect to any lease disclosed pursuant to this Section 4.10, all
rents and other amounts currently due thereunder have been paid; no waiver
or indulgence or postponement of any obligation thereunder has been
20
granted by any lessor or sublessor; and MAI has not received any notice that it
has breached any term, condition or covenant.
4.11 Taxes
(a) MAI has (i) duly filed (or there have been duly filed on
its behalf) with the appropriate federal, state, local and foreign taxing
authorities all Tax Returns required to be filed by or with respect to MAI, and
such Tax Returns are true, correct and complete in all respects, and (ii) paid
in full on a timely basis (or there have been paid on its behalf) all Taxes
shown to be due on such Tax Returns. The provision for current Taxes on each of
the Financial Statements and the Closing Balance Sheet is or will be adequate
for the payment of all accrued but unpaid Taxes through the date thereof. At or
before Closing, Shareholders shall cause MAI to pay all taxes then due and MAI
shall pay all taxes arising, or relating to any period, before the Closing Date
when they become due.
(b) Neither MAI nor any Affiliate thereof has received any
notice of a deficiency or assessment with respect to taxes of MAI from any
federal, state, local or foreign taxing authority which has not been fully paid
or finally settled; there are no ongoing audits or examinations of any Tax
Return which includes MAI and no notice of audit or examination of any such Tax
Return has been received; MAI has not given and there has not been given on its
behalf a waiver or extension of any statute of limitations relating to the
payment of Taxes; and no issue has been raised in writing on audit or in any
other proceeding with respect to Taxes of MAI by any federal, state, local or
foreign taxing authority which, if resolved against MAI, would have a Material
Adverse Effect on MAI.
(c) MAI has not filed a consent under Section 341(f) of the
Code concerning collapsible corporations. MAI has not made any payments, is not
obligated to make any payments, and is not a party to any contract, agreement or
other arrangement that could obligate it to make any payments that would not be
deductible under Section 280G of the Code. MAI has disclosed on its federal
income Tax Returns all positions taken therein that could give rise to a
substantial understatement of federal income tax within the meaning of Section
6661 (or its successor, Section 6662) of the Code.
(d) For purposes of this Agreement "Taxes" shall mean all
taxes, charges, fees, levies, penalties or other assessments imposed by any
United States federal, state, local or foreign taxing authority, including, but
not limited to, income, excise, property, sales, transfer, franchise, payroll,
gains, withholding, ad valorem, social security or other taxes, including any
interest, penalties or additions attributable to Taxes.
(e) For purposes of this Agreement, "Tax Return" shall mean
any return, report or information return required to be filed with any taxing
authority with respect to Taxes.
21
(f) After the Closing, MAI shall bear responsibility for and
pay the reasonable costs and expenses relating to the preparation of any Tax
Return relating to any period before the Closing Date and shall pay, any Taxes
relating to any period before the Closing Date or as a result of this
transaction.
4.12 ERISA
(a) Section 4.12(a) of the Schedule contains a true and
complete list of each employee benefit, compensation or welfare benefit plan,
program or agreement maintained or contributed to or required to be contributed
to by MAI (the "Plans"). MAI has no formal plan or commitment, whether legally
binding or not, to create any additional Plan or modify or change any existing
Plan that would affect any employee or terminated employee of MAI.
(b) With respect to each of the Plans, MAI has heretofore
delivered to Buyer true and complete copies of each of the following documents:
(i) each Plan and related trust, if any, (including all amendments thereto);
(ii) annual report and actuarial report, if required to be filed under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), for the
last two (2) years and the latest financial statement, if any, for each such
Plan; (iii) the most recent summary plan description, together with each summary
of material modifications, required under ERISA; and (iv) the most recent
determination letter received from the IRS with respect to each Plan that is
intended to be qualified under Section 401 of the Code.
(c) All required contributions have been, or will be, made
with respect to each Plan on or prior to the Closing Date or will be properly
recorded on the Closing Balance Sheet.
(d) Each of the Plans has been operated and administered in
all material respects in accordance with applicable laws, including, but not
limited to, ERISA and the Code and each of the Plans that is intended to be
"qualified" within the meaning of Section 401(a) of the Code is so qualified.
(e) Except as set forth in Section 4.12(e) of the Schedule, no
Plan provides benefits, including, without limitation, death or medical benefits
(whether or not insured), with respect to current or former employees beyond
their retirement or other termination of service (other than (A) coverage
mandated by applicable law, (B) death benefits or retirement benefits under any
"employee pension plan," as that term is defined in Section 3(2) of ERISA, (C)
deferred compensation benefits accrued as liabilities on the books of MAI or (D)
benefits the full cost of which is borne by the current or former employee (or
his beneficiary)).
(f) There are no pending, threatened or anticipated claims
(other than routine claims for benefits) by, on behalf of or against any of the
Plans or any trusts related thereto.
22
(g) The consummation of the transactions contemplated by this
Agreement will not (either alone or upon the occurrence of any additional acts
or events) (A) entitle any current or former employee of MAI to severance pay,
employment compensation or any other payment, benefit or award or (B) accelerate
or modify the time of payment or vesting, or increase the amount of any benefit,
award or compensation due any such employee.
4.13 Ownership of Property
MAI has good, valid and marketable title to all Purchased Assets and
properties, whether real or personal, tangible or intangible, and all other
assets and properties reflected in its balance sheet as of October 31, 1996, or
acquired subsequent thereto, subject to no Encumbrances, except (i) those items
that secure liabilities that are reflected in said balance sheet or the notes
thereto or incurred in the ordinary course of business after the date of such
balance sheet, (ii) statutory liens for amounts not yet delinquent or which are
being contested in good faith, (iii) liens and encumbrances on, and rights of
redemptions with respect to, foreclosed real estate, and (iv) such Encumbrances
that do not in the aggregate materially detract from the value or interfere with
the use or operations of the assets and properties subject thereto. MAI as
lessee has the right under valid leases to occupy, use, possess and control all
property leased by MAI, as presently occupied, used, possessed and controlled by
MAI. The properties and assets owned or leased by MAI are adequate for the
conduct of the current business of MAI. Giving effect to the transactions
contemplated by this Agreement, Buyer shall have all assets, personnel and
property necessary and proper to conduct MAI's business consistent with
historical practice, subject to Buyer securing appropriate licenses and
regulatory approvals to the extent necessary. The documents selling, assigning
and conveying from MAI to Buyer the Purchased Assets will grant and transfer to
Buyer good and marketable title to the Purchased Assets, free and clear of all
encumbrances, except those expressly permitted in this Agreement.
Notwithstanding the foregoing, certain other persons may claim conflicting
rights to the name "Mortgage America" and "Alternative Lending Mortgage
Corporation," but Shareholders do not reasonably believe these claims will have
a material adverse effect on the Business.
4.14 Environmental Protection
MAI has not received from any source with respect to any property
("Operating Property") that it owns (including as a trustee), leases, or
actively participates in the management of, any Environmental Claim to the
effect that MAI, or any Operating Property or Loan Property, or any predecessor
is not in compliance with all environmental or health laws, rules, Regulations,
standards and requirements relating to pollution (including the discharge of
materials into the environment or indoors) or protection of the environment,
including common law ("Environmental Laws"), nor any requests for information
which could result in or help provide a basis for any Environmental Claim, nor
are there any facts of which MAI or Shareholders have knowledge which could
reasonably be expected to form the basis of an Environmental Claim against MAI.
All environmental audits, analyses, or surveys of any Operating Property or Loan
Property which have been submitted to or by MAI are identified in Section 4.14
of the Schedule, and copies of such audits, analyses, surveys
23
or other documents have been made available to Buyer. MAI has not owned,
managed, supervised or participated in the management of any commercial real
property except for the three office buildings occupied by MAI in Bay City.
4.15 Brokers and Finders
Neither Shareholders nor MAI, nor any of MAI's officers, directors,
employees or agents has employed any broker, finder or financial advisor or
incurred any liability for any fees or commissions in connection with the
transactions contemplated hereby, except for legal, accounting and other
professional fees payable by MAI or Shareholders in connection with the
Acquisition. Shareholders shall cause all legal, accounting and other
professional fees and expenses of MAI related to this transaction to be paid by
MAI prior to Closing.
4.16 Insurance
MAI is insured with reputable insurers against such risks and in such
amounts normally insured against by companies of the same type and in the same
line of business. All of the insurance policies, binders or bonds maintained by
MAI are in full force and effect; MAI is not in default thereunder; all claims
thereunder have been filed in due and timely fashion; and all such policies,
binders and bonds will remain in full force and effect through the Closing Date
unaffected by the transactions contemplated hereby.
4.17 Mortgage Banking Licenses and Qualifications
MAI (i) is qualified as and is (A) an FHA approved supervised mortgagee
under 24 C.F.R. 'SS' 203.3, and (B) a supervised lender under the VA loan
guarantee program, 38 U.S.C. 'SS' 1802(d); (ii) in all material respects meets
all applicable requirements of laws and regulations so as to be eligible to
originate, hold, sell FHA Loans, mortgage loans guaranteed by the VA Loans and
conventional mortgage loans; and (iii) has all other material certifications,
authorizations, licenses, permits and other approvals ("Licenses") necessary to
conduct its current mortgage banking business, and is in good standing under all
applicable federal, state and local laws and regulations thereunder, as a
mortgage lender and servicer. A complete list of such Licenses is set forth in
Section 4.17 of the Schedule. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
affect the validity of any License currently possessed by MAI, and all such
Licenses will remain in full force and effect after the Closing Date. MAI
shall cause, at MAI's sole expense, all regulatory filings and other actions
necessary or desirable in connection with the Acquisition and change in
ownership of the Business of MAI. Section 4.17 of the Schedule sets forth all
regulatory actions and consents necessary or desirable in connection with the
Acquisition and change in ownership of the Business and Buyer's operation of the
Business.
4.18 Loan Portfolio
24
MAI does not perform any mortgage servicing for any Investors or other
third parties.
4.19 Enforceability
All Mortgage Loans are valid and legally binding obligations of the
borrowers thereunder enforceable in accordance with their terms, except as
enforcement thereof may be limited by (i) bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity (whether applied in a proceeding in equity or at
law), (ii) state laws requiring creditors to proceed against the collateral
before pursuing the borrower, and (iii) state laws on deficiencies. Neither the
operation of any of the terms of any Mortgage Loan nor the exercise of any right
thereunder, has rendered or will render the related mortgage or note
unenforceable, in whole or in part, subject it to any right of rescission,
setoff, counterclaim or defense, and no such right of rescission, setoff,
counterclaim or defense has been asserted with respect thereto.
4.20 Title to Certain Mortgage Loans
Mortgage Loans held in MAI's account (whether or not for future sale or
delivery to an Investor) are owned by MAI free and clear of any Encumbrance
other than its lender banks pursuant to warehouse lines. Such Mortgage Loans
have been duly recorded or submitted for recordation in the appropriate filing
office in the name of MAI as mortgagee. MAI has not, with respect to any such
Mortgage Loan, released any security therefor, except upon receipt of reasonable
consideration for such release or accepted prepayment of any such Mortgage Loan
which has not been promptly applied to such Mortgage Loan.
4.21 No Recourse
Except as set forth in Section 4.21 of the Schedule, MAI is not a party
to (A) any agreement or arrangement with (or otherwise obligated to) any Person,
including an Investor or insurer, to repurchase from any such Person any
Mortgage Loan and mortgaged property serviced for others or any mortgage loan
sold by MAI with servicing released ("Servicing Released Loans"), or (B) any
agreement, arrangement or understanding to reimburse, indemnify or hold harmless
any Person or otherwise assume any liability with respect to any Loss suffered
or incurred as a result of any default under or the foreclosure or sale of any
such Mortgage Loan or mortgage property or Servicing Released Loans, except
insofar as (i) such recourse is based upon breach by MAI of a customary
representation, warranty or undertaking, or (ii) MAI incurs expenses such as
legal fees in excess of the reimbursement limits, if any, set forth in the
applicable Mortgage Servicing Agreement.
4.22 Compliance
MAI has been and is (and specifically the documentation, origination,
purchase, assumption, modification, sale, servicing of Mortgage Loans (including
the maintenance of and transactions with respect to custodial Account) and
maintenance of books and records by it has been and is) in
25
compliance with all Regulations, orders, writs, decrees, injunctions and other
requirements of any court or governmental authorities applicable to it, its
properties and assets or its conduct of business in all material respects. MAI
has not done or failed to do, and has not caused to be done or omitted to be
done, any act or omission, the effect of which would operate to invalidate or
materially impair (i) any title insurance policy, (ii) any hazard insurance
policy, (iii) any flood insurance policy required by the National Flood
Insurance Act of 1968, as amended, (iv) any fidelity bond, direct surety bond,
or errors and omissions insurance policy required by HUD, FHA, VA or private
mortgage insurers or (v) any surety or guaranty agreement. During the twelve
month period preceding the date hereof, no Agency, Investor or private mortgage
insurer has (i) claimed that MAI has violated or not complied with the
applicable underwriting standards with respect to mortgage loans sold by MAI to
such Investor or (ii) imposed restrictions on the activities (including
commitment authority) on MAI.
4.23 Investor Commitments
MAI has no Investor Commitments.
4.24 Custodial Accounts
MAI has full power and authority to maintain escrow accounts
("Custodial Accounts") for certain serviced loans. Such Custodial Accounts
comply in all respects with (i) all applicable Regulations (including without
limitation Regulations governing the calculation of the amount of the monthly
payments for deposit into Custodial Accounts that mortgagors are required to
make), and (ii) any terms of the Mortgage Loans (and Mortgage Servicing
Agreements) relating thereto. The Custodial Accounts contain the amounts shown
in the records of MAI, which amounts represent all monies received or advanced
by MAI as required by the applicable Mortgage Servicing Agreements, less amounts
remitted by or on behalf of MAI pursuant to applicable Mortgage Servicing
Agreements except for checks in process.
4.25 Accounts Receivable
All accounts receivable arising from the Business, including without
limitation the amounts that have been advanced by MAI in connection with
servicing the Mortgage Loans pursuant to Mortgage Servicing Agreements (such as
principal, accrued interest, taxes and insurance premiums) are valid and
subsisting amounts owing to MAI, have been acquired in the ordinary course of
business and are carried on the books at values determined in accordance with
GAAP, and are not subject to defenses, setoffs or claims of the mortgagor (other
than those already accounted for) arising from acts or omissions of MAI.
4.26 Data Processing
MAI has good and valid title or valid license to the data processing
software (including documentation, user manuals, upgrades and current releases,
etc.), currently used by it, and the data
26
processing system (software and hardware), used to support MAI's mortgage
servicing business is operating in the intended manner.
4.27 Inquiries
Section 4.27 of the Schedule contains a true and correct list of all of
the audits, investigations, complaints and inquiries of MAI by an Agency, HUD,
an Investor, or a private mortgage insurer since June 30, 1995, the result of
which audits and investigations claimed a material failure to comply with
applicable Regulations, resulted in a repurchase of Mortgage Loans by MAI,
resulted in indemnification by MAI in connection with the Mortgage Loans,
resulted in rescission of an insurance or guaranty contract or agreement, or
resulted in payment of a penalty to a Agency, HUD, an Investor or a private
mortgage insurer, and like adverse findings. Except for customary ongoing
quality control reviews, no such audit or investigation (each an "Inquiry") is
pending or threatened. Sellers have made available to Buyer copies of all
written reports and materials received in connection with such audits,
investigations, complaints and inquiries.
4.28 Representations
No breach or violation of any representation, warranty or covenant
exists which individually, or collectively, would have a Material Adverse Effect
on MAI or any Purchased Assets with respect to any Mortgage Loans, the ownership
of which has been transferred by MAI to any Person.
4.29 Advances
Except as set forth in Section 4.29 of the Schedule, there are no
pooling, participation, servicing or other agreements to which MAI is a party
which obligate it to make servicing advances with respect to defaulted or
delinquent Mortgage Loans.
4.30 Pools
Except as set forth in Section 4.30 of the Schedule, all Pools serviced
by MAI have been certified and, if required, re-certified. With respect to any
Pools serviced by MAI which have not been fully certified, MAI has notified the
custodian with respect thereto of all deficiencies, and such custodian has so
notified the applicable Investor or Investor Program.
4.31 Commercial Mortgages
MAI has never taken title to any commercial mortgage loan. MAI has
never foreclosed on any commercial property securing any commercial mortgage
loan in its own name, is not required under any Mortgage Servicing Agreement to
foreclose on any commercial property securing any commercial mortgage loans in
default in its own name and has never taken title to any commercial property
securing any commercial mortgage loan. Any breach of any representation or
warranty set
27
forth in this Section 4.31 shall be deemed to render such representation or
warranty to be untrue and incorrect in a material respect.
4.32 No Tax-Sharing Agreements
MAI is not a party to any tax sharing agreement or similar arrangement.
4.33 No Intercompany Accounts
MAI has no intercompany accounts.
4.34 MAI Employees
To the best of Sellers' knowledge, each employee of MAI will accept
Buyer's offer of employment after the Closing Date. MAI has no agreements,
policies, practices or understandings (written or oral) concerning MAI employee
bonus programs, employee incentive plans or employee benefit plans except as set
forth in Section 4.12(a) of the Schedule. A complete list of MAI's employees is
set forth in Section 4.34 of the Schedule.
4.35 Conduct Prior to Closing
Within the four (4) months prior to the Closing Date or on the Closing
Date, except as set forth in Section 4.35 of the Schedule, MAI has conducted its
business only in the ordinary course, and MAI has not:
(a) issued, sold or delivered any shares of its capital stock
or issue or sell any securities convertible into, or options with respect to, or
warrants to purchase or rights to subscribe to, any shares of its capital stock;
(b) effected any recapitalization, reclassification, stock
dividend, stock split or like change in capitalization;
(c) amended its articles of incorporation or by-laws;
(d) merged or consolidated with, or, except as a result of
foreclosure or repossession in the ordinary course of its mortgage banking
business, acquired substantially all of the assets of, any other entity;
(e) sold, transferred, leased or encumbered a material amount
of assets (other than Excluded Assets)except in the ordinary course of business;
28
(f) materially altered or varied its methods or policies of
(i) underwriting, pricing, originating, warehousing, selling and servicing, or
buying or selling rights to service, its Mortgage Loans, (ii) hedged (which term
includes both buying futures and forward commitments from financial
institutions) its mortgage loan positions or commitments, and (iii) obtained
financing and credit;
(g) granted to any director, officer, employee or consultant
any material increase in compensation or benefits (other than as may be required
under the terms of written agreements in effect on the date hereof and other
than normal increases made in the ordinary course of business to officers or
employees in accordance with customary past practices and policies);
(h) granted any severance or termination pay (other than as
may be required under the terms of written agreements in effect on the date
hereof) to, or entered into or amended any employment or severance agreement
with, any person, other than termination pay paid in the ordinary course of
business to officers or employees in accordance with customary past practices
and policies;
(i) adopted any new or amended any existing director, officer
or employee benefit plans (including, without limitation, profit sharing, bonus,
director and officer incentive compensation, retirement, medical,
hospitalization, life or other insurance plans, arrangements and commitments) or
any trust agreement relating thereto;
(j) incurred any debt other than in the ordinary course of
business in amounts consistent with past practice;
(k) made any change in accounting principles or methods from
those currently employed, except as required by GAAP or by applicable regulatory
requirements;
(l) granted any mortgage or security interest in, or made any
pledge of, or permitted any lien or encumbrance to be placed on, any of its
assets or properties other than in the ordinary course of business consistent
with past practice;
(m) canceled, waived, released or compromised any material
debt or claim, other than upon payment in full;
(n) failed to maintain in full force and effect all existing
insurance policies and fidelity bonds;
(o) taken any action, or failed to take any action, that would
result in a breach or violation of the representations and warranties of Sellers
contained in this Agreement or caused any condition to the transactions
contemplated hereby not to be satisfied;
(p) accelerated, terminated, modified or canceled any material
contract, lease, or license to which MAI is a party;
29
(q) entered into any employment or collective bargaining
agreement, or modified any existing employment or collective bargaining
agreement; and
(r) agreed to do any of the foregoing included in (a)
through (q).
4.36 MAI's and Shareholders' Investment Intention/Restricted Securities.
(a) MAI is acquiring the Exchange Shares for investment solely
for MAI's account, and when distributed to Shareholders pursuant to a Plan of
Liquidation, Shareholders will acquire the Exchange Shares for investment solely
for the Shareholders' account and not with a view to, or for resale in
connection with, the distribution or other disposition thereof and neither MAI
nor Shareholders have any present intention of selling, granting any
participation in, or otherwise distributing the same except in compliance with
the securities laws as provided in Section 67. MAI and the Shareholders agree
and acknowledge that MAI and the Shareholders will not, directly or indirectly,
offer, transfer, sell, assign, pledge, hypothecate or otherwise dispose of any
Exchange Shares or solicit any offers to purchase or otherwise acquire or take a
pledge of any Shares, except in accordance with the terms of this Agreement
unless (i) the transfer, sale, assignment, pledge, hypothecation or other
disposition is pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "Securities Act") and the rules and
regulations thereunder and has been registered under any applicable state
securities or "blue sky" laws or (ii) no such registration is required because
of the availability of an exemption from registration under the Securities Act
and the rules and regulations in effect thereunder and under any applicable
state securities or "blue sky" laws.
(b) MAI and each Shareholder has such knowledge and experience
in financial or business matters that it is capable of evaluating the merits and
risks of the investment in the Exchange Shares and the Shareholder can bear the
economic risk of its investment.
(c) MAI and each Shareholder is an "accredited investor"
within the meaning of SEC Rule 501 of Regulation D, as presently in effect.
(d) MAI and each Shareholder understands that the Exchange
Shares are characterized as "restricted securities" under the federal securities
laws inasmuch as they are being acquired from Buyer in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the Securities Act of
1933, as amended (the "Act"), only in certain limited circumstances. In this
connection, MAI and each Shareholder represent that they are familiar with SEC
Rule 144, as presently in effect, and understand the resale limitations imposed
thereby and by the Act.
(e) Without in any way limiting the representations set forth
above, MAI and each Shareholder further agrees not to make any disposition of
all or any portion of the Exchange Shares unless:
30
(i) There is then in effect a Registration Statement
under the Act covering such proposed disposition and such disposition
is made in accordance with such Registration Statement; or
(ii) the Shareholder shall have notified Buyer of the
proposed disposition and shall have furnished the Buyer with an opinion
of counsel, reasonably satisfactory to the Buyer, that such disposition
will not require registration of such shares under the Securities Act.
It is agreed that the Buyer will not require opinions of counsel for
transactions which are shown to the Buyer's reasonable satisfaction as
being made pursuant to and in compliance with Rule 144.
(f) It is understood that the certificates evidencing the
Exchange Shares may bear one or all of the following legends:
(i) "These securities have not been registered under
the Securities Act of 1933 (the 'Act') and have been issued pursuant to
exceptions under the Act and under applicable state securities laws.
They may not be sold, offered for sale, pledged or hypothecated in the
absence of a registration statement in effect with respect to the
securities under such Act or an opinion of counsel satisfactory to the
Company that such registration is not required under the Act or under
such Act." The foregoing legend shall be removed from any such
certificate at the request of the holder thereof at such time as the
shares represented thereby are registered under the Act or become
eligible for resale pursuant to Rule 144(k).
(ii) Any legend required by applicable state
securities laws.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer makes the following representations and warranties to MAI and
Shareholders, each of which is true and correct on the date hereof, shall remain
true and correct to and including the Closing Date, shall be unaffected by any
investigation heretofore or hereafter made by MAI or any notice to MAI, and
shall survive the closing of the transactions provided for herein.
5.1 Organization
Buyer is a corporation duly organized and in good standing under the
laws of the State of Florida. Buyer has the corporate power and authority to own
or lease all of its properties and to carry on its business as it is now being
conducted. Buyer is licensed to originate mortgage loans in the stated listed on
Schedule 2.1(k).
31
5.2 Authority; No Violation
(a) Buyer has full corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby, provided that Buyer may require certain Shareholder approval pursuant to
certain NASDAQ rules. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action in respect thereof and no other
corporate proceedings on the part of Buyer are necessary to consummate the
transactions so contemplated except for such potential NASDAQ Shareholder
approval. This Agreement has been duly and validly executed and delivered by
Buyer and, assuming this Agreement constitutes a valid and binding agreement of
Seller, constitutes a valid and binding obligation of Buyer, enforceable against
Buyer in accordance with its terms (subject to applicable bankruptcy, insolvency
and similar laws affecting creditors' rights generally and subject, as to
enforceability, to general principles of equity.)
(b) Neither the execution and delivery of this Agreement nor
the consummation by Buyer of the transactions contemplated hereby, nor
compliance by Buyer with any of the terms or provisions hereof, will (i)
conflict with or result in a breach of any provision of the articles of
incorporation or by-laws of Buyer, (ii) subject to making or obtaining the
consents, permits, authorizations, approvals, filings and registrations set
forth in Section 5.2 of the Buyer Schedule, violate any statute, code,
ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to Buyer or any of its properties or assets, or (iii) subject to
obtaining or making the consents, permits, authorizations, approvals, filings
and registrations set forth in Section 5.2 of the Buyer Schedule, violate,
conflict with, result in a breach of any provisions of, constitute a default (or
an event which, with notice or lapse of time, or both, would constitute a
default) under, result in the termination of, accelerate the performance
required by, or result in a right of termination or acceleration or the
creation of any Encumbrance upon any of the properties or assets of Buyer
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which Buyer is a party, or by which its properties or assets may
be bound or affected except for such violations, conflicts, breaches or defaults
which either individually or in the aggregate would not have a Material Adverse
Effect on Buyer. Notwithstanding the foregoing, the representations and
warranties in this subsection (b) shall not relate to or cover any consents,
approvals, filings or registrations, if any, arising from the regulated
nature of MAI or made applicable to Buyer by virtue of MAI or Buyer's
acquisition of the Purchased Assets and business of MAI or such regulations
governing MAI and the mortgage banking industry as a result of Buyer's purchase
of the Purchased Assets.
5.3 Brokers and Finders
Neither Buyer nor any of its officers, directors, employees or agents
has employed any broker, finder or financial advisor or incurred any liability
for any fees or commissions in connection with the transactions contemplated
hereby, except for legal, accounting and other professional fees payable in
connection with the Acquisition.
32
5.4 Buyer's Review of Seller's Schedules
Buyer acknowledges that it has reviewed the Seller's schedules attached
to this Agreement. The Buyer is satisfied with the form and format of such
schedules and accepts the matters accurately disclosed therein; provided that
this representation shall not constitute a release or waiver of Buyer's claims
and causes of action arising from misstatements, errors and omissions contained
in Buyer's schedules.
ARTICLE 6
COVENANTS
6.1 Filings and Consent
(a) Promptly following the execution and delivery hereof,
Shareholders shall, or shall cause MAI to, obtain or file all consents
(including Agency and Investor consents), approvals, permits, authorizations,
notices, and registrations (collectively, "filings and consent solicitations")
necessary to consummate the assignment to Buyer of the Purchased Assets and
business of MAI. Buyer shall cooperate with Shareholders and MAI in obtaining or
making the necessary filings and consent solicitations. Sellers will use their
best efforts to cause the filings and consent solicitations to be made as soon a
practicable. The parties hereto agree that they will consult with each other
with respect to the obtaining of all necessary permits, consents, approvals and
authorizations of all third parties and governmental bodies necessary or
advisable to consummate the transactions contemplated by this Agreement, and
each party will keep the others apprised of the status of matters relating to
completion of the transactions contemplated herein.
(b) Sellers and Buyer shall promptly furnish each other with
copies of written communications received by Shareholders, MAI or Buyer, as the
case may be, or delivered by any of them, of any governmental body, Agency,
Investor or private mortgage insurer in respect of the transactions contemplated
hereby.
6.2 Press Releases
MAI and Buyer shall cooperate with each other in the development and
distribution of all news releases and other public information disclosures with
respect to the Agreement or the transactions contemplated hereby; provided,
however, prior to the consummation of the Acquisition, no party hereto shall
make any public announcement or disclosure with respect to the transactions
contemplated hereby without the prior approval of the other parties, except
where disclosure is required by law. The parties anticipate issuing a press
release relating to the acquisition upon execution of this Agreement.
33
6.3 Employment Agreements
Buyer shall enter into Employment Agreements with ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ (collectively, the
"Executives") to serve as executive officers of the Post-Closing MAI Business
Unit, or of Buyer or an affiliate of Buyer, in the form attached hereto as
Exhibit 6.3 for ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and the others will be modified in form
reasonably acceptable to Buyer and MAI.
6.4 Marketing of Competing Products
Shareholders and MAI acknowledge that Buyer markets products that
directly compete with MAI's products, and after closing Buyer's other business
units will market products which directly compete with the Post-Closing MAI
Business Unit.
6.5 Leases
Buyer shall enter into a lease agreement for Buyer to lease MAI's
principal offices in Bay City, Michigan for ten (10) years with Buyer having two
five-year renewal options (the "Lease Agreements"). The form of Lease Agreement
is attached as Exhibit 6.5.
6.6 HSR Act Filing
To the extent any filing, notice or consent is required under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvement Act of 1976, each of Buyer and MAI
shall, in cooperation with the other, file any reports or notifications that may
be required to be filed by it and shall reasonably cooperate to satisfy such
requirements. The official fees of making any necessary filings under such Act
will be split equally between Buyer and Sellers.
6.7 Cash Conversion
Buyer agrees to provide Seller an opportunity by no later than
September 30, 1997 to dispose of up to 15% of the Exchange Shares (not to exceed
$7.5 million in value) for payment in immediately available funds. Buyer may
fulfill this obligation by including such shares held by Seller in a secondary
offering, by arranging a private placement or by any other method which results
in Seller obtaining the then fair market value of such shares after taking into
account normal sales commissions and transaction costs.
6.8 Seat on Board
Buyer agrees to seek the election of ▇▇▇ ▇▇▇▇▇▇▇ to Seller's Board of
Directors by proposing ▇▇▇ ▇▇▇▇▇▇▇ for election by the existing Board and
seeking to include ▇▇▇ ▇▇▇▇▇▇▇ on the list of nominees submitted to Buyer's
shareholders. This obligation shall terminate if the Shareholders and
34
their immediate families and controlled entities collectively own less than 5%
of Seller's then outstanding shares of common stock.
6.9 Confidentiality
In the event that, for any reason, this transaction does not close, the
parties shall use reasonable, good faith efforts to keep confidential the
information learned about the other's business.
ARTICLE 7
FURTHER COVENANTS OF MAI AND SHAREHOLDERS
MAI and Shareholders covenant and agree as follows:
7.1 Access to Information and Records
During the period prior to the Closing:
(a) MAI shall, and shall cause its officers, employees,
agents, independent accountants and advisors to, furnish to Buyer, its
officers, employees, agents, independent accountants and advisors, at
reasonable times and places, all information in their possession
concerning MAI as may be requested, and give such persons access to all
of the properties, books, records, contracts and other documents of or
pertaining to MAI that MAI or its officers, employees, agents,
independent accountants or advisors shall have in their custody.
(b) With the prior consent of MAI in each instance (which
consent shall not be unreasonably withheld), Buyer and its officers,
employees, agents, independent accountants and advisors, shall have
access to vendors, customers, and others having business dealings with
MAI for the purpose of performing Buyer's due diligence investigation.
7.2 Bank Accounts
Not less than ten (10) days prior to the Closing, MAI shall provide to
Buyer a list of each bank in which MAI has an account or safe deposit box, the
name and number of each such account or box and the names of all persons
authorized to draw thereon or who have access thereto, with the amounts they
are authorized to draw.
7.3 Conduct of Business Pending the Closing
From the date hereof until the Closing, except as otherwise approved in
writing in advance by the Buyer (which approval shall not be unreasonably
withheld):
35
(a) No Changes. MAI will carry on its business diligently
and in the same manner as heretofore and will not make or institute any changes
in its methods of purchase, sale, management, accounting or operation.
(b) Maintain Organization. MAI will take such action as may be
necessary to maintain, preserve, renew and keep in favor and effect the
existence, rights and franchises of MAI and will use its best efforts to
preserve the business organization of MAI intact, to keep available to Buyer the
present officers and employees, and to preserve for Buyer its present
relationships with suppliers and customers and others having business
relationships with MAI.
(c) No Breach. MAI and Shareholders will not do or omit any
act, or permit any omission to act, which may cause a breach of any material
contract, commitment or obligation, or any breach of any representation,
warranty, covenant or agreement made by MAI and/or the Shareholders herein, or
which would have required disclosure on Schedule 4.35 had it occurred after
October 31, 1996 and prior to the date of this Agreement.
(d) No Material Contracts. No contract or commitment will be
entered into, and no purchase of raw materials or supplies and no sale of goods
or services (real, personal, or mixed, tangible or intangible) will be made, by
or on behalf of MAI, except the transfer of the real estate as described in
Section and contracts, commitments, purchases or sales which are in the ordinary
course of business and consistent with past practice, are not material to the
MAI (individually or in the aggregate) and would not have been required to be
disclosed in the Disclosure Schedule had they been in existence on the date of
this Agreement.
(e) No Corporate Changes. MAI shall not amend its Articles
of Incorporation or By-laws or make any changes in authorized or issued capital
stock.
(f) Maintenance of Insurance. MAI shall maintain all of the
insurance in effect as of the date hereof and shall procure such additional
insurance as shall be reasonably requested by Buyer.
(g) Maintenance of Property. MAI shall use, operate,
maintain and repair all property of MAI in a normal business manner.
(h) Interim Financials. MAI will provide Buyer with interim
monthly financial statements and other management reports as and when they are
available.
(i) No Negotiations. Neither MAI nor any Shareholder will
directly or indirectly (through a representative or otherwise) solicit or
furnish any information to any prospective buyer, commence, or conduct presently
ongoing, negotiations with any other party or enter into any agreement with any
other party concerning the sale of MAI, MAI's assets or business or any part
thereof or any equity securities of MAI (an "acquisition proposal"), and MAI and
Shareholders shall immediately advise Buyer of the receipt of any acquisition
proposal.
36
7.4 Change of Corporate Name
Concurrently with the Closing, MAI shall change its corporate name to a
new name bearing no resemblance to its present name so as to permit the use of
its present name by Buyer.
7.5 Consents
MAI and Shareholders will use their best efforts prior to Closing to
obtain all consents necessary for the consummation of the transactions
contemplated hereby.
7.6 Other Action
MAI and Shareholders shall use their best efforts to cause the
fulfillment at the earliest practicable date of all of the conditions to the
parties' obligations to consummate the transactions contemplated in this
Agreement.
7.7 Disclosure
MAI and Shareholders shall have a continuing obligation to promptly
notify Buyer in writing with respect to any matter hereafter arising or
discovered which, if existing or known at the date of this Agreement, would have
been required to be set forth or described in the Disclosure Schedule, but no
such disclosure shall cure any breach of any representation or warranty which is
inaccurate.
ARTICLE 8
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
Each and every obligation of Buyer to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of each of the
following conditions:
8.1 Representations and Warranties True on the Closing Date
Each of the representations and warranties made by MAI and Shareholders
in this Agreement, and the statements contained in the Disclosure Schedule or in
any instrument, list, certificate or writing delivered by MAI pursuant to this
Agreement, shall be true and correct in all material respects when made and
shall be true and correct in all material respects at and as of the Closing Date
as though such representations and warranties were made or given on and as of
the Closing Date, except for any changes permitted by the terms of this
Agreement or consented to in writing by Buyer.
8.2 Compliance With Agreement
37
MAI and Shareholders shall have in all material respects performed and
complied with all of their agreements and obligations under this Agreement which
are to be performed or complied with by them prior to or on the Closing Date,
including the delivery of the closing documents specified in Section 10.1.
8.3 Absence of Litigation
No Litigation shall have been commenced or threatened, and no
investigation by any Government Entity shall have been commenced, against Buyer,
MAI or any of the affiliates, officers or directors of any of them, with respect
to the transactions contemplated hereby.
8.4 Consents and Approvals
All approvals, consents and waivers that are required to effect the
transactions contemplated hereby shall have been received, and executed
counterparts thereof shall have been delivered to Buyer not less than two
business days prior to the Closing. Notwithstanding the foregoing, receipt of
the consent of any third party to the assignment of a Contract which is not (and
is not required to be) disclosed in the Disclosure Schedule shall not be a
condition to Buyer's obligation to close, provided that the aggregate of all
such Contracts does not represent a material portion of MAI's sales or
expenditures. After the Closing, MAI and Shareholders will continue to use their
best effects to obtain any such consents or approvals, and neither MAI nor any
Shareholder shall hereby be relieved of any liability hereunder for failure to
perform any of their respective covenants or for the inaccuracy of any
representation or warranty.
8.5 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Waiting Period
All applicable waiting periods related to the HSR Act shall have
expired.
8.6 NASDAQ Requirement for Shareholder Approval
Buyer obtains Shareholder approval if required by NASDAQ for
transaction.
ARTICLE 9
CONDITIONS PRECEDENT TO MAI'S OBLIGATIONS
Each and every obligation of MAI and Shareholders to be performed on
the Closing Date shall be subject to the satisfaction prior to or at the Closing
of the following conditions:
9.1 Representations and Warranties True on the Closing Date
38
Each of the representations and warranties made by Buyer in this
Agreement shall be true and correct in all material respects when made and shall
be true and correct in all material respects at and as of the Closing Date as
though such representations and warranties were made or given on and as of the
Closing Date.
9.2 Compliance With Agreement
Buyer shall have in all material respects performed and complied with
all of Buyer's agreements and obligations under this Agreement which are to be
performed or complied with by Buyer prior to or on the Closing Date, including
the delivery of the closing documents specified in Section 10.2.
9.3 Absence of Litigation
No Litigation shall have been commenced or threatened, and no
investigation by any government entity shall have been commenced, against Buyer,
MAI or any of the affiliates, officers or directors of any of them, with respect
to the transactions contemplated hereby; provided that the obligations of MAI
shall not be affected unless there is a reasonable likelihood that as a result
of such action, suit, proceeding or investigation MAI will be unable to retain
substantially all the consideration to which it is entitled under this
Agreement.
9.4 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Waiting Period
All applicable waiting periods related to the HSR Act shall have
expired.
ARTICLE 10
CLOSING
The closing of this transaction ("▇▇▇ ▇▇▇▇▇▇▇") shall take place at the
offices of Buyer in Tampa, Florida, at 11:00 A.M. on January 9, 1997, or at such
other time and place as the parties hereto shall agree upon. Such date is
referred to in this Agreement as the "Closing Date." Regardless of the Closing
Date, the transaction shall be deemed to have occurred for all purposes as of
the Effective Time and the parties shall cooperate to treat the transaction as
having occurred as of the Effective Time.
10.1 Documents to be Delivered by MAI and Shareholders
At the Closing, MAI and Shareholders shall deliver to Buyer the
following documents, in each case duly executed or otherwise in proper form:
39
(a) Bills of Sale. Bills of sale and such other instruments of
assignment, transfer, conveyance and endorsement as will be sufficient in the
opinion of Buyer and its counsel to transfer, assign, convey and deliver to
Buyer the Purchased Assets as contemplated hereby.
(b) Compliance Certificate. A certificate signed by the chief
executive officer of MAI that each of the representations and warranties made by
MAI and Shareholders in this Agreement is true and correct in all material
respects on and as of the Closing Date with the same effect as though such
representations and warranties had been made or given on and as of the Closing
Date (except for any changes permitted by the terms of this Agreement or
consented to in writing by Buyer), and that MAI and Shareholders have performed
and complied with all of MAI's and Shareholders' obligations under this
Agreement which are to be performed or complied with on or prior to the Closing
Date.
(c) Opinion of Counsel. A written opinion of Joseph, Wolf,
Endean & ▇▇▇▇▇▇, P.C., counsel to MAI and Shareholders, dated as of the Closing
Date, addressed to Buyer, substantially in the form of Exhibit 10.1(c) hereto.
(d) Employment Agreements. The Employment Agreements referred
to in Section , duly executed by the persons referred to in such Section.
(e) Certified Resolutions. A certified copy of the resolutions
of the Board of Directors and the Shareholders of MAI authorizing and approving
this Agreement and the consummation of the transactions contemplated by this
Agreement.
(f) Escrow Agreement. The Escrow Agreement duly executed by
MAI, Buyer and the Escrow Agent in the form of Exhibit 3.2(b) hereto.
(g) Articles; By-laws. A copy of the By-laws of MAI certified
by the secretary of MAI, and a copy of the Articles of Incorporation of MAI
certified by the Secretary of State of Michigan.
(h) Real Estate Leases. The Lease Agreements executed by the
owner of the property occupied by MAI in Bay City.
(i) Registration Rights Agreement. The egistration Rights
Agreement in the form attached as Exhibit 10.1(i).
(j) Incumbency Certificate. Incumbency certificates relating
to each person executing any document executed and delivered to MAI pursuant to
the terms hereof.
40
(k) Other Documents. All other documents, instruments or
writings required to be delivered to Buyer at or prior to the Closing pursuant
to this Agreement and such other certificates of authority and documents as
Buyer may reasonably request.
10.2 Documents to be Delivered by Buyer
At the Closing, Buyer shall deliver to MAI the following documents, in
each case duly executed or otherwise in proper form:
(a) Exchange Shares. To MAI, and to the Escrow Agent, the
Exchange Shares representing the purchase price.
(b) Assumption of Liabilities. Such undertakings and
instruments of assumption as will be reasonably sufficient in the opinion of MAI
and its counsel to evidence the assumption of Assumed Liabilities as provided
for in Article 2.
(c) Compliance Certificate. A certificate signed by the chief
executive officer of Buyer that the representations and warranties made by Buyer
in this Agreement are true and correct on and as of the Closing Date with the
same effect as though such representations and warranties had been made or given
on and as of the Closing Date (except for any changes permitted by the terms of
this Agreement or consented to in writing by MAI), and that Buyer has performed
and complied with all of Buyer's obligations under this Agreement which are to
be performed or complied with on or prior to the Closing Date.
(d) Opinion of Counsel. A written opinion of ▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, general counsel to Buyer, dated as of the Closing Date, addressed to
MAI, in substantially the form of Exhibit 10.2(d)-1 and a written opinion of
▇▇▇▇▇ & Lardner, special counsel to Buyer dated as of the Closing Date,
addressed to Buyer in substantially the form of Exhibit 10.2(d)-2 hereto.
(e) Escrow Agreement. The Escrow Agreement duly executed by
Buyer, MAI and the Escrow Agent in the form of Exhibit 3.2 hereto.
(f) Employment Agreements. The Employment Agreements
referred to in Section 6.3 duly executed by the Buyer referred to in such
Section.
(g) Real Estate Leases. The Lease Agreements duly executed
by Buyer.
(h) Registration Rights Agreement. The Registration Rights
Agreement.
(i) Other Documents. All other documents, instruments or
writings required to be delivered to MAI at or prior to the Closing pursuant to
this Agreement and such other certificates of authority and documents as MAI may
reasonably request.
41
ARTICLE 11
TERMINATION
11.1 Right of Termination Without Breach
This Agreement may be terminated without further liability of any party
at any time prior to the Closing:
(a) by mutual written agreement of Buyer and MAI, or
(b) by either Buyer or MAI if the Closing shall not have
occurred on or before January 31, 1997, provided the terminating party has not,
through breach of a representation, warranty or covenant, prevented the Closing
from occurring on or before such date.
11.2 Termination for Breach.
(a) Termination by Buyer. If (i) there has been a material
violation or breach by MAI of any of the agreements, representations or
warranties contained in this Agreement which has not been waived in writing by
Buyer, or (ii) there has been a failure of satisfaction of a condition to the
obligations of Buyer which has not been so waived, or (iii) MAI shall have
attempted to terminate this Agreement under this Article 11 or otherwise without
grounds to do so, then Buyer may, by written notice to MAI at any time prior to
the Closing that such violation, breach, failure or wrongful termination attempt
is continuing, terminate this Agreement with the effect set forth in Section
10.2(c) hereof.
(b) Termination by MAI. If (i) there has been a material
violation or breach by Buyer of any of the agreements, representations or
warranties contained in this Agreement which has not been waived in writing by
MAI, or (ii) there has been a failure of satisfaction of a condition to the
obligations of MAI which has not been so waived, or (iii) Buyer shall have
attempted to terminate this Agreement under this Article 11 or otherwise without
grounds to do so, then MAI may, by written notice to Buyer at any time prior to
the Closing that such violation, breach, failure or wrongful termination attempt
is continuing, terminate this Agreement with the effect set forth in Section
10.2(c) hereof.
(c) Effect of Termination. Termination of this Agreement
pursuant to this Section 11.2 shall not in any way terminate, limit or restrict
the rights and remedies of any party hereto against any other party which has
violated, breached or failed to satisfy any of the representations, warranties,
covenants, agreements, conditions or other provisions of this Agreement prior to
termination hereof. In addition to the right of any party under common law to
redress for any such breach or violation, each party whose breach or violation
has occurred prior to termination shall
42
jointly and severally indemnify each other party for whose benefit such
representation, warranty, covenant, agreement or other provision was made
("indemnified party") from and against all losses, damages, costs and expenses
(including, without limitation, interest (including prejudgment interest in any
litigated matter), penalties, court costs, and attorneys fees and expenses)
asserted against, resulting to, imposed upon, or incurred by the indemnified
party, directly or indirectly, by reason of, arising out of or resulting from
such breach or violation. Subject to the foregoing, the parties' obligations
under Section 10.2 of this Agreement shall survive termination.
(d) Opportunity to Cure. In the event that either party
desires to terminate the Agreement as a result of a breach by the other party,
and such breach is reasonably capable of being cured, the party shall give
written notice and provide a ten day opportunity to cure before terminating the
Agreement.
ARTICLE 12
MAI'S PLAN OF REORGANIZATION AND LIQUIDATION
12.1 Plan of Reorganization
Effective as of the Closing Date, MAI shall adopt the Plan of
Liquidation attached as Exhibit 12.1 and proceed to completely liquidate,
dissolve and terminate its business pursuant to the Plan of Liquidation and to
distribute its assets, including the Exchange Shares, to the Shareholders pro
rata to stock ownership. The parties intend that the transactions contemplated
by this Agreement and the liquidation of MAI pursuant to the Plan of Liquidation
shall constitute a Plan of Reorganization and shall qualify as a "C"
reorganization under IRS 'SS' 368(a)(1)(c).
12.2 Shareholders' Investment Intent
The Shareholders represent, warrant and confirm that they have no plan
or intention to sell, exchange, or otherwise dispose of any of the Exchange
Shares received as a result of the liquidation of MAI pursuant to the Plan of
Liquidation except as set forth on Schedule 12.2.
12.3 Termination of MAI Business Operations
MAI shall immediately terminate all business operations and terminate
all employees, except as may be necessary to permit Buyer to take advantage of
MAI's non-transferable licenses pursuant to the temporary operation agreement
provided in Section 12.5 below until Buyer can complete the application for such
licenses to the extent required.
12.4 Immediate Partial Liquidation Distribution
43
Within 15 Business Days after the Closing Date, MAI shall begin the
liquidation distribution process by distributing not less than 50% of the
Exchange Shares received as the Base Payment to the Shareholders. MAI shall
complete final liquidation in six months, regardless of whether Buyer has
obtained appropriate licenses.
12.5 Buyer's Temporary Operation of MAI's Business Pending License
Transfer
(a) The parties acknowledge that Buyer (which term for
purposes of this Section shall include Buyer's Affiliates) may require, but not
yet have, all Licenses necessary to conduct the mortgage banking business and
mortgage brokering business being acquired from MAI. The parties have been
coordinating regarding Buyer's efforts to obtain all necessary licenses but in
certain situations, it is not practical for Buyer to obtain requisite licenses
prior to Closing. Buyer covenants to use reasonable good faith efforts to secure
all appropriate Licenses as soon as possible.
(b) Until the earlier of (i) Buyer obtaining all Licenses
necessary or appropriate for Buyer's operation of the mortgage banking and
mortgage brokering business consistent with MAI's past practices or (ii) the
close of business on June 30, 1997, Buyer shall be permitted to operate, manage
and supervise MAI's mortgage banking business in the name of MAI, and to thereby
take advantage of MAI's Licenses, to the extent that Buyer has not yet secured
its own Licenses to conduct such business. Buyer shall pay all costs and
expenses relating to, or arising out of, Buyer's management of MAI's business,
including without limitation, providing or facilitating the credit facilities
necessary to fund such business. Unless otherwise required by law, all personnel
involved in Buyer's temporary operation of MAI's business shall be on Buyer's
payroll. MAI shall pay Buyer a management fee equal to all profits which MAI
would otherwise earn from Buyer's temporary operation of MAI's business and
Buyer shall reimburse MAI for any loss from such temporary operation of MAI's
business.
Buyer's temporary operation of MAI's business shall result in MAI making no
profit or loss from such temporary operation, except as otherwise required by
law. MAI shall cooperate with Buyer to facilitate Buyer's temporary operation of
MAI's business. MAI may impose such conditions and restrictions upon Buyer's
temporary operation of MAI's business as MAI shall consider appropriate, acting
reasonably and in good faith, and provided that MAI and Shareholders shall not
seek to profit directly or indirectly from the imposition of such conditions and
restrictions.
12.6 MAI's Assignment to Shareholders of Agreement Upon MAI Liquidation
As part of MAI's Liquidation at the appropriate time, as determined by
MAI, acting reasonably and in good faith, MAI shall assign to the Shareholders,
and the Shareholders agree to accept and perform, all of MAI's rights,
privileges, obligations, liabilities and covenants, of every kind and nature,
arising out of or in connection with this Agreement, including the right to
receive the Contingent Payment. The Shareholders, by written agreement in form
and content reasonably satisfactory to Buyer, may re-assign among themselves
such rights and responsibilities derived from MAI, provided that such rights and
responsibilities shall not be transferred to any third party, subject
44
to the provisions of Section 16.5. MAI shall provide written notice to Buyer and
Shareholders as part of MAI's liquidation that MAI has assigned to Shareholders
all future rights to receive the Contingent Payment under this Agreement. Upon
receipt of such notice, Buyer shall make all future payments directly to the
respective Shareholders (with Stock Certificates issued in the names of the
respective Shareholders, where appropriate), based on MAI's Common Stock
ownership schedule set forth in Section 4.2 unless the recipient individual
Shareholder directs otherwise by written notice. Without limiting Buyer's other
remedies, Buyer shall have the express right to setoff any loss or claim arising
under this Agreement against the Contingent Payment, even if the Contingent
Payment has been assigned to the Shareholders as part of a Plan of Liquidation.
(This provision shall not modify Buyer's right to set-off or otherwise limit
Buyer's rights against Shareholders as an assignee of MAI.)
12.7 Appointment of Shareholders' Agent
(a) The Shareholders hereby appoint and constitute ▇▇▇▇▇▇
▇▇▇▇▇▇▇ as Shareholders' Agent hereunder, to exercise the powers on behalf of
Shareholders set forth in this Agreement; and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ hereby accepts such
appointment. In the event of the death, resignation or inability to act of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, and upon receipt by Buyer of evidence of the same which is
satisfactory to Buyer, Shareholders will, by majority consent, name a successor
Shareholders' Agent with all powers of his predecessor, subject to prior
approval of Buyer.
(b) Each Shareholder, by his execution of this Agreement,
hereby constitutes and appoints the Shareholders' Agent his true and lawful
attorney in fact, with full power in his name and on his behalf:
(i) to receive on behalf of such Shareholder the
Exchange Shares constituting the Contingent Payment, to give Buyer a
receipt therefor on behalf of such Shareholder and to hold such
proceeds subject to the terms hereof and the instructions of such
Shareholder with respect to the ultimate disbursement thereof;
(ii) to act on such Shareholder's behalf according to
the terms of this Agreement, including, without limitation, the power
to contest or acquiesce in the determination of the Contingent Payment
in accordance with Section 3.5; the power to contest or acquiesce
regarding any payment calculation statement in accordance with Section
; to amend this Agreement in accordance with Section 15.1; to waive
Buyer's performance pursuant to Section 15.1; to give and receive
notices on behalf of all the Shareholders; and to act on their behalf
in connection with any matter as to which the Shareholders jointly and
severally are an "Indemnified Party" under Article 13 hereof; all in
the absolute discretion of the Shareholders' Agent;
(iii) to act on such Shareholder's behalf, including
providing any consents, approvals or undertakings on behalf of
Shareholder with respect to the Registration Rights Agreement of even
date, including the hold-back provisions contained in Section 7
thereof;
45
(iv) in general, to do all things and to perform all
acts, including, without limitation, executing and delivering all
agreements, certificates, receipts, instructions and other instruments
contemplated by or deemed advisable in connection with this Agreement.
This power of attorney, and all authority hereby conferred, is granted subject
to the interests of the other Shareholders and the Buyer hereunder and in
consideration of the mutual covenants and agreements made herein, and shall be
irrevocable and shall not be terminated by any act of any Shareholder or by
operation of law, whether by the death or incapacity of any Shareholder or by
the occurrence of any other event. Each Shareholder agrees, jointly and
severally, to indemnify, defend and hold harmless the Shareholders' Agent from
any and all loss, damage or liability which they, or any one of them, may
sustain as a result of any action taken in good faith hereunder.
12.8 Tax-free Exchange for Seller
Buyer and Seller agree that in the event there is a challenge to the
tax free nature of the stock-for-asset exchange contemplated by this Agreement,
each will reasonably cooperate with each other, and third parties, to furnish
all relevant information. Buyer and MAI shall each pay their own costs and
expenses in such matters. Shareholders and MAI acknowledge that Buyer makes no
representation or warranty regarding the tax consequences of this transaction.
ARTICLE 13
INDEMNIFICATION
13.1 Indemnification
(a) From and after the Closing Date, Shareholders and MAI,
jointly and severally shall indemnify and hold harmless Buyer and each of its
Affiliates from and against any and all Losses which any of them may suffer,
incur or sustain arising out of or attributable to (whether or not arising out
of third party claims) (i) any breach of any covenant, representation or
warranty made by Sellers pursuant to this Agreement, and (ii) any claim or
liability (other than payment of benefits in the ordinary course), tax, penalty
asserted, legal action or administrative proceeding resulting from or arising in
connection with any Plan or Single Employer Plan that was accrued or incurred
prior to the Closing Date.
(b) From and after the Closing Date, Buyer shall indemnify and
hold harmless Sellers from and against any and all Losses which any of them may
suffer, incur or sustain arising out of any breach of any covenant to be
performed by Buyer pursuant to this Agreement.
46
(c) From and after the Closing Date, MAI and Sellers shall
indemnify and hold Buyer and its affiliates harmless against, and agree to pay,
any and all expenses, costs or losses relating to the operation of MAI prior to
Closing, except as set forth on Schedule 13.1.
(d) If any third party makes a claim for which an indemnifying
party under this Section ("Indemnified Party") seeks indemnity from the
indemnifying party ("Indemnitor"), the Indemnified Party shall as soon as
practicable notify Indemnitor of the details of the claim ("Claim Notice").
After receiving a Claim Notice, Indemnitor may elect, by
written notice to the Indemnified Party, to assume the defense of such claim by
using counsel selected by Indemnitor, acting reasonably. If Indemnitor assumes
such defense and admits that the claim is subject to the Indemnitor's indemnity
obligations, then (i) the claim shall be deemed to be a claim indemnified by the
Indemnitor; (ii) the Indemnified Party may, at its election, participate in the
defense of the claim, but Indemnitor will have no obligation to pay for any
defense costs including attorneys' fees of the Indemnified Party after
Indemnitor assumes the defense of the claim; and (iii) Indemnitor will have the
right, without cost to Indemnified Party, to compromise and settle the claim on
any basis believed reasonable, in good faith, by Indemnitor, and Indemnified
Party shall be bound thereby, provided that Indemnitor can reasonably
demonstrate the financial resources to perform under the terms of the proposed
Settlement.
After receiving a Claim Notice, if Indemnitor either does not
assume the defense thereof, or does so under a reservation of rights without
admitting that the claim is subject to the Indemnitor's indemnity obligations,
then: (i) the claim shall not be deemed to be a claim indemnified by the
Indemnitor and neither party shall have waived any rights to assert that the
claim is or is not properly a claim subject to the Indemnitor's indemnity
obligations; (ii) both Indemnitor and Indemnified Party may, at their individual
election, participate in the defense of such claim but Indemnitor will remain
responsible for the costs of defense, including reasonable attorneys' fees of
the Indemnified Party should the claim ultimately be determine to be subject to
Indemnitor's indemnity obligation; and (iii) the Indemnified Party shall have
the right to compromise and settle the claim on any basis believed reasonable,
in good faith, by the Indemnified Party, and the Indemnitor will be bound
thereby should the claim ultimately be determined to be subject to Indemnitor's
indemnity obligation.
(e) Notwithstanding anything to the contrary anywhere in this
Agreement, (i) MAI and Shareholders' maximum aggregate liability arising out of
this Agreement and the Acquisition shall be the Purchase Price except for claims
based on intentional fraud of MAI and/or the Shareholders; (ii) MAI and
Shareholders shall have no liability for any claim which is not presented to
them in writing within three years following the Effective Date; (iii) MAI and
Shareholders shall be jointly and severally liable for all indemnification
relating to claims presented in writing within three years following the
Effective Date. The notice of a potential claim shall state the general factual
basis, to the extent known, and the basis of alleged liability.
47
ARTICLE 14
POST-CLOSING COVENANTS
14.1 Personnel Matters
After the Closing Date, except for the Executives, each employee of MAI
will continue to be employed by Buyer on terms that are comparable to the
employment terms, compensation and benefits provided by MAI immediately prior to
the Closing.
14.2 Shareholder Cooperation
Shareholders shall encourage MAI employees to accept employment with
Buyer.
14.3 Board of Directors
Buyer shall exercise its reasonable best efforts to cause the election
of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ to Buyer's Board of Directors, provided, that ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
and/or his Family and Affiliates shall continue to own at least five percent
(5%) of Buyer's outstanding shares of stock.
14.4 Guaranties
Within forty-five (45) days following the Closing Date, Buyer shall
exercise its best efforts to cause the release of all personal guaranties and
personal collateral provided by any of the Shareholders with respect to loans by
third parties to MAI.
14.5 Auto Business; Right of First Refusal
As of the Closing Date, the Auto Business shall be completely separated
from the Business and shall be conducted by Affiliates of MAI with a corporate
entity, corporate facilities, equipment and personnel entirely separate from MAI
and the Business. Notwithstanding the foregoing, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ shall be
permitted to spend a reasonable amount of time working in the Auto Business,
provided, that such work does not interfere with his duties to the Business as
set forth in his Employment Agreement with Buyer. After the Closing and upon
Buyer's review of a business plan developed by the Auto Business, Buyer shall
consider the possibility of strategic alliances with the Auto Business. Buyer
shall have a right of first refusal to purchase the Auto Business in the event
of any direct or indirect sale of the Auto Business, its assets or the stock or
other equity interest of the entity which owns and operates the Auto Business.
Pursuant to this Right of First Refusal, MAI or its successor shall give Buyer
thirty (30) days advance written notice of any proposed sale of the Auto
Business, including sale of stock or equity of the Auto business, which notice
shall include the
48
proposed sale price, terms and proposed purchaser. The Buyer shall have
reasonable opportunity to conduct due diligence regarding the condition of
business at the time and Buyer shall have thirty (30) days to decide whether or
not to purchase the business or the equity interest in the venture.
ARTICLE 15
AMENDMENTS
15.1 Amendment, Extension and Waiver
Subject to applicable law, at any time prior to the consummation of the
transactions contemplated by this Agreement, Sellers and Buyer may (a) amend
this Agreement, (b) extend the time for the performance of any of the
obligations or other acts of any other party hereto, (c) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto, or (d) waive compliance with any of the agreements or
conditions contained in this Agreement. This Agreement may not be amended except
by an instrument in writing signed on behalf of each of the parties hereto. Any
agreement on the part of a party hereto to any extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party, but such waiver or failure to insist on strict compliance with such
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
ARTICLE 16
MISCELLANEOUS
16.1 Survival
The entire Agreement, including without limitation the representations
and warranties set forth herein, shall survive the Closing.
16.2 Expenses
Each party hereto shall bear and pay all costs and expenses incurred by
it in connection with the transactions contemplated hereby, including fees and
expenses of its own financial consultants, accountants and counsel.
16.3 Entire Agreement
49
This Agreement, including the documents, schedules and other writings
referred to herein or delivered pursuant hereto, contains the entire agreement
and understanding of the parties with respect to its subject matter, including,
without limitation, the letter of intent. This Agreement supersedes all prior
arrangements and understandings between the parties, both written or oral with
respect to its subject matter.
16.4 Parties in Interest
The Agreement shall be binding upon and shall inure to the benefit of
upon the parties hereto and their respective successors and assigns; provided,
however, that nothing in this Agreement, expressed or implied, is intended to
confer upon any other person or entity, any rights, remedies, obligations or
liabilities of any nature whatsoever under or by reason of this Agreement.
16.5 Assignment
No party hereto may assign any of its rights or obligations hereunder
to any other person, without the prior written consent of the other parties
provided, however, Buyer may assign its rights and obligations hereunder to any
one or more of its Affiliates (whether existing on the date hereof or hereafter
created). This provision shall not prohibit MAI's assignment of rights under
this Agreement to Shareholders pursuant to Shareholders' Plan of Liquidation and
any other assignment among Shareholders specifically authorized hereunder.
Moreover, Shareholders may pledge their rights under this Agreement to a
financial institution pursuant to a bona fide loan transaction provided that any
such assignment is expressly subject to Buyer's right of setoff under this
Agreement.
16.6 Setoff
The Buyer shall have the right to setoff against the Purchase Price
(including the Contingent Payment) and the Exchange Shares (including Exchange
Shares after they have been transferred by MAI to Shareholders as part of MAI's
liquidation) for any damages for any breach of Shareholders' or MAI's
representations, warranties or covenants. This shall not limit any of Buyer's
other remedies under this Agreement, at law or in equity.
16.7 Notices
All notices or other communications hereunder shall be in writing and
shall be deemed given if delivered personally or mailed by prepaid registered or
certified mail (return receipt requested), or by overnight courier, cable,
telegram or telex addressed as follows:
50
(a) If to Seller to:
▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Mortgage America, Inc.
▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Copy to:
▇▇▇▇ ▇. ▇▇▇▇, Esq.
Joseph, Wolf, Endean & Stable, PC
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile:
and
▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Mason, Steinhardt, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to Buyer to:
▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Industry Mortgage Company
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Copy to:
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, P.A.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
51
16.8 Captions
The table of contents and captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
16.9 Counterparts
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one Agreement.
16.10 Governing Law
This Agreement shall be governed by and construed in accordance with
the laws of the State of Florida, without giving effect to the principles of
conflict of laws thereof.
16.11 No Third Party Beneficiaries
There are no third party beneficiaries and no third party shall have
any rights or remedies under this Agreement.
IN WITNESS WHEREOF, Seller and Buyer have executed this Agreement as of
the day and year first above written.
MORTGAGE AMERICA, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chairman
---------------------
IMC MORTGAGE COMPANY
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: CEO
---------------------
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
52
/s/ ▇▇▇▇ ▇. ▇▇▇▇
---------------------------
▇▇▇▇ ▇. ▇▇▇▇
/s/ ▇▇▇ ▇▇▇▇▇▇▇
---------------------------
▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
53