AGREEMENT AND PLAN OF
MERGER
By and Among
Search Capital Group, Inc.,
Search Capital Acquisition Corp.,
and
MS Financial, Inc.,
dated as of February 7, 1997
TABLE OF CONTENTS
1. PLAN OF REORGANIZATION. . . . . . . . . . . . . . . . . .-1-
1.1. The Merger.. . . . . . . . . . . . . . . . . . . . .-1-
(a) The Merger. . . . . . . . . . . . . . . . . . .-1-
(b) Effects of the Merger . . . . . . . . . . . . .-1-
(c) Certificate of Incorporation. . . . . . . . . .-2-
(d) Bylaws. . . . . . . . . . . . . . . . . . . . .-2-
(e) Directors and Officers. . . . . . . . . . . . .-2-
1.2. Conversion of Securities . . . . . . . . . . . . . .-2-
(a) Capital Stock of Newco. . . . . . . . . . . . .-2-
(b) Cancellation of Certain Shares of Capital Stock of
MS Financial. . . . . . . . . . . . . . . . . .-2-
(c) Conversion of Capital Stock of MS Financial . .-2-
(d) Maximum and Minimum Exchange Ratio. . . . . . .-3-
(f) Fractional Shares . . . . . . . . . . . . . . .-3-
(g) Adjustments for Financial Changes . . . . . . .-3-
1.3. Exchange of Certificates . . . . . . . . . . . . . .-5-
(a) Exchange Agent. . . . . . . . . . . . . . . . .-5-
(b) Exchange Procedures . . . . . . . . . . . . . .-5-
(c) Distributions with Respect to Unexchanged Shares
of MS Financial Stock . . . . . . . . . . . . .-6-
(d) Termination of Exchange Fund. . . . . . . . . .-6-
(e) No Liability. . . . . . . . . . . . . . . . . .-6-
(f) Withholding Rights. . . . . . . . . . . . . . .-6-
(g) No Further Ownership Rights in Capital Stock of MS
Financial . . . . . . . . . . . . . . . . . . .-6-
(h) Lost, Stolen or Destroyed Certificates. . . . .-6-
1.4. Stock Transfer Books . . . . . . . . . . . . . . . .-7-
1.5. Stock Options and Other Rights to MS Financial Stock-7-
1.6. Dissenting Shares. . . . . . . . . . . . . . . . . .-7-
2. CLOSING.. . . . . . . . . . . . . . . . . . . . . . . . .-8-
2.1. Certificate of Merger Filing; Closing Time . . . . .-8-
2.2. Documents to be Delivered at Closing by MS Financial-8-
2.3. By Search/Newco. . . . . . . . . . . . . . . . . . .-9-
3.1. Due Organization . . . . . . . . . . . . . . . . . -10-
3.2. Authorization; Validity. . . . . . . . . . . . . . -10-
3.3. No Conflicts . . . . . . . . . . . . . . . . . . . -11-
3.4. Permits and Intangibles. . . . . . . . . . . . . . -12-
3.5. Capital Stock of the Company . . . . . . . . . . . -12-
3.6. Transactions in Capital Stock. . . . . . . . . . . -12-
3.7. Subsidiary . . . . . . . . . . . . . . . . . . . . -12-
3.8. Predecessor Status; etc. . . . . . . . . . . . . . -12-
3.9. Spin-off by the Company. . . . . . . . . . . . . . -13-
3.10. Financial Statements. . . . . . . . . . . . . -13-
3.11. SEC Filings . . . . . . . . . . . . . . . . . -13-
3.12. Liabilities and Obligations . . . . . . . . . -14-
3.13. Accounts and Notes Receivable . . . . . . . . -15-
3.14. Finance Contracts . . . . . . . . . . . . . . -15-
3.15. Offices, FTC; Warranties. . . . . . . . . . . -17-
3.16. Environmental Matters . . . . . . . . . . . . -17-
(a) Hazardous Material. . . . . . . . . . . . . . -17-
(b) Hazardous Materials Activities. . . . . . . . -17-
(c) Permits . . . . . . . . . . . . . . . . . . . -18-
(d) Environmental Liabilities . . . . . . . . . . -18-
3.17. Real and Personal Property. . . . . . . . . . -18-
3.18. Significant Car Dealers, Material Contracts and
Commitments. . . . . . . . . . . . . . . . . . . . -18-
3.19. Insurance . . . . . . . . . . . . . . . . . . -19-
3.20. Compensation; Employment Agreements . . . . . -19-
3.21. Employee Benefit Plans. . . . . . . . . . . . -20-
3.22. Employee Matters. . . . . . . . . . . . . . . -21-
3.23. Conformity with Law; Litigation . . . . . . . -21-
3.24. Taxes . . . . . . . . . . . . . . . . . . . . -21-
3.25. Government Contracts. . . . . . . . . . . . . -22-
3.26. Absence of Changes. . . . . . . . . . . . . . -22-
3.27. Bank Accounts Powers of Attorney. . . . . . . -24-
3.28. Relations with Governments. . . . . . . . . . -24-
3.29. Disclosure. . . . . . . . . . . . . . . . . . -25-
3.30. Opinion of Financial Advisor. . . . . . . . . -25-
3.31. Vote Required . . . . . . . . . . . . . . . . -25-
3.32. Brokers . . . . . . . . . . . . . . . . . . . -25-
3.33. Absence of Claims Against Company . . . . . . -25-
3.34. Complete Copies of Materials. . . . . . . . . -25-
3.35. Compliance with Laws of Delaware. . . . . . . -25-
3.36. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Filing. . . . . . . . . . . -25-
4. REPRESENTATIONS OF SEARCH AND NEWCO . . . . . . . . . . -25-
4.1. Due Organization . . . . . . . . . . . . . . . . . -26-
4.2. Authorization; Validity of Obligations . . . . . . -26-
4.3. No Conflicts; Required Filings and Consents. . . . -26-
4.4. Permits and Intangibles. . . . . . . . . . . . . . -27-
4.5. Capitalization of Search and Ownership of Search Stock-27-
4.6. SEC Filings; Financial Statements. . . . . . . . . -28-
4.7. Absence of Certain Changes or Events . . . . . . . -29-
4.8. Conformity with Law; Litigation. . . . . . . . . . -30-
4.9. Ownership of Newco; No Prior Activities. . . . . . -30-
4.10. Vote Required . . . . . . . . . . . . . . . . -30-
4.11. Brokers . . . . . . . . . . . . . . . . . . . -30-
4.12. Transactions in Capital Stock . . . . . . . . -30-
4.13. Disclosure. . . . . . . . . . . . . . . . . . -31-
4.14. Complete Copies of Materials. . . . . . . . . -31-
4.15. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Filing. . . . . . . . . . . -31-
4.16. Review of Company . . . . . . . . . . . . . . -31-
4.17. Taxes . . . . . . . . . . . . . . . . . . . . -31-
5. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . -32-
5.1. Access to Information; Confidentiality . . . . . . -32-
5.2. Conduct of Business by MS Financial. . . . . . . . -33-
5.3. Prohibited Activities. . . . . . . . . . . . . . . -34-
5.4. No Solicitation of Transactions. . . . . . . . . . -36-
5.5. Notification of Certain Matters. . . . . . . . . . -36-
5.6. Cooperation in Obtaining Required Consents and
Approvals. . . . . . . . . . . . . . . . . . . . . -36-
5.7. Tax Returns. . . . . . . . . . . . . . . . . . . . -37-
5.8. Registration Statement; Proxy Statement . . . . . -37-
5.9. Stockholders Meetings. . . . . . . . . . . . . . . -38-
5.10. Appropriate Action; Consents; Filings. . . . -38-
5.11. Obligations of Newco. . . . . . . . . . . . . -40-
5.12. Public Announcements. . . . . . . . . . . . . -40-
5.13. Delivery of SEC Documents . . . . . . . . . . -40-
5.14. Further Action. . . . . . . . . . . . . . . . -40-
5.15. Indemnification . . . . . . . . . . . . . . . -40-
5.16. Operations. . . . . . . . . . . . . . . . . . -41-
5.17. Tax Reorganization. . . . . . . . . . . . . . -43-
5.18. Search Stock. . . . . . . . . . . . . . . . . -43-
5.19. Directorship . . . . . . . . . . . . . . . . -43-
6. CONDITIONS TO THE MERGER. . . . . . . . . . . . . . . . -43-
6.1. Conditions to the Obligations of Each Party. . . . -43-
6.2. Conditions to the Obligations to Search and Newco. -44-
(a) Representations and Warranties; Performance of
Obligations . . . . . . . . . . . . . . . . . -44-
(b) No Litigation . . . . . . . . . . . . . . . . -44-
(c) Consents and Approvals. . . . . . . . . . . . -44-
(d) Cold Comfort Letter . . . . . . . . . . . . . -44-
(e) Bank Financing. . . . . . . . . . . . . . . . -45-
(f) Insurance . . . . . . . . . . . . . . . . . . -45-
6.3. Conditions to the Obligations of MS Financial. . . -45-
(a) Representations and Warranties; Performance of
Obligations . . . . . . . . . . . . . . . . . -45-
(b) No Litigation . . . . . . . . . . . . . . . . -45-
(c) Consents and Approvals. . . . . . . . . . . . -45-
7. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . -45-
7.1. Termination. . . . . . . . . . . . . . . . . . . . -45-
7.2. Effect of Termination. . . . . . . . . . . . . . . -47-
7.3. Cooperation. . . . . . . . . . . . . . . . . . . . -47-
7.4. Successors and Assigns . . . . . . . . . . . . . . -47-
7.5. Entire Agreement . . . . . . . . . . . . . . . . . -47-
7.6. Counterparts . . . . . . . . . . . . . . . . . . . -47-
7.7. Fees and Expenses. . . . . . . . . . . . . . . . . -48-
7.8. Specific Performance; Remedies . . . . . . . . . . -49-
7.9. Notices. . . . . . . . . . . . . . . . . . . . . . -49-
7.10. Governing Law . . . . . . . . . . . . . . . . -50-
7.11. Severability. . . . . . . . . . . . . . . . . -50-
7.12. Absence of Third Party Beneficiary Rights . . -50-
7.13. Mutual Drafting . . . . . . . . . . . . . . . -50-
7.14. Further Representations . . . . . . . . . . . -50-
7.15. Amendment; Waiver . . . . . . . . . . . . . . -50-
7.16. Survival of Certain Clauses . . . . . . . . . -50-
8. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . -51-
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made
as of February 7, 1997, by and among (i) Search Capital Group,
Inc., a Delaware corporation ("Search"), (ii) Search Capital
Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of Search ("Newco"), and (iii) MS Financial, Inc., a
Delaware corporation ("MS Financial").
BACKGROUND
A. MS Financial is a Mississippi-based consumer finance
company engaged in the financing and servicing of non-prime
automobile installment loans; and
B. The respective Boards of Directors of Search, Newco and
MS Financial deem it advisable and in the best interests of
Search, Newco and MS Financial and their respective stockholders
that Newco merge with and into MS Financial (the "Merger")
pursuant to this Agreement and the applicable provisions of the
Delaware Statutes.
C. This Agreement is intended as a plan of reorganization
within the provisions of Section 368(a) of the Code.
D. Some of the capitalized terms set forth below are
defined in Article 8 below.
NOW, THEREFORE, in consideration of the foregoing premises,
which are incorporated herein by reference, and of the
representations, warranties, covenants and agreements herein
contained, and for other good and valuable consideration, the
receipt and sufficiency of which are acknowledged by all parties,
the parties hereto, intending to be legally bound, agree as
follows:
1. PLAN OF REORGANIZATION
1.1. The Merger.
(a) The Merger. At the Effective Time, Newco shall be
merged with and into MS Financial pursuant to this Agreement
and the Delaware Statutes, the separate corporate existence
of Newco shall cease and MS Financial shall continue as the
surviving corporation of the Merger (the "Surviving
Corporation").
(b) Effects of the Merger. The Merger shall have the
effects provided therefor by the Delaware Statutes. Without
limiting the generality of the foregoing, and subject
thereto, at the Effective Time (i) all the rights,
privileges, powers and franchises, of a public as well as of
a private nature, and all property, real and personal, and
all debts due on whatever account, including without
limitation subscriptions to shares, and all other choses in
action, and all and every other interest of or belonging to
or due to MS Financial or Newco, shall be vested in the
Surviving Corporation without further act or deed, and all
property, rights and privileges, powers and franchises and
all and every other interest shall be thereafter as
effectually the property of the Surviving Corporation as
they were of MS Financial and Newco immediately prior to the
Effective Time, and (ii) all debts, liabilities, duties and
obligations of MS Financial and Newco shall be the debts,
liabilities, duties and obligations of the Surviving
Corporation.
(c) Certificate of Incorporation. At the Effective
Time, the Amended and Restated Certificate of Incorporation
of MS Financial shall be the Certificate of Incorporation of
the Surviving Corporation, until thereafter amended in
accordance with the terms of the Certificate of
Incorporation of the Surviving Corporation and the Delaware
Statutes.
(d) Bylaws. From and after the Effective Time, the
Bylaws of Newco as in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving
Corporation until thereafter amended in accordance with the
terms of the Bylaws and Certificate of Incorporation of the
Surviving Corporation and the Delaware Statutes.
(e) Directors and Officers. The directors of Newco
immediately prior to the Effective Time shall be the initial
directors of the Surviving Corporation, each such director
to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation until
a successor to such director is elected and has qualified or
until such director's death, resignation, removal or
disqualification. The officers of Newco immediately prior
to the Effective Time shall be the initial officers of the
Surviving Corporation, each such officer to hold office in
accordance with the Bylaws of the Surviving Corporation
until a successor to such officer is duly elected or
appointed and qualified, or until such officer's death,
resignation, removal or disqualification.
1.2. Conversion of Securities. At the Effective Time, by
virtue of the Merger and without any action on the part of
Search, Newco, MS Financial or any stockholder of Newco or MS
Financial, the shares of capital stock of each of Newco and MS
Financial shall be converted as follows:
(a) Capital Stock of Newco. Each share of Newco Stock
issued and outstanding immediately prior to the Effective
Time shall be converted into and become one validly issued,
fully paid and non-assessable share of common stock of the
Surviving Corporation.
(b) Cancellation of Certain Shares of Capital Stock of
MS Financial. All shares of capital stock of MS Financial
that are owned directly or indirectly by Search, Newco, MS
Financial or the Subsidiary of MS Financial immediately
prior to the Effective Time (as treasury shares or
otherwise) shall be canceled and no stock of Search or other
consideration shall be delivered in exchange therefor.
(c) Conversion of Capital Stock of MS Financial.
Subject to Sections 1.2 (d), (e), (f), (g) and (h), each
share of MS Financial Stock issued and outstanding
immediately prior to the Effective Time (other than shares
to be canceled pursuant to Section 1.2(b) and Dissenting
Shares, if any), shall automatically be canceled and
extinguished and converted, without any action on the part
of the holder thereof, into the right to receive that number
of shares of Search Common Stock as equals the Exchange
Ratio. At the Effective Time, all such shares of MS
Financial Stock shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to
exist, and each holder of a Certificate shall cease to have
any rights with respect thereto, except the right to receive
the shares of Search Common Stock to which such holder is
entitled under this Section 1.2(c).
(d) Maximum and Minimum Exchange Ratio.
Notwithstanding the provisions of Section 1.2(c) above and
except for any adjustment made pursuant to Sections 1.2(e),
(g) and (h) in no event will the Exchange Ratio exceed 0.46
or be less than 0.34.
(e) Adjustment of Exchange Ratio. Subject to the
provisions of Section 5.18 hereof, if, between the date of
this Agreement and the Effective Time, the outstanding
shares of Search Common Stock, or, subject to compliance
with Section 5.3 below, MS Financial Stock, shall have been
changed into a different number of shares, or a different
class, by reason of any reclassification, recapitalization,
split up, stock dividend, stock combination or exchange of
shares, then the Exchange Ratio shall be correspondingly
adjusted.
(f) Fractional Shares. No certificates or scrip
evidencing fractional shares of Search Common Stock shall be
issued, but in lieu thereof each holder of shares of MS
Financial Stock who would otherwise be entitled to receive
a fraction of a share of Search Common Stock shall, at the
option of Search, either receive from Search an amount of
cash equal to the Valuation Period Market Value multiplied
by Exchange Ratio multiplied by the fraction of a share of
Search Common Stock to which such holder would otherwise be
entitled, as soon as practicable after the Effective Time,
or the Exchange Agent shall sell in the open market all such
fractional share interests, as agent of the holder, and
remit such proceeds to the holder. If Search elects to have
the Exchange Agent sell such fractional shares, Search shall
pay all brokers' commissions associated with such sales.
(g) Adjustments for Financial Changes.
(i) Notwithstanding the provisions of Sections
1.2(c) and (d), the Per Share Amount and the maximum and
minimum Exchange Ratio figures in Section 1.2(d) shall be
adjusted as set forth in Section 1.2(g)(ii) if, at the
Effective Time, the unaudited financial statements of MS
Financial for the last month ending before the Effective
Time (provided, however, that if the Effective Time is on or
before the 15th day of a month, then the unaudited financial
statements for the second month before the Effective Time
shall govern) (the "Most Recent Financial Statements"))
prepared in accordance with GAAP and MS Financial's past
practice but adjusting stockholders' equity in accordance
with (A), (B) and (C) below (as so adjusted, the "Adjusted
Stockholders' Equity"), show that stockholders' equity is
less than the stockholders' equity shown on the Current
Balance Sheet.
(A) The actual stockholders' equity
reflected on the balance sheet included in the
Most Recent Financial Statements (the "Adjustment
Balance Sheet") shall be adjusted to reflect (1)
that no decrease in stockholders' equity shall be
made for the aggregate $2,995,500 in costs shown
on Schedule 1.2(g), (2) no increase in the amount
of stockholders' equity shall be made for the
first $2,300,000 of income tax refunds in excess
of $4,000,000, and (3) no decrease in
stockholders' equity shall be made for the
payments required by Section 5.16(f) below. The
actual stockholders' equity on the Adjustment
Balance Sheet shall be further adjusted in the
event that KPMG requires any changes to
stockholders' equity as a result of requiring
changes in the "Allowance for Losses" account
shown on the Current Balance Sheet, but adjusted
for unearned discount (as so adjusted, "Allowance
for Losses") against the "Notes Receivable--C.A.R.S."
account shown on the Current Balance
Sheet, but adjusted for unearned discount (as so
adjusted, "Net Managed Receivables"). In the
event of a KPMG required change, no increase in
such Allowance for Losses shall be subtracted
from stockholders' equity and no decrease in such
Allowance for Losses shall be added to
stockholders' equity. (As reflected in the
Current Balance Sheet, the Allowance for Losses
was $12,567,932 against Net Managed Receivables
of $132,742,638, for a ratio of 9.5%.)
(B) If the Delinquency Rate Percentage for
the month to which the Most Recent Financial
Statements relate exceeds by 25% or more the
Delinquency Rate Percentage for December 1996
(which was 19.3%), stockholders' equity shall be
adjusted by an amount equivalent to 50% of the
income statement net after tax effect of charging
off all Finance Contracts reflected in the "Notes
Receivable -- C.A.R.S." account that are 91 days
or more contractually past due, first, by
charging the Allowance for Losses shown on the
Adjustment Balance Sheet for the dollar amount of
such charge-offs and, second, by debiting the
Provision for Losses account on the statement of
income included in the Most Recent Financial
Statement (the "Adjustment Income Statement") by
an amount sufficient to restore the ratio of the
Allowance for Losses (less the amount of
additional changes required by KPMG as of
December 31, 1996 as discussed in paragraph (A)
above) to Net Managed Receivables to 9.5%.
(C) If, for the period between January 1,
1997 and the end of the month to which the Most
Recent Financial Statements relate, the total
amount of Net Managed Receivables charged off,
and that should have been charged off, by
MS Financial (other than charge-offs made
pursuant to paragraph (B) above) according to
GAAP and MS Financial's general accounting
practices in place between July 1, 1996 and
December 31, 1996, exceeds $7 million,
stockholders' equity shall be adjusted by an
amount equivalent to 50% of the income statement
net after tax effect of debiting the Provision
for Losses account on the Adjustment Income
Statement by an amount sufficient to restore the
ratio of the Allowance for Losses (less the
amount of additional changes required by KPMG as
of December 31, 1996 as discussed in paragraph
(A) above) to Net Managed Receivables to 9.5%.
(ii) The formula for calculating the Per Share
Amount adjustment is as provided in this Section 1.2(g)(ii).
If the Adjusted Decrease in Stockholders' Equity (as defined
below) is $2,100,000 or less, no adjustment to the Per Share
Amount shall be made. If the Adjusted Decrease in
Stockholders' Equity is more than $2,100,000 but less than
$3,100,000, then 50% of such decrease shall be applied to
the following calculation of the Adjusted Per Share Amount.
If the Adjusted Decrease in Stockholders' Equity is
$3,100,000 or more, then 100% of such decrease shall be
applied to the following calculation of the Adjusted Per
Share Amount. For purposes of this Section 1.2(g),
"Adjusted Decrease in Stockholders' Equity" shall be equal
to stockholders equity as shown on the Current Balance Sheet
less the Adjusted Stockholders' Equity multiplied by the
applicable percentage (50% or 100%) required by the
foregoing; provided, that the Adjusted Decrease in
Stockholders' Equity shall be zero if the Adjusted
Stockholders' Equity is greater than the stockholders'
equity on the Current Balance Sheet. The dollar amount of
the Adjusted Decrease in Stockholders' Equity shall then be
divided by the total number of shares of MS Financial Stock
to be exchanged in the Merger, the resulting decimal number
shall be subtracted from the otherwise applicable Per Share
Amount, and the resulting figure shall become the adjusted
Per Share Amount (the "Adjusted Per Share Amount") to be
used in the Merger. The formula for calculating the
adjusted maximum and minimum Exchange Ratio figures is as
follows: the figures in Section 1.2(d) shall be multiplied
by a fraction, the numerator of which is the Adjusted Per
Share Amount and the denominator of which is the Per Share
Amount prior to any adjustment.
(h) Adjustment of Exchange Ratio. In the event that
the adjustments provided for in Section 1.2(g) are made, the
Adjusted Per Share Amount (rounded to the nearest hundredth
of a share) shall replace the Per Share Amount in the
calculation of the Exchange Ratio to be made pursuant to the
definition of Exchange Ratio.
1.3. Exchange of Certificates.
(a) Exchange Agent. At or before the Effective Time,
Search shall deposit, or shall cause to be deposited, with
the Exchange Agent for the benefit of the holders of shares
of MS Financial Stock, for exchange in accordance with this
Article 1, through the Exchange Agent, the Exchange Fund.
The Exchange Agent shall, pursuant to instructions from
Search, deliver the Search Common Stock and any cash
contemplated to be distributed pursuant to this Article 1
out of the Exchange Fund. The Exchange Fund shall not be
used for any other purpose.
(b) Exchange Procedures. As soon as reasonably
practicable after the Effective Time, Search will instruct
the Exchange Agent to mail to each holder of record of a
Certificate, (i) a letter of transmittal which shall specify
that delivery shall be effected, and that risk of loss and
title to the Certificates shall pass, only upon proper
delivery of the Certificates to the Exchange Agent and shall
be in such form and have such other customary provisions as
Search may reasonably specify and (ii) instructions for use
in effecting the surrender of such holders' Certificates in
exchange for certificates evidencing shares of Search Common
Stock. Upon surrender of a Certificate for cancellation to
the Exchange Agent together with such letter of transmittal,
duly executed, and such other customary documents as may be
required pursuant to such instructions, the holder of such
Certificate shall be entitled to receive in exchange
therefor the Merger Consideration and the Certificate so
surrendered shall forthwith be cancelled. Subject to
Section 1.3(h), under no circumstances will any holder of a
Certificate be entitled to receive any part of the Merger
Consideration until such holder shall have surrendered such
Certificate. In the event of a transfer of ownership of
shares of MS Financial Stock which is not registered in the
transfer records of MS Financial, the Merger Consideration
may be paid in accordance with this Article 1 to the
transferee if the Certificate evidencing such shares of MS
Financial Stock is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect
such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as
contemplated by this Section 1.3(b) (but subject to Section
1.3(h)), each Certificate shall be deemed at any time after
the Effective Time to evidence only the right to receive
upon such surrender the Merger Consideration. No interest
shall be paid on the Merger Consideration.
(c) Distributions with Respect to Unexchanged Shares
of MS Financial Stock. No dividends or other distributions
declared or made after the Effective Time with respect to
Search Common Stock with a record date after the Effective
Time shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of Search Common
Stock constituting the Merger Consideration with respect to
such unsurrendered Certificate, until the holder of such
Certificate shall surrender such Certificate to the Exchange
Agent (or Search, after termination of the Exchange Fund in
accordance with Section 1.3(d)). Subject to the effect of
applicable laws, following surrender of any such
Certificate, there shall be paid to the holder of such
Certificate, in addition to the Merger Consideration,
without interest, the amount of dividends or other
distributions with a record date after the Effective Time
theretofore paid with respect to the whole shares of Search
Common Stock constituting the Merger Consideration, with
respect to such Certificate.
(d) Termination of Exchange Fund. Any portion of the
Exchange Fund which remains undistributed to the holders of
MS Financial Stock for one year after the Effective Time
shall be delivered to Search, upon demand and, subject to
Section 1.3(e), any holders of MS Financial Stock who have
not theretofore complied with this Article 1 shall
thereafter look only to Search for the Merger Consideration
to which they are entitled.
(e) No Liability. Neither Search nor the Surviving
Corporation shall be liable to any holder of shares of MS
Financial Stock for any shares of Search Common Stock or
cash (or dividends or distributions with respect thereto),
delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(f) Withholding Rights. Search shall be entitled to
deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of shares of MS
Financial Stock such amounts as Search is required to deduct
and withhold with respect to the making of such payment
under the Code, or any provision of state, local or foreign
tax law. To the extent that amounts are so withheld by
Search, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder
of the shares of MS Financial Stock in respect of which such
deduction and withholding was made by Search.
(g) No Further Ownership Rights in Capital Stock of MS
Financial. All Merger Consideration issued or paid upon the
conversion of shares of MS Financial Stock in accordance
with the terms hereof shall be deemed to have been issued or
paid in full satisfaction of all rights pertaining to such
shares of MS Financial Stock.
(h) Lost, Stolen or Destroyed Certificates. In the
event any Certificate(s) shall have been lost, stolen or
destroyed, the Exchange Agent shall cause payment of the
Merger Consideration to be made in exchange for such lost,
stolen or destroyed Certificate(s) upon the making of an
affidavit of that fact by the holder thereof; provided,
however, that Search may, in its reasonable discretion and
as a condition precedent thereto, require the owner of such
lost, stolen or destroyed Certificate(s) to deliver a bond
in such sum as it may reasonably direct as indemnity against
any claim that may be made against Search with respect to
the Certificate(s) alleged to have been lost, stolen or
destroyed.
1.4. Stock Transfer Books. At the Effective Time, the stock
transfer books of MS Financial shall be closed and there shall be
no further registration of transfers of shares of MS Financial
Stock thereafter on the records of MS Financial. If, after the
Effective Time, Certificates are presented to MS Financial for
any reason, they shall be canceled and exchanged as provided in
Section 1.3.
1.5. Stock Options and Other Rights to MS Financial Stock.
(a) All Company Options outstanding at the Effective
Time shall remain outstanding following the Effective Time.
At the Effective Time, the Company Options shall, by virtue
of the Merger and without any further action on the part of
MS Financial or the holder thereof, be assumed by Search in
such manner that Search (i) is a corporation "assuming a
stock option in a transaction to which Section 424(a)
applied" within the meaning of Section 424 of the Code or
(ii) to the extent that Section 424 of the Code does not
apply to any such Company Options, would be such a
corporation were Section 424 of the Code applicable to such
Company Options. From and after the Effective Time, all
references to MS Financial in the MS Financial Stock Option
Plans and the applicable stock option agreements issued
thereunder shall be deemed to refer to Search, which shall
have assumed the MS Financial Stock Option Plans as of the
Effective Time by virtue of this Agreement and without any
further action. Each Company Option assumed by Search shall
be exercisable upon the same terms and conditions as under
the applicable MS Financial Stock Option Plan and the
applicable option agreement issued thereunder, except that
(A) each such Company Option shall be exercisable for, and
represent the right to acquire, that whole number of shares
of Search Common Stock (rounded up or down to the nearest
whole share) equal to the number of shares of MS Financial
Stock subject to such Company Option multiplied by the
Exchange Ratio, and (B) the option price per share of Search
Common Stock shall be an amount equal to the option price
per share of MS Financial Stock subject to such Company
Option in effect immediately prior to the Effective Time
divided by the Exchange Ratio (the option price per share,
as so determined, being rounded upward to the nearest full
cent). No payment shall be made for fractional interests.
(b) The MS Financial Employee Stock Purchase Plan
shall be canceled in accordance with its terms immediately
prior to the Effective Time.
1.6. Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to
the contrary, and only in the event that a stockholder of MS
Financial is entitled to exercise rights under Section 262
of the Delaware Statutes with respect to the Merger, then
any Dissenting Shares held by such holder shall not be
converted into or represent the right to receive the Merger
Consideration. If stockholders of MS Financial are not
entitled to exercise rights under Section 262 of the
Delaware Statutes with respect to the Merger, this Section
1.6 shall be inapplicable. A holder of Dissenting Shares
shall be entitled to receive payment of the fair value of
such holder's Dissenting Shares in accordance with the
provisions of Section 262 of the Delaware Statutes, except
that all shares of MS Financial Stock held by stockholders
who shall have failed to perfect or who effectively shall
have withdrawn or lost their rights to appraisal of such
shares of MS Financial Stock under Section 262 of the
Delaware Statutes shall not be considered Dissenting Shares
and shall be governed by the provisions of this Agreement
applicable to the conversion of MS Financial Stock other
than Dissenting Shares.
(b) MS Financial shall give Search (i) prompt notice
upon receipt by MS Financial, at any time prior to the
Effective Time, of any demand for appraisal of shares of MS
Financial Stock in accordance with Section 262 of the
Delaware Statutes and withdrawals of any such notice and
(ii) the opportunity to participate in all negotiations and
proceedings with respect to demands for appraisal under
Section 262 of the Delaware Statutes. MS Financial shall
not, except with the prior written consent of Search, or as
required by the Delaware Statutes, make any payment with
respect to any demands for the appraisal of shares of MS
Financial Stock or offer to settle or settle any such
demands.
2. CLOSING.
2.1. Certificate of Merger Filing; Closing Time. As
promptly as practicable, and in no event later than the first
business day following the satisfaction or, if permissible,
waiver of the conditions set forth in Article 6 (or such other
date as may be agreed upon in writing by the parties hereto), the
parties hereto will cause the Merger to be consummated by filing
a certificate of merger (the "Certificate of Merger"), together
with any required officers' certificates and/or other required
filings, with the Secretary in such form as is required by, and
executed in accordance with, the relevant provisions of the
Delaware Statutes. The Merger shall become effective at the
Effective Time. Immediately prior to the filing of the
Certificate of Merger, the Closing will be held at the offices of
Search in Dallas, Texas, or such other place as the parties may
agree.
2.2. Documents to be Delivered at Closing by MS Financial.
At the Closing the following documents, in a form satisfactory to
Search, acting reasonably, and fully executed by the appropriate
party or parties thereto, shall be delivered to Search by MS
Financial:
(a) A Closing Certificate signed by the President of
MS Financial stating (i) that the representations and
warranties in Article 3 of this Agreement are true and
correct in all material respects as of the Closing, with
corrections to any representations and warranties that have
changed since the date of this Agreement, (ii) that all of
the terms, covenants, agreements and conditions of this
Agreement and such Related Documents required to be complied
with, performed or satisfied by MS Financial prior to the
Closing have been complied with, performed or satisfied by
MS Financial in all material respects.
(b) Copies of the resolutions adopted by the Board of
Directors of MS Financial and the stockholders of MS
Financial authorizing the execution and delivery of this
Agreement and the consummation of the Transactions, duly
certified as of the Closing by the Secretary of MS
Financial;
(c) Corporate good standing certificates dated within
ten (10) days of Closing of MS Financial and its Subsidiary,
with respect to each state in which either MS Financial or
its Subsidiary does business or is qualified to do business,
and incumbency certificates for MS Financial and its
Subsidiary dated as of the Closing Date;
(d) All consents or approvals required to (i) avoid
default under any material contracts to which MS Financial
or any of its Subsidiaries is a party, or (ii) avoid any
penalties imposed by any Governmental Authority and (iii) to
consummate the Transactions;
(e) Evidence of the cancellation of the MS Financial
Employee Stock Purchase Plan;
(f) The Most Recent Financial Statements, together
with all other information necessary to make the
calculations provided for in Section 1.2(g) and (h);
(g) All other documents required to be delivered by MS
Financial which are listed on the Closing Checklist;
(h) The resignations of all of the existing officers
and directors of MS Financial's Subsidiary and the
resignations of the directors of MS Financial; and
(i) The certification by MS Financial's Secretary on
this Agreement pursuant to Section 251 of the Delaware
Statutes stating that a majority of the outstanding stock of
MS Financial entitled to vote on this Agreement has been
voted for the adoption of this Agreement.
2.3. By Search/Newco. At the Closing, the following
documents, in a form satisfactory to MS Financial, acting
reasonably, and fully executed by the appropriate party or
parties thereto, shall be delivered to MS Financial by Search and
Newco:
(a) Closing Certificates for Search and Newco signed
by their Presidents stating (i) that the representations and
warranties in Article 4 of this Agreement are true and
correct in all material respects as of the Closing, with
corrections to any representations and warranties that have
changed since the date of this Agreement, and (ii) that all
of the terms, covenants, agreements and conditions of this
Agreement and the Related Documents required to be complied
with, performed or satisfied by Search and Newco,
respectively, prior to the Closing, have been complied with,
performed or satisfied by Search and Newco in all material
respects, provided that if any change is made based upon the
occurrence of a Search Material Adverse Effect, MS Financial
shall have the rights set out in Section 7.1 of this
Agreement.
(b) Copies of the resolutions adopted by the Boards of
Directors of Search and Newco authorizing the execution and
delivery of this Agreement and the consummation of the
Transactions, duly certified as of the Closing by the
Secretary of Search and Newco, respectively;
(c) Corporate good standing certificates from the
State of Delaware for Search and Newco, each such
certificate dated within ten (10) days of Closing, and an
incumbency certificate for each of Search and Newco dated as
of the Closing Date;
(d) All consents or approvals required to (i) avoid
default under any material contracts to which Search or
Newco is a party or (ii) avoid any penalties imposed by any
Governmental Authority and (iii) consummate the
Transactions;
(e) All other documents required to be delivered by
Search or Newco which are listed on the Closing Checklist;
(f) Written evidence reasonably satisfactory to MS
Financial that the Exchange Agent has been given
instructions regarding the issuance of shares of Search
Common Stock pursuant to this Agreement and has been
provided with cash sufficient to make payment for fractional
shares as required by this Agreement or is authorized to
accumulate fractional shares and sell same in accordance
with Section 1.2(f); and
(g) The certification by Newco's Secretary on this
Agreement pursuant to Section 251 of the Delaware statutes
stating that a majority of the outstanding stock of Newco
entitled to vote on this Agreement has been voted for the
adoption of this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF MS FINANCIAL
To induce Search and Newco to enter into this Agreement and
consummate the Transactions, MS Financial represents and warrants
to Search and Newco as set forth below.
3.1. Due Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation. The Company has the
requisite corporate power to carry on its business as it is now
being conducted. The Company is duly qualified as a foreign
corporation and is in good standing in each jurisdiction where
the character of its properties owned or held under lease or the
nature of its activities makes such qualification necessary,
except where the failure to be so qualified or in good standing
would not, individually or in the aggregate, have a Company
Material Adverse Effect. Schedule 3.1, contains a list of all
jurisdictions in which the Company is authorized or qualified to
do business as a foreign corporation. The Company has delivered
to Search true, complete and correct copies of the Restated
Certificate of Incorporation and Bylaws of the Company. The
Restated Certificate of Incorporation and Bylaws are in full
force and effect and have not been amended, modified, revoked,
terminated or cancelled or in any other manner varied from the
documents delivered to Search. The Company's Restated
Certificate of Incorporation and Bylaws are collectively referred
to as the "MS Charter Documents." The Company has made available
to Search true, complete and correct sets of the minute books of
the Company, and the copies thereof delivered to Search are
complete and accurate copies of all materials included therein
for the periods covered thereby. The Company is not in violation
of any provision of the MS Charter Documents.
3.2. Authorization; Validity. The Company has all requisite
corporate power and authority to execute and deliver this
Agreement and all of the agreements and documents referred to on
the Closing Checklist (the "Related Documents") to which the
Company is a party and, with respect to the Merger, upon the
adoption of this Agreement by MS Financial's stockholders in
accordance with this Agreement, the Related Documents and the
Delaware Statutes, to perform its obligations pursuant to the
terms of this Agreement and all of the Related Documents to which
the Company is a party and to consummate the Transactions. The
execution and delivery by the Company of this Agreement and the
Related Documents to which the Company is a party and the
performance by the Company of its obligations under this
Agreement and such Related Documents have been duly and validly
authorized by the Board of Directors of the Company and by all
other necessary corporate action other than adoption of this
Agreement by the holders of a majority of the then outstanding
shares of MS Financial Stock and the filing and recordation of
the Certificate of Merger as required by the Delaware Statutes.
This Agreement has been, and the Related Documents to which the
Company is a party will be, duly and validly executed and
delivered by the Company and are, or upon their execution will
be, legal, valid and binding obligations of the Company
enforceable against the Company in accordance with their terms,
except as such enforceability may be limited by principles of
public policy and subject to the laws of general application
relating to bankruptcy, insolvency and the relief of debtors and
rules of Law governing specific performance, injunctive relief or
other equitable remedies.
3.3. No Conflicts; Compliance.
(a) The execution, delivery and performance of this
Agreement and the Related Documents by the Company, and the
consummation of the Transactions, will not:
(i) conflict with, or result in a breach or
violation of, any of the MS Charter Documents;
(ii) except as disclosed in Schedule 3.3(a)(ii),
conflict with, or result in a default (or would
constitute a default but for any requirement of notice
or lapse of time or both), or require the consent of
any third party, under any document, agreement or other
instrument or obligation, including, without
limitation, those relating to the Warehouse Loans and
the Securitization Trusts, to which the Company is a
party or by which the Company or any assets of the
Company are bound or affected, other than conflicts or
defaults which would not, individually or in the
aggregate, have a Company Material Adverse Effect, or
result in the creation or imposition of any lien,
charge or encumbrance on any of the Company's
properties, other than liens, charges, or encumbrances
which would not, individually or in the aggregate, have
a Company Material Adverse Effect;
(iii) except as disclosed in Schedule
3.3(a)(iii),result in any impairment of, or give to any
other Person any right of termination, amendment,
acceleration or cancellation with respect to, any
permit, license, franchise, contractual right or other
authorization of the Company material to MS Financial
and its Subsidiary taken as a whole; or
(iv) violate any Law to which the Company is
subject or by which any assets of the Company are bound
or affected, the violation of which would have a
Company Material Adverse Effect.
(b) Except as disclosed in Schedule 3.3(b), the
execution and delivery of this Agreement by the Company do
not, and the performance of this Agreement by the Company
will not, require any consent, approval, authorization or
permission of, or filing with or notification to, any
Governmental Authority except (i) for applicable
requirements, if any, of the Exchange Act, the Securities
Act, and Blue Sky Laws, and filing and recordation of the
Certificate of Merger as required by the Delaware Statutes,
(ii) such notice as is necessary to comply with HSR, and
(iii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or
notifications, would not prevent or delay consummation of
the Merger, or otherwise prevent MS Financial from
performing its obligations under this Agreement.
3.4. Permits and Intangibles. The Company owns or holds all
Material Permits, and Schedule 3.4 contains a list of all
Material Permits. The Material Permits are valid, and the
Company has not received any notice that any Governmental
Authority intends to modify, suspend, cancel, terminate or not
renew any Material Permit. Except as disclosed on Schedule 3.4,
the Company is not in conflict with, or in default or violation
of, (i) any Law applicable to the Company or by which any
property or asset of the Company is bound or affected, (ii) any
of the Material Permits or (iii) any note, bond, mortgage,
indenture, contract, agreement, lease, or other instrument or
obligation to which the Company is a party or by which the
Company or any property or asset of the Company is bound or
affected except as would not have a Company Material Adverse
Effect. The Transactions will not result in a default under or a
breach or violation of, or adversely affect the rights and
benefits afforded to the Company by, any Material Permit.
3.5. Capital Stock of the Company. The authorized capital
stock of MS Financial consists of 50,000,000 shares of MS
Financial Stock, 10,429,926 shares of which are issued and
outstanding, 374,000 shares of which are held as treasury shares,
and 5,000,000 shares of preferred stock, par value $.001 per
share, none of which is issued or outstanding. The authorized
capital stock of the Subsidiary and its par value are indicated
on Schedule 3.5 hereto. All of the issued and outstanding shares
of the capital stock of the Company have been duly authorized and
validly issued, are fully paid and nonassessable and not subject
to preemptive rights. All of the issued and outstanding shares
of the capital stock of the Company and any other securities sold
by the Company and the Securitization Trusts were offered,
issued, sold and delivered by the Company in compliance with all
applicable state and federal Laws concerning the issuance, offer
and sale of securities. Further, none of such shares was issued
in violation of any preemptive rights.
3.6. Transactions in Capital Stock. Except as set forth on
Schedule 3.6, no option, warrant, call, subscription right,
conversion right or other contract or commitment of any kind
exists of any character, written or oral, which may obligate the
Company to issue or sell any shares of capital stock or other
equity interests. Except as set forth on Schedule 3.6, the
Company has no obligation (contingent or otherwise) to purchase,
redeem or otherwise acquire any of its equity securities or any
interests therein or to pay any dividend or make any distribution
in respect thereof.
3.7. Subsidiary. Except as listed in Schedule 3.7, the
Company does not presently own, of record or beneficially, or
control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in
any corporation, association or business entity, nor is the
Company, directly or indirectly, a participant in any joint
venture, partnership or other noncorporate entity. The only
Subsidiary of MS Financial is MS Auto Receivables Company. MS
Financial owns all of the capital stock of MS Auto Receivables
Company.
3.8. Predecessor Status; etc. Schedule 3.8 sets forth a
listing of all names of all predecessor companies of the Company
during the five-year period immediately preceding the date
hereof, including without limitation the names of any entities
from whom the Company has acquired material assets. Except as
specified in Schedule 3.8, the Company has not at any time during
the five-year period immediately preceding the date hereof been
a Subsidiary or division of another corporation or a part of an
acquisition which was later rescinded.
3.9. Spin-off by the Company. Except as disclosed in
Schedule 3.9, there has not been, nor does there exist any
agreement in respect of, any sale or spin-off of material assets
of either the Company, or any Affiliate of the Company, within
the past two years and there are no plans for any such sale or
spin-off.
3.10. Financial Statements. Schedule 3.10 includes (a)
true, complete and correct copies of the Company's audited
Consolidated Balance Sheet as of December 31, 1995 (the end of
its most recent completed fiscal year for which audited financial
statements are available), and audited Consolidated Statements of
Income, Cash Flows and Stockholders' Equity for the three years
ended December 31, 1995 (collectively, the "Reviewed Financials")
and (b) true, complete and correct copies of the Company's
unaudited Consolidated Balance Sheet (the "Current Balance
Sheet") as of December 31, 1996 (the "Balance Sheet Date"), and
unaudited Consolidated Statement of Income for the twelve month
period ended December 31, 1996 (the "Current Income Statement";
the Current Balance Sheet and the Current Income Statement are
sometimes referred to collectively as the "Unaudited Financials;"
and together with the Reviewed Financials, the "Company Financial
Statements"). The Company Financial Statements have been
prepared in accordance with GAAP throughout the periods indicated
(except as may be indicated in the notes thereto), subject, in
the case of the Unaudited Financials, to year-end audit
adjustments and to the omission of footnote information. The
balance sheets included in the Company Financial Statements and
each of the statements of income, cash flows and stockholders'
equity included in the Company Financial Statements present
fairly in all material respects the consolidated financial
position, results of operations, cash flows and changes in
stockholders' equity of MS Financial and its consolidated
Subsidiary as at the respective dates thereof and for the
respective periods indicated therein (subject, in the case of the
Unaudited Financials, to year-end audit adjustments). Since
December 31, 1996, there have been no material changes in the
Company's accounting policies.
3.11. SEC Filings.
(a) MS Financial has timely filed all Company SEC
Reports and has delivered true and complete copies thereof
to Search. The Company SEC Reports, and all similar SEC
filings and reports for the Securitization Trusts, (i) were
prepared in all material respects in accordance with the
requirements of the Securities Act and the Exchange Act, as
the case may be, and the rules and regulations thereunder
and (ii) did not, at the time they were filed (or at the
effective date thereof in the case of registration
statements), contain any untrue statement of a material fact
or omit to state a material fact required to be stated
therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they
were made, not misleading. MS Financial's Subsidiary is not
currently required to file any form, report or other
document with the SEC under Section 12 of the Exchange Act.
(b) The information supplied by the Company for
inclusion in the Registration Statement and the Proxy
Statement shall not, at (i) the time the Registration
Statement is declared effective, (ii) the time the Proxy
Statement (or any amendment thereof or supplement thereto)
is first mailed to the stockholders of MS Financial and
Search, (iii) the time of each of the MS Financial
Stockholders Meeting and the Search Stockholders Meeting,
and (iv) the Effective Time, contain any statement which, at
such time and in light of the circumstances under which it
is made, is false or misleading with respect to any material
fact, or omit to state any material fact required to be
stated therein, or necessary in order to make the statements
therein not false or misleading or necessary to correct any
statement in any earlier communication with respect to the
solicitation of proxies for the MS Financial Stockholders
Meeting and the Search Stockholders Meeting which shall have
become false or misleading. If at any time prior to the
Effective Time any event or circumstance relating to the
Company, or their respective officers or directors, is
discovered by the Company which should be set forth in an
amendment or a supplement to the Registration Statement or
Proxy Statement, Company shall promptly inform Search and
cooperate with Search in the preparation, filing and mailing
of an appropriate amendment or supplement. Notwithstanding
the foregoing, the Company makes no representation or
warranty with respect to any information supplied by Search
or any of its representatives in the Proxy Statement. All
documents that the Company is responsible for filing with
the SEC in connection with the Transactions will comply as
to form and substance in all material respects with the
applicable requirements of the Securities Act and the rules
and regulations promulgated thereunder and the Exchange Act
and the rules and regulations promulgated thereunder.
(c) MS Financial has heretofore furnished to Search
complete and correct copies of all amendments and
modifications (if any) that have not been filed by MS
Financial with the SEC to all agreements, documents and
instruments previously filed by MS Financial as exhibits to
the Company SEC Reports and currently in effect.
(d) Except for the transactions described in Schedule
3.11(d), all transactions involving the Company that are
required to be disclosed in the Company SEC Reports in
accordance with Item 404 of Regulation S-K promulgated under
the Securities Act have been so disclosed, and since January
1, 1996 the Company has not entered into any transactions
that would be required to be disclosed in future public
filings under the Exchange Act pursuant to such Item which
have not already been disclosed in the Company SEC Reports
filed prior to the date hereof.
3.12. Liabilities and Obligations.
(a) Except as disclosed in Schedule 3.12, the Company
is not liable for or subject to any liabilities except for:
(i) those liabilities reflected on the Current
Balance Sheet and not previously paid or discharged;
(ii) those liabilities disclosed in any Company
SEC Report filed by the Company after December 31,
1996;
(iii) those liabilities arising in the ordinary
course of business consistent with past practice such
as was in place between July 1, 1996 and December 31,
1996; and
(iv) those liabilities that would not,
individually or in the aggregate, have a Company
Material Adverse Effect.
For purposes of this Section 3.12, the term "liabilities" shall
include without limitation any direct or indirect liability or
obligation, indebtedness, guaranty, endorsement, claim, loss,
damage, deficiency, cost, expense, obligation or responsibility,
either accrued, absolute, contingent, mature, unmature or
otherwise and whether known or unknown, fixed or unfixed, ▇▇▇▇▇▇
or inchoate, liquidated or unliquidated, secured or unsecured.
(b) The Company has no liability for sale or other
excise taxes that would be accelerated due to the Merger.
3.13. Accounts and Notes Receivable. Schedule 3.13
contains an accurate list, as of a date not more than two
business days prior to the date hereof, of the accounts and notes
receivable of the Company (including without limitation
receivables from and advances to employees and the Stockholders,
but excluding those applicable to Finance Contracts) which
includes all aging of all accounts and notes receivable, but
excluding those applicable to Finance Contracts, showing amounts
due in 30-day aging categories. The Company knows of no defenses
to the accounts receivable or notes receivable.
3.14. Finance Contracts. Each Finance Contract acquired
by the Company, whether or not pursuant to a Car Dealer
Agreement, including all Related Security under such Finance
Contract
(a) has been fully performed by Company and, to the
best of the Company's knowledge, the Car Dealer party
thereto,
(b) is an installment sale agreement or other deferred
payment obligation providing for the retention of a first
lien or security interest in the underlying personal
property to secure payment of the obligation evidenced
thereby and such lien has been, or, in the case of Finance
Contracts purchased in the last 60 days, is in the process
(which process is being timely and properly pursued
consistent with industry standards and legal requirements)
of being duly perfected in accordance with applicable Law,
(c) is owned by the Company and the Company owns all
rights to receive all amounts payable thereunder, except for
the rights of Lenders and trustees of the Securitization
Trusts disclosed on Schedule 3.14(c);
(d) is in one of the forms attached as Schedule
3.14(d), or, to the Company's best knowledge, is otherwise
in full compliance with all applicable Laws, except where
such non-compliance is immaterial and would not invalidate
the Finance Contract or the Company's rights (after the
Merger) to enforce full performance of same by the related
obligor;
(e) except as required by applicable law, does not
impose any obligation upon Company or any other Person,
which, if not performed, would give rise to any right of
offset, counterclaim or other defense on the part of the
related obligor to any amount payable by it under the
Finance Contract,
(f) except as disclosed in Schedule 3.14(f), is free
of any dispute, adverse claim, counterclaim, offset or
defense (including, without limitation, the material breach
of (i) any warranty by the Car Dealer of the goods covered
by such Finance Contract or (ii) any service contract,
extended service warranty or like agreement by such Car
Dealer) of the obligor or such other Person or entity as may
have guaranteed or secured the obligations of the obligor
(except for (y) the insolvency of such obligor or such other
Person or entity as may have guaranteed or secured the
obligations of the obligor and (z) the right of an obligor
to receive a rebate of the unearned finance charge in the
event of payment in full prior to maturity) except for (1)
the interest of the obligor in the goods sold pursuant to
such Finance Contract, (2) the security interests created in
favor of such Car Dealer and the Company, and (3) mechanics'
or similar statutory liens subordinate to such security
interests resulting from actions of the obligor,
(g) to the best of the Company's knowledge does not,
and the Company has received no claims that it does,
contravene any Laws applicable thereto and no party thereto
has at any time violated any such Laws with respect thereto,
(h) grants to the respective Car Dealer and assigns to
Company a valid, enforceable and perfected first priority
security interest in and to such Finance Contract and such
Related Security which is free and clear of any adverse
claims subject to the exceptions stated in clause (f) above,
(i) has no effective financing statement or lien
notation on any certificate of title or other instrument
similar in effect covering all or any part of such Finance
Contract or Related Security, which would give the Person
filing, named on or entitled to the benefit of such
statement or instrument priority senior to or pari passu
with Company, on file in any recording office or is
otherwise effective except such as may be filed in favor of
the Car Dealer or Company and collaterally assigned to the
Senior Bank Lender,
(j) requires Company to be named as loss payee or
beneficiary (as may be applicable) under any insurance
policy with respect to such Finance Contract, and entitles
Company to the benefits of such insurance policy,
(k) refers to motor vehicles, including any equipment
sold and financed in connection with the Finance Contract,
which to the extent required under applicable Law, are duly
registered and licensed and are or, in the case of Finance
Contracts purchased in the last 60 days will timely and
properly be the subject of a certificate of title issued in
the name of the obligor which indicates a security interest
therein held by the Company, in the appropriate form and in
compliance with all appropriate procedures as may be
necessary under applicable Law to cause a perfected and
first priority security interest to exist in favor of the
Company to secure the obligations of such obligor under such
Finance Contract;
(l) if purchased from a Car Dealer from which Company
has purchased five (5) or more Finance Contracts, was
validly assigned to Company by a Car Dealer in connection
with a Car Dealer Agreement in substantially the form of one
of the forms set forth in Schedule 3.14(l) and Car Dealer
Assignment in substantially one of the forms of assignment
contained in Schedule 3.14(l) or appearing at the bottom of
the second page of each of the forms of the Finance Contract
contained in Schedule 3.14(d), free and clear of all liens
and adverse claims and (i) to the best of the Company's
knowledge, constitutes a legal, valid and binding obligation
of such Car Dealer enforceable against such Car Dealer in
accordance with its terms, and (ii) pursuant to which
Company is in physical possession of such Finance Contract
and all writings comprising such Related Security; and
(m) contains representations and warranties from the
Car Dealer to Company with respect to such Finance Contract
under the Car Dealer Assignment related thereto all of which
are to the best of the Company's knowledge true and correct.
3.15. Offices, FTC; Warranties.
(a) Each of the Company's offices is and has been
operated as a licensed location in any jurisdiction
requiring such license in conformity with all such licensing
and other Laws applicable to the purchase of Finance
Contracts, and the sale of insurance coverage related
thereto, including, without limitation, Motor Vehicle Retail
Installment Sales Acts, Sales Finance Agency Acts, or any
other Law regulating the business of acquiring Finance
Contracts and the sale of insurance coverage related
thereto, except where any failure would not have a Company
Material Adverse Effect. The Company is familiar with the
Federal Trade Commission's used car rule and, to the best of
the Company's knowledge, based on "as is" sheets provided by
Car Dealers, its Car Dealers are in compliance with such
rule.
(b) Each Finance Contract has been originated by a Car
Dealer pursuant to a Car Dealer Agreement that, to the best
of the Company's knowledge, is enforceable in accordance
with its terms against such Car Dealer. To the extent that
the Finance Contracts finance so-called "extended warranty
plans," or "service contracts" to the best of the Company's
knowledge, such plans are in substantial compliance with all
applicable consumer credit Laws, including any and all
special insurance Laws relating thereto.
3.16. Environmental Matters.
(a) Hazardous Material. The Company does not have any
liability for claims arising out of events involving
underground storage tanks, or any substance that has been
designated by any Governmental Authority or by applicable
Law to be radioactive, toxic, hazardous or otherwise a
danger to health or the environment, including, without
limitation, PCBs, asbestos, petroleum, urea-formaldehyde and
all substances listed as hazardous substances pursuant to
the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, or defined as a hazardous
waste pursuant to the United States Resource Conservation
and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said Laws, but excluding office and
janitorial supplies properly and safely maintained (a
"Hazardous Material") present in, on or under any property,
including the land and the improvements, ground water and
surface water thereof, that the Company has at any time
owned, operated, occupied or leased.
(b) Hazardous Materials Activities. The Company does
not have any liability for claims arising out of events
involving the transportation, storage, use, manufacture,
disposal of, release of, or exposure of its employees or
others to Hazardous Materials in violation of any Law in
effect on or before the Closing Date, nor from the disposal
of, transportation, sale, or manufacture of any product
containing a Hazardous Material (collectively, "Company
Hazardous Materials Activities") in violation of any Laws
promulgated by any Governmental Authority in effect prior to
or as of the date hereof to prohibit, regulate or control
Hazardous Materials or any Hazardous Material Activity.
(c) Permits. The Company currently does not hold, and
is not required to hold, any environmental approvals,
permits, licenses, clearances and consents (the
"Environmental Permits") necessary for the conduct of the
Company's Hazardous Material Activities and other business
of the Company as such activities and business are currently
being conducted.
(d) Environmental Liabilities. No action, proceeding,
revocation proceeding, amendment procedure, writ, injunction
or claim is pending, or threatened concerning any
Environmental Permit, Hazardous Material or any Company
Hazardous Materials Activity. The Company is not aware of
any fact or circumstance which could involve the Company in
any environmental litigation or impose upon the Company any
material environmental liability.
3.17. Real and Personal Property. Schedule 3.17 sets
forth an accurate list of all owned and leased real property, all
personal property included in "Furniture and Fixtures" and
"Leasehold Improvements" on the Current Balance Sheet and all
other personal property owned or leased by the Company with a
value in excess of $5,000 (a) as of the Balance Sheet Date and
(b) acquired since the Balance Sheet Date, including in each case
a true, complete and correct copy of the lease for each item of
equipment with an annual rental payment of $5,000 or more and all
real properties on which are situated buildings, warehouses,
workshops, garages and other structures used in the operation of
the business of the Company and also including an indication as
to which assets are currently owned, or were formerly owned, by
any Stockholder or business or personal Affiliates of the Company
or any Stockholder. To the best knowledge of the Company, all
leases set forth on Schedule 3.17 are in full force and effect
and constitute valid and binding agreements of the Company and,
to the best knowledge of the Company, of the other parties
thereto in accordance with their respective terms. All fixed
assets used by the Company that are material to the operation of
its business are either owned by the Company or leased under an
agreement listed on Schedule 3.17. Schedule 3.17 includes true,
complete and correct copies of all title reports and title
insurance policies received or owned by the Company that are
still in effect. Schedule 3.17 also includes a summary
description of all plans or projects involving the opening of new
operations, expansion of any existing operations or the
acquisition of any real property or existing business, to which
management of the Company has made any material expenditure in
the two-year period prior to the date of this Agreement, which if
pursued by the Company or the Surviving Corporation would require
additional material expenditures of capital.
3.18. Significant Car Dealers, Material Contracts and
Commitments.
(a) Schedule 3.18 includes a complete and accurate
list of all Car Dealers that originated $50,000 or more in
Finance Contracts during 1996. Schedule 3.18 also contains
an accurate list of all material contracts, commitments,
leases, instruments, agreements, licenses or permits to
which Company is a party or by which it or its properties
are bound (including without limitation contracts with
directors, employees, any of the Stockholders, Car Dealers,
joint venture or partnership agreements, real estate leases,
equipment leases, software licenses, contracts with any
labor organizations, loan agreements, servicing agreements,
securitization agreements, indemnity or guaranty agreements,
bonds, mortgages, options to purchase land, liens, pledges
or other security agreements) (i) as of the Balance Sheet
Date and (ii) entered into since the Balance Sheet Date
(collectively, the "Material Contracts"). The Company has
made available to Search true, complete and correct copies
of the Material Contracts and all amendments thereto.
Except to the extent set forth on Schedule 3.18, (w) none of
Company's Car Dealers has canceled or substantially reduced
or is currently attempting or threatening to cancel or
substantially reduce its sale of Finance Contracts to the
Company, (x) the Company has complied with all of its
commitments and obligations and is not in default under any
of the Material Contracts and no notice of default has been
received with respect to any of the Material Contracts and
(y) there are no Material Contracts that were not negotiated
at arm's length with third parties not Affiliated with
Company or any officer, director or Stockholder of Company
and (z) the Company has no knowledge that any of the
Material Contracts will not be complied with by the parties
thereto.
(b) Each Material Contract is valid and binding on the
Company, is in full force and effect, is, to the best of the
Company's knowledge, enforceable against the parties thereto
(other than the Company) in accordance with its terms and is
not subject to any default (or event that, with notice or
the passage of time, or both would constitute a default)
thereunder by any party obligated to Company pursuant
thereto. The Company has used its best efforts to fully
comply in all material respects with the provisions of each
Material Contract. Company has used its best efforts to
obtain, or will obtain prior to the Closing, all necessary
consents, waivers and approvals of parties to any Material
Contracts as are required in connection with any of the
Transactions, or as are required of any Governmental
Authority or other third party in order that any such
Material Contract remain in effect without modification
after the Merger and without giving rise to any default or
right of termination, cancellation or acceleration or loss
of any right or benefit thereunder. All Company Third Party
Consents are listed on Schedule 3.18.
3.19. Insurance. Schedule 3.19 sets forth an accurate
list of all insurance policies carried by the Company and all
insurance loss runs or workmen's compensation claims received for
the past two policy years. The Company has delivered to Search,
prior to the date of this Agreement, true, complete and correct
copies of all current insurance policies, all of which are in
full force and effect. All premiums payable under all such
policies have been paid and, to the best of the Company's
knowledge, the Company is otherwise in full compliance with the
terms of such policies (or other policies providing substantially
similar insurance coverage). Such policies of insurance are of
the type and in amounts customarily carried by similarly situated
Persons conducting businesses similar to that of the Company.
The Company does not know of any threatened termination of or
material premium increase with respect to, any of such policies.
The Company maintains insurance adequate to indemnify all of its
officers and directors for any liability arising from events that
occurred prior to Closing and such insurance shall remain
effective notwithstanding the Merger.
3.20. Compensation; Employment Agreements. Schedule
3.20 hereto sets forth an accurate list of all officers,
directors and key employees of the Company, as of the date
hereof, all employment agreements with such officers, directors
and key employees and the rate of compensation (and the portions
thereof attributable to salary, bonus and other compensation,
respectively) of each of such Persons as of (a) the Balance Sheet
Date and (b) the date hereof. The Company has provided to Search
true, complete and correct copies of all employment, management,
severance and other compensation or benefit contracts,
commitments and arrangements with Persons listed on Schedule
3.20.
3.21. Employee Benefit Plans.
(a) All employee benefit plans, programs and policies
(whether formal or informal, and whether maintained for the
benefit of a single individual or more than one individual)
maintained or contributed to by the Company for the benefit
of any current or former employee of the Company or in which
such employees are entitled to participate are listed in
Schedule 3.21 (the "Benefit Plans"). Copies of all such
written Benefit Plans, written descriptions of all such oral
Benefit Plans, and all other documentation relating to such
Benefit Plans have been delivered or made available to
Search. The Company does not sponsor and has not
participated in any "defined benefit plan" as defined in
Section 3(25) of ERISA.
(b) Each Benefit Plan and the operation and
administration thereof complies, and has at all times
complied, in all material respects with the requirements of
all applicable Laws including without limitation the
Employee Retirement Income Security Act of 1974, as amended
("ERISA") and the Code. (a) Each Benefit Plan which is an
employee pension benefit plan as defined in Section 3(2) of
ERISA and is intended to qualify under section 401(a) of the
Code so qualifies and has received a favorable determination
letter from the Internal Revenue Service that it is so
qualified and nothing has occurred since the date of such
letter to affect the qualified status of such Plan, and each
trust which forms a part of any such plan is tax-exempt
under section 501(a) of the Code, (b) no liability has been
incurred or is expected to be incurred under Title IV of
ERISA to any party with respect to any Benefit Plan, or any
other plan presently or heretofore maintained or contributed
to by the Company, any predecessor to the Company or any
entity that is or at any time was a member of a controlled
group, as defined in Section 412(n) (6) (B) of the Code,
which includes or included the Company ("Controlled Group
Member"), and no fact exists or event has occurred that
would reasonably be expected to give rise to any such
liability, (c) neither the Company nor any Controlled Group
Member has incurred any liability for any tax imposed under
section 4971 through 4980B of the Code or civil liability
under section 502(i) or (1) of ERISA, (d) no Benefit Plan is
a multi-employer plan within the meaning of section 3(37) of
ERISA, (e) no Benefit Plan provides health or death benefit
coverage beyond the termination of an employee's employment,
except as required by Part 6 of Title I of ERISA or section
4980B of the Code, (f) no material "reportable event"
(within the meaning of section 4043 of ERISA) has occurred
with respect to any Benefit Plan or any plan maintained by
a Controlled Group Member since the effective date of said
section 4043, (g) no suit, actions or other litigation
(excluding claims for benefits incurred in the ordinary
course of plan activities) have been brought against or with
respect to any Benefit Plan, and (h) all contributions to
Benefit Plans that were required to be made under such
Benefit Plans have been made as of the Balance Sheet Date,
and all benefits accrued under any unfunded Benefit Plan
will have been paid, accrued or otherwise adequately
reserved in accordance with GAAP as of such date and the
Company will have performed by the Closing Date all material
obligations required to be performed as of such date under
Benefit Plans.
(c) The Company and the Subsidiary have not incurred
any liability under, and have complied in all respects with,
the Worker Adjustment Retraining Notification Act and no
fact or event exists that could give rise to liability under
such act, except for such occurrences, noncompliances and
liabilities as would not, individually or in the aggregate,
have a Company Material Adverse Effect.
3.22. Employee Matters. The Company is not bound by or
subject to (and none of its respective assets or properties is
bound by or subject to) any arrangement with any labor union. No
employee of the Company is represented by any labor union or
covered by any collective bargaining agreement and no campaign to
establish such representation is in progress. There is no
pending or threatened labor dispute involving the Company and any
group of its employees nor has the Company experienced any labor
interruptions over the past three years that resulted in a
Company Material Adverse Effect and the Company considers its
relationship with its employees to be good.
3.23. Conformity with Law; Litigation. (a) The Company
has not violated any Law or any Order of any Governmental
Authority having jurisdiction over it other than violations which
would not have a Company Material Adverse Effect. (b) Except as
described in Schedule 3.23, there are no claims, counterclaims,
actions, suits, investigations or other proceedings, pending or
threatened, against or affecting the Company, or seeking to delay
or prevent consummation of the Merger, at law or in equity, or
before or by any arbitrator or any Governmental Authority having
jurisdiction over it and no notice of any claim, counterclaim,
action, suit or proceeding, whether pending or threatened, has
been received. (c) There are no judgments, orders, injunctions,
decrees, stipulations or awards (whether rendered by a
Governmental Authority or by arbitration) against the Company or
against any of its properties or businesses.
3.24. Taxes.
(a) Other than as set forth on Schedule 3.24(a), the
Company has timely filed or will timely file all requisite
federal, state and other Tax returns, reports and forms
("Returns") for all periods ended on or before the Closing
Date, other than Returns with respect to which the failure
to file would not result in penalties, fines, or other
payments totaling more than $5,000 in the aggregate.
(b) Other than as set forth on Schedule 3.24(b), there
are no examinations in progress or claims against the
Company for Taxes for any period or periods and no notice of
any claim for Taxes, whether pending or threatened, has been
received.
(c) The amounts shown as accruals for Taxes on the
Current Balance Sheet are sufficient for the payment of all
Taxes, whenever determined, for all fiscal periods ended on
or before that date.
(d) The Company has a taxable year ended on December
31.
(e) The Company currently utilizes the accrual method
of accounting for income tax purposes and such method of
accounting has not changed in the past five years.
(f) The Company has paid or has fully accrued for all
Taxes and will have withheld with respect to its employees
all federal and state income taxes, FICA, FUTA and other
taxes required to be withheld, whenever determined, with
respect to periods ending on or before the Closing Date.
(g) Copies of (i) any Tax examinations, (ii)
extensions of statutory limitations for the collection or
assessment of Taxes and (iii) the Returns of the Company for
the last three (3) fiscal years are included as part of
Schedule 3.24(g).
(h) There are (and as of immediately following the
Closing there will be) no liens, pledges, charges, claims,
security interests or other encumbrances of any sort
("Liens") on the assets of the Company relating to or
attributable to Taxes (excluding current year property or ad
valorem taxes).
(i) None of the Company's assets are treated as "tax
exempt use property" within the meaning of Section 168(h) of
the Code.
(j) As of the Effective Time, there will not be any
contract, agreement, plan or arrangement, including but not
limited to the provisions of this Agreement, covering any
employee or former employee of the Company that,
individually or collectively, could give rise to the payment
of any amount that would not be deductible pursuant to
Section 280G, 404 or 162 of the Code.
(k) The Company has not filed any consent agreement
under Section 341(f)(2) of the Code or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a
subsection (f) asset (as defined in Section 341(f)(4) of the
Code) owned by the Company.
(l) The Company is not a party to a tax sharing, tax
indemnity or allocation agreement nor does the Company owe
any amount under any such agreement.
(m) The Company is not, and has not been at any time,
a "United States real property holding corporation" within
the meaning of Section 897(c)(2) of the Code.
(n) The Company's tax basis in its assets for purposes
of determining its future amortization, depreciation and
other federal income tax deductions is accurately reflected
on the Company's tax books and records.
(o) The Company has not taken or agreed to take any
action that would prevent the Merger from constituting a
reorganization qualifying under the provisions of Section
368(a) of the Code.
3.25. Government Contracts. The Company is not a party
to any governmental contracts subject to price redetermination or
renegotiation.
3.26. Absence of Changes. Since December 31, 1996,
except as disclosed in Schedule 3.26 or agreed to by Search in
writing, there has not been:
(a) any event giving rise to a Company Material
Adverse Effect,
(b) any damage, destruction or loss (whether or not
covered by insurance) adversely affecting the properties or
business of the Company that would have a Company Material
Adverse Effect,
(c) any change in the authorized capital of the
Company or in its outstanding securities or any grant of any
options, warrants, calls, conversion rights or commitments,
(d) any declaration or payment of any dividend or
distribution in respect of the capital stock or any direct
or indirect redemption, purchase or other acquisition of any
of the capital stock of the Company,
(e) any increase in the compensation, bonus, sales
commissions or fee arrangements payable or to become payable
by the Company to any of its officers, directors,
Stockholders, employees, consultants or agents other than in
the ordinary course of business and in accordance with and
consistent with past practices,
(f) any work interruptions, labor grievances or claims
filed, or any similar event or condition of any character,
which would result in a Company Material Adverse Effect,
(g) any sale or transfer, or any agreement to sell or
transfer, any asset, property or right of the Company having
an original cost of $5,000 or more to any Person, including
without limitation the Stockholders and their Affiliates,
(h) any cancellation, or agreement to cancel, any
indebtedness or other obligation owing to the Company,
including without limitation any indebtedness or obligation
of any Stockholders or any Affiliate thereof, provided that
the Company may negotiate and adjust bills in the course of
good faith disputes with customers in a manner consistent
with past practice,
(i) any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any interest in
any of the assets, property or rights of the Company or
requiring consent of any party to the transfer and
assignment of any such assets, property or rights,
(j) any purchase or acquisition of, or agreement, plan
or arrangement to purchase or acquire, any property, rights
or assets outside of the ordinary course of business of the
Company,
(k) any waiver of any material rights or claims of the
Company,
(l) any breach, amendment or termination of any
Material Contract,
(m) any transaction by the Company outside the
ordinary course of business,
(n) any capital expenditure or commitment by the
Company, individually or in the aggregate, exceeding $5,000
other than those listed on Schedule 3.26(n),
(o) change in the accounting methods or practices
(including any change in depreciation or amortization
policies or rates) by the Company or the revaluation by the
Company of any of its assets,
(p) any creation or assumption by the Company of any
mortgage, pledge, security interest or lien or other
encumbrance on any asset, other than those listed on
Schedule 3.26(p),
(q) any entry into, amendment of, relinquishment,
termination or nonrenewal by the Company of any contract,
lease transaction, commitment or other right or obligation
requiring aggregate payments by the Company in excess of
$50,000, other than those listed on Schedule 3.26(q),
(r) loan by the Company to any Person or entity,
incurring by the Company of any indebtedness (excluding
indebtedness under the Fourth Amended and Restated Loan
Agreement dated as of May 1, 1996 among MS Financial, Fleet
Bank, N.A., as Agent, and the Banks party thereto, as
amended by the First Amendment to the Fourth Amended and
Restated Loan Agreement dated as of December 16, 1996 by and
among MS Financial, Fleet Bank, N.A., as Agent, and the
Banks party thereto and proposed to be further amended
pursuant to the Bank Loan Term Sheet (the "MS Loan
Agreement") guaranteeing by the Company of any indebtedness
or debt securities of others or issuance or sale of any debt
securities of the Company,
(s) the commencement or notice or threat of
commencement of any lawsuit or proceeding against or
investigation of the Company or any of its affairs not
otherwise disclosed on Schedule 3.23, or
(t) agreement by the Company or any officer or
employee thereof to do any of the things described in the
preceding clauses (a) through (s) (other than agreements
with Search regarding the Transactions), or
(u) any change of servicer or notice of an impending
change of servicer for any of the Securitization Trusts.
3.27. Bank Accounts Powers of Attorney. Schedule 3.27
sets forth an accurate list, as of the date of this Agreement,
of:
(a) the name of each financial institution in which
the Company has any account or safe deposit box
(b) the names in which the accounts or boxes are held
(c) the type of account and
(d) the name of each Person authorized to draw thereon
or have access thereto.
Schedule 3.27 also sets forth the name of each Person,
corporation, firm or other entity holding a general or special
power of attorney from the Company and a description of the terms
of such power.
3.28. Relations with Governments. The Company has not
made, offered or agreed to offer anything of value to any
governmental official, political party or candidate for
government office and it has not taken any action that would
cause the Company to be in violation of the Foreign Corrupt
Practices Act of 1977, as amended, or any Law of similar effect.
3.29. Disclosure. No representation or warranty by the
Company contained in this Agreement contains any untrue statement
of a material fact or omits to state any material fact necessary
to make any statement herein not misleading.
3.30. Opinion of Financial Advisor. MS Financial has
received the opinion of Bear, ▇▇▇▇▇▇▇ & Co. ("Bear ▇▇▇▇▇▇▇") on
the date of this Agreement to the effect that the Merger is fair
from a financial point of view to MS Financial's stockholders as
of the date thereof. As soon as practicable after the date of
this Agreement, MS Financial will deliver a written copy of such
opinion to Search dated as of the date of the Proxy Statement and
such written opinion will be attached to the Proxy Statement. A
copy of the Bear ▇▇▇▇▇▇▇ engagement letter dated October 25,
1996, as amended by the letter agreement dated November 21, 1996
(the "Engagement Letter"), has previously been delivered to
Search.
3.31. Vote Required. The affirmative vote of the
holders of a majority of the then outstanding shares of MS
Financial Stock is the only vote of the holders of any class or
series of capital stock of MS Financial necessary to adopt this
Agreement and consummate the Transactions.
3.32. Brokers. No broker, finder or investment banker
(other than Bear ▇▇▇▇▇▇▇) is entitled to any brokerage, finder's
or other fee or commission in connection with the Transactions
based upon arrangements made by or on behalf of MS Financial.
The Engagement Letter is the only agreement pursuant to which
Bear ▇▇▇▇▇▇▇ will be entitled to any payment relating to the
Transactions.
3.33. Absence of Claims Against Company. To the best
knowledge of the Company, the Stockholders have no claims
against the Company.
3.34. Complete Copies of Materials. The Company has
delivered to Search true, correct and complete copies (or
summaries) of each agreement, contract, commitment or other
document that is referred to in the Schedules or that has been
requested by Search or its counsel in writing.
3.35. Compliance with Laws of Delaware. Without
limiting any of the other representations or warranties contained
herein, MS Financial shall comply with all provisions of the
Delaware Statutes applicable to the Transaction, including but
not limited to Section 262 thereof.
3.36. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Filing. The Company will file
any and all documentation, notices and responses, and will
cooperate with Search with respect to any and all filings,
notices and responses, to Governmental Authorities necessary to
comply with HSR and to obtain the pre-clearance for the Merger to
be effectuated.
3.37. Review of Search. Without in any way affecting
the importance, scope or effectiveness of, or impacting its
reliance on, any other provision of this Agreement, and without
acknowledging the accuracy or completeness of any materials
provided to it, the Company acknowledges that it has had a full
opportunity to request from Search and Newco all information
concerning Search and Newco that the Company deems relevant to
its decision to enter into this Agreement and to consummate the
Transactions, and has reviewed the information provided by Search
and Newco.
4. REPRESENTATIONS OF SEARCH AND NEWCO
To induce MS Financial to enter into this Agreement and
consummate the Transactions, each of Search and Newco represents
and warrants to MS Financial as follows:
4.1. Due Organization. Search and Newco are corporations
duly organized, validly existing and in good standing under the
laws of the State of Delaware. Search and Newco have the
requisite corporate power to carry on their respective businesses
as they are now being conducted. Search and Newco are duly
qualified as foreign corporations and are in good standing in
each jurisdiction where the character of either of their
properties owned or held under lease or the nature of their
respective activities makes such qualification necessary, except
where the failure to be so qualified or in good standing would
not, individually or in the aggregate, have a Search Material
Adverse Effect. Search and Newco have delivered to MS Financial
true, complete and correct copies of their Certificates of
Incorporation and Bylaws. The Certificates of Incorporation and
Bylaws are in full force and effect and, as of the date of this
Agreement, have not been amended, modified, revoked, terminated
or cancelled or in any other manner varied from the documents
delivered to MS Financial. The Certificate of Incorporation and
Bylaws are collectively referred to as the "Search Charter
Documents." Search and Newco have made available to MS Financial
true, complete and correct sets of their minute books. Neither
Search nor Newco is in violation of any provision of the Search
Charter Documents.
4.2. Authorization; Validity of Obligations. Search and
Newco have all requisite corporate power and authority to execute
and deliver this Agreement and the Related Documents and, with
respect to the Merger and the issuance of the shares of Search
Common Stock in connection with the Merger, if required by the
rules of the NASD, upon the approval thereof by Search's
stockholders in accordance with those rules, the Search Charter
Documents, this Agreement and the Delaware Statutes, to perform
their respective obligations pursuant to the terms of this
Agreement and the Related Documents to which they are a party and
to consummate the Transactions. The execution and delivery of
this Agreement and such Related Documents by Search and Newco and
the performance by each of Search and Newco of their respective
obligations under this Agreement and such Related Documents have
been duly and validly authorized by the respective Boards of
Directors of Search and Newco, and by all other necessary
corporate action other than approval of the issuance of Search
Common Stock pursuant to the Merger by holders of a majority of
the total votes cast with respect thereto by the stockholders of
Search at the Search Stockholders Meeting pursuant to the
Delaware Statutes, the Search Charter Documents and the rules of
the NASD, and the filing and recordation of the Certificate of
Merger. This Agreement has been, and the Related Documents to
which either Search or Newco is a party will be, duly and validly
executed and delivered by Search and/or Newco, as the case may
be, and will be, legal, valid and binding obligations of Search
and/or Newco enforceable against Search and/or Newco in
accordance with their terms, except as such enforceability may be
limited by principles of public policy and subject to the laws of
general application relating to bankruptcy, insolvency and the
relief of debtors and rules of Law governing specific
performance, injunctive relief or other equitable remedies.
4.3. No Conflicts; Required Filings and Consents.
(a) The execution, delivery and performance of this
Agreement and the Related Documents, the consummation of the
Transactions and the fulfillment of the terms hereof and
thereof will not:
(i) conflict with, or result in a breach or
violation of, the Search Charter Documents;
(ii) conflict with, or result in a default (or
would constitute a default but for any requirement of
notice or lapse of time or both) under any document,
agreement or other instrument to which either Search or
Newco is a party, or result in the creation or
imposition of any lien, charge or encumbrance on any of
Search's or Newco's properties pursuant to (y) any Law
to which either Search or Newco or any of their
respective property is subject, or (z) any judgment,
order or decree to which Search or Newco is bound or
any of their respective property is subject, other than
such as would not individually or in the aggregate have
a Search Material Adverse Effect;
(iii) result in termination of, or give to any
other Person any right of termination, amendment,
acceleration or cancellation with respect to any
permit, license, franchise, contractual right or other
authorization of Search or Newco material to Search and
its Subsidiaries, taken as a whole; or
(iv) violate any Law to which Search or Newco is
subject or by which any assets of Search or Newco are
bound or affected the violation of which would have a
Search Material Adverse Effect.
(b) The execution and delivery of this Agreement by
Search and Newco do not, and the performance of this
Agreement by Search and Newco will not, require any consent,
approval, authorization or permission of, or filing with or
notification to, any Governmental Authority except (i) for
applicable requirements, if any, of the Exchange Act, the
Securities Act, and Blue Sky Laws, and filing and
recordation of the Certificate of Merger with the Secretary
as required by the Delaware Statutes (ii) such notice as is
necessary to comply with HSR and (iii) where failure to
obtain such consents, approvals, authorizations or permits,
or to make such filings or notifications, would not prevent
or delay consummation of the Merger, or otherwise prevent
Search or Newco from performing its obligations under this
Agreement.
4.4. Permits and Intangibles. Search and Newco own or hold
all Search Material Permits. The Search Material Permits are
valid, and neither Search nor Newco has received any notice that
any Governmental Authority intends to modify, suspend, cancel,
terminate or not renew any Search Material Permit. Except as
disclosed on Schedule 4.4, neither Search nor Newco is in
conflict with, or in default or violation of, (i) any Law
applicable to Search or Newco or by which any property or asset
of Search or Newco is bound or affected, (ii) any of the Search
Material Permits or (iii) any note, bond, mortgage, indenture,
contract, agreement, lease, or other instrument or obligation to
which Search or Newco is a party or by which Search or Newco or
any property or asset of Search or Newco is bound or affected
except as would not have a Search Material Adverse Effect. The
Transactions will not result in a default under, or a breach or
violation of, or adversely affect the rights and benefits
afforded to Search or Newco by, any Search Material Permit.
4.5. Capitalization of Search and Ownership of Search Stock.
(a) The authorized capital stock of Search consists of
130,000,000 shares of Search Common Stock and 60,000,000
shares of Preferred Stock. 3,181,861 shares of Search Common
Stock, 50,000 shares of 12% Senior Convertible Preferred
Stock and 2,456,098 shares of 9%/7% Convertible Preferred
Stock were outstanding on January 31, 1997. At that date,
warrants and options to purchase 751,649 shares of Search
Common Stock were outstanding and Search was obligated to
issue an additional 146,381 shares of Search Common Stock
and Search had committed to issue warrants and options to
purchase an additional 817,500 shares of Search Common
Stock. A total of 7,968,294 shares of Search Common Stock
were reserved for issuance upon conversion of the
outstanding shares of 12% Senior Convertible Preferred Stock
and 9%/7% Convertible Preferred Stock. The authorized
capital stock of Newco consists of 1,000 shares of Common
Stock, all of which are outstanding and outstanding owned
beneficially and of record by Search. All of the issued and
outstanding shares of the capital stock of Search and Newco
have been duly authorized and validly issued, are fully paid
and nonassessable and not subject to preemptive rights. All
of the issued and outstanding shares of the capital stock of
Search and Newco were offered, issued, sold and delivered by
Search or Newco, as the case may be, in compliance with all
applicable state and federal laws concerning the issuance,
offer and sale of securities. Further, none of such shares
was issued in violation of any preemptive rights.
(b) The shares of Search Common Stock to be issued
pursuant to the Merger will be duly authorized, validly
issued, fully paid and nonassessable and not subject to
preemptive rights created by statute, the Search Charter
Documents or any agreement to which Search is a party or by
which Search is bound and will, when issued, be registered
under the Securities Act, the Exchange Act and applicable
Blue Sky Laws, unless exempt therefrom.
4.6. SEC Filings; Financial Statements.
(a) Search has filed all Search SEC Reports. The
Search SEC Reports (i) were prepared in all material
respects in accordance with the requirements of the
Securities Act and the Exchange Act, as the case may be, and
the rules and regulations thereunder and (ii) did not, at
the time they were filed (or at the effective date thereof
in the case of registration statements), contain any untrue
statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to
make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
No Subsidiary of Search is currently required to file any
form, report or other document with the SEC under Section 12
of the Exchange Act.
(b) The information supplied by Search for inclusion
in the Registration Statement and the Proxy Statement shall
not, at (i) the time the Registration Statement is declared
effective, (ii) the time the Proxy Statement (or any
amendment thereof or supplement thereto) is first mailed to
the stockholders of Search and MS Financial, (iii) the time
of the MS Financial Stockholders Meeting or the Search
Stockholders Meeting, and (iv) the Effective Time, contain
any statement which, at such time and in light of the
circumstances under which it is made, is false or misleading
with respect to any material fact, or omit to state any
material fact required to be stated therein or necessary in
order to make the statements therein not false or misleading
or necessary to correct any statements in any earlier
communication with respect to the solicitation of proxies
for the MS Financial Stockholders Meeting and the Search
Stockholders Meeting which shall have become false or
misleading. If at any time prior to the Effective Time any
event or circumstance relating to Search or any Search
Subsidiary, or their respective officers or directors,
should be discovered by Search which should be set forth in
an amendment or a supplement to the Registration Statement
or Proxy Statement, Search shall promptly inform MS
Financial. Notwithstanding the foregoing, Search and Newco
make no representation or warranty with respect to any
information supplied by MS Financial, the Stockholders, or
any of their representatives which is contained in the Proxy
Statement. All documents that Search is responsible for
filing with the SEC in connection with the Transactions will
comply as to form and substance in all material aspects with
the applicable requirements of the Securities Act and the
rules and regulations promulgated thereunder and the
Exchange Act and the rules and regulations promulgated
thereunder.
(c) Search has heretofore furnished to MS Financial
complete and correct copies of all amendments and
modifications (if any) that have not been filed by Search
with the SEC to all agreements, documents and instruments
previously filed by Search as exhibits to the Search SEC
Reports and currently in effect as of the date of this
Agreement.
(d) Each of the consolidated financial statements
(including, in each case, any notes thereto) contained in
the Search SEC Report for the transition period ended March
31, 1996 and the unaudited consolidated financial statements
of Search and its consolidated Subsidiaries for the six
months ended September 30, 1996 were prepared in accordance
with GAAP (except as may be indicated in the notes thereto
and except that financial statements included with interim
reports do not contain all GAAP notes to such financial
statements) and each fairly presented in all material
respects the consolidated financial positions, results of
operations and changes in stockholders' equity and cash
flows of Search and the consolidated Subsidiaries as at the
respective dates thereof and for the respective periods
indicated therein (subject, in the case of unaudited
statements, to normal and recurring year-end adjustments
which were not and are not expected, individually or in the
aggregate, to have a Search Material Adverse Effect). Since
September 30, 1996, there have been no material changes in
Search's accounting policies.
(e) Except for the transactions described in Schedule
4.6(e), all transactions involving Search or any of its
subsidiaries that are required to be disclosed in the Search
SEC Reports in accordance with Item 404 of Regulation S-K
promulgated under the Securities Act have been so disclosed,
and between September 30, 1996 and the date of this
Agreement, neither Search nor any of its subsidiaries has
entered into any transactions that would be required to be
disclosed in future public filings under the Exchange Act
pursuant to such Item which have not already been disclosed
in the Search SEC Reports filed prior to the date hereof.
4.7. Absence of Certain Changes or Events. Since September
30, 1996 and prior to the date of this Agreement, except (a) as
contemplated by, or disclosed pursuant to, this Agreement or any
Schedule to this Agreement, (b) disclosed by Search to MS
Financial in writing on the date hereof, or (c) disclosed in any
Search SEC Report, Search and its subsidiaries have conducted
their businesses only in the ordinary course and in a manner
consistent with past practice and, since September 30, 1996,
there has not been (i) any event or events (whether or not
covered by insurance), individually or in the aggregate, having
a Search Material Adverse Effect other than changes or effects
affecting the non-prime automobile finance industry generally,
(ii) any material change by Search in its accounting methods,
principles or practices, or (iii) any entry by Search or any
Search Subsidiary into any commitment or Transaction material to
Search or the Search Subsidiaries, except in the ordinary course
of business and consistent with past practice.
4.8. Conformity with Law; Litigation.
(a) Search and Newco have not violated any Law or any
Order of any Governmental Authority having jurisdiction over
either of them other than violations which would not have a
Search Material Adverse Effect.
(b) Except as disclosed in any Search SEC Report, there
are no claims, counterclaims, actions, suits, investigations
or other proceedings, pending or, to the best of Search's
and Newco's knowledge, threatened, against or affecting
Search or Newco, or seeking to delay or prevent consummation
of the Merger, at law or in equity, or before or by any
arbitrator or any Governmental Authority having jurisdiction
over either of them and no notice of any such claim,
counterclaim, action, suit or proceeding, whether pending or
threatened, has been received by either of them. Except as
disclosed in any Search SEC Report, there are no judgments,
orders, injunctions, decrees, stipulations or awards
(whether rendered by a Governmental Authority or by
arbitration) against Search or Newco or against any of
either of their properties or businesses having a Search
Material Adverse Effect.
4.9. Ownership of Newco; No Prior Activities.
(a) Newco was formed solely for the purpose of
engaging in the Transactions.
(b) As of the date hereof and the Effective Time,
except for obligations or liabilities incurred in connection
with its incorporation or organization and the Transactions
and except for this Agreement and any other agreements or
arrangements, contemplated by this Agreement, Newco has not
and will not have incurred, directly or indirectly, through
any subsidiary or Affiliate, any obligations or liabilities
or engaged in any business activities of any type or kind
whatsoever or entered into any agreements or arrangements
with any Person.
4.10. Vote Required. The affirmative vote of the
holders of a majority of the outstanding shares of Search Common
Stock and Preferred Stock voted is the only vote, if any, of the
holders of any class or series of capital stock of Search
necessary to approve the issuance of shares of Search Common
Stock to the stockholders of MS Financial pursuant to the Merger.
4.11. Brokers. No broker, finder or investment banker
(other than Alex. ▇▇▇▇▇ & Sons Incorporated and Tri-River Capital
Group) is entitled to any brokerage, finder's or other fee or
commission in connection with the Transactions based upon
arrangements made by or on behalf of Search or Newco.
4.12. Transactions in Capital Stock. Except as set
forth in Section 4.5(a), the Search SEC Reports and, as
contemplated by this Agreement, as of the date of this Agreement,
no option, warrant, call, subscription right, conversion right or
other contract or commitment of any kind exists of any character,
written or oral, which may obligate Search to issue or sell any
shares of capital stock or other equity interests. Except as set
forth in the Search SEC Reports filed prior to the date of this
Agreement or in Schedule 4.12, neither Search nor Newco has any
obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any of its equity securities or any interests
therein or to pay any dividend or make any distribution in
respect thereof.
4.13. Disclosure. No representation or warranty by
Search or Newco contained in this Agreement contains any untrue
statement of a material fact or omits to state any material fact
necessary to make any statement herein or therein not misleading.
4.14. Complete Copies of Materials. Except as set forth
in Schedule 4.14, Search and Newco have made available to MS
Financial true and complete copies (or summaries) of each
agreement, contract, commitment or other document which pertains
to Search or Newco, or to which Search or Newco is a party, and
which is referred to in the Closing Checklist or in the
Schedules, or that has been requested in writing by MS Financial
or its counsel.
4.15. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Filing. Search and Newco will
file any and all documentation, notices and responses, and will
cooperate with MS Financial with respect to any and all filings,
notices and responses to Governmental Authorities necessary to
comply with HSR or required by Law and to obtain the pre-clearance
for the Merger to be effectuated.
4.16. Review of Company. Without in any way affecting
the importance, scope or effectiveness of, or impacting its
reliance on, any other provision of this Agreement, and without
acknowledging the accuracy or completeness of any materials
provided to it, Search acknowledges that it has had a full
opportunity to request from the Company, all information
concerning the Company that Search deems relevant to its decision
to enter into this Agreement and to consummate the Transactions
and that it has reviewed such information as has been provided to
it.
4.17. Taxes.
(a) Search and Newco have timely filed or will timely
file all requisite Returns for all periods ended on or
before the Effective Time.
(b) There are no examinations in progress or claims
against Search or Newco for Taxes for any period or periods
and no notice of any claim for Taxes, whether pending or
threatened, has been received.
(c) The amounts shown as accruals for Taxes on
Search's current balance sheet are sufficient for the
payment of all Taxes, whenever determined, for all fiscal
periods ended on or before that date.
(d) Search has a taxable year ending on March 31 in
each year.
(e) Search and Newco currently use the accrual method
of accounting for income tax purposes and such method of
accounting has not changed in the past five years.
(f) Search and Newco have paid or have fully accrued
for all Taxes and will have withheld with respect to its
employees all federal and state income taxes, FICA, FUTA and
other taxes required to be withheld, whenever determined,
with respect to periods ending on or before the Closing
Date.
(g) Copies of (i) any Tax examinations and (ii)
extensions of statutory limitations for the collection or
assessment of Taxes are included as part of Schedule 4.17.
(h) There are (and as of immediately following the
Closing there will be) no liens, pledges, charges, claims,
security interests or other encumbrances of any sort
("Liens") on the assets of Search or Newco relating to or
attributable to Taxes (excluding current year property or ad
valorem taxes).
(i) None of Search's or Newco's assets are treated as
"tax exempt use property" within the meaning of Section
168(h) of the Code.
(j) Search and Newco have not filed any consent
agreement under Section 341(f)(2) of the Code or agreed to
have Section 341(f)(2) of the Code apply to any disposition
of a subsection (f) asset (as defined in Section 341(f)(4)
of the Code) owned by Search or Newco.
(k) Neither Search nor Newco is or has been at any
time, a "United States real property holding corporation"
within the meaning of Section 897(c)(2) of the Code.
(l) Search's tax basis in its assets for purposes of
determining its future amortization, depreciation and other
federal income tax deductions is accurately reflected on
Search's tax books and records.
(m) Neither Search nor Newco has taken or agreed to
take any action that would prevent the Merger from
constituting a reorganization qualifying under the
provisions of Section 368(a) of the Code.
5. COVENANTS
5.1. Access to Information; Confidentiality.
(a) Between the date of this Agreement and the
Effective Time, Search and MS Financial will, and each will
direct its Subsidiaries to, afford to the other and its
officers and authorized representatives access to (i) all of
their sites, properties, books and records, including,
without limitation, in the case of MS Financial, the records
of the Securitization Trusts, and (ii) such additional
financial and operating data and other information as to
their respective businesses and properties as each may from
time to time reasonably request, including but not limited
to verification of the other party's compliance with all of
the terms and conditions of this Agreement and access to
employees, customers and vendors for due diligence inquiry.
Each of Search and MS Financial will cooperate and will
direct its Subsidiaries to cooperate with the other and its
representatives in the preparation of any documents or other
material which may be required in connection with this
Agreement. The representations, warranties, covenants and
obligations as set forth in this Agreement shall not be
affected or modified in any manner whatsoever by any due
diligence inquiry. In addition, any due diligence inquiry
shall not be a defense to any breach of any of the
representations, warranties, covenants or obligations
contained herein.
(b) Each of the Company, on the one hand, and Search
and Newco on the other hand, agrees that it will not
disclose any confidential or proprietary information which
it obtains or acquires regarding the other or its Subsidiary
to any Person, firm, corporation, association or other
entity for any purpose or reason whatsoever, except to
authorized employees or other authorized representatives of
the respective parties and to counsel, lenders, secured
creditors, underwriters, investment bankers and other
advisers; provided, that such advisors agree to the
confidentiality provisions of this Section 5.1(b), subject
to Section 5.1(c) below.
(c) The confidentiality obligations of a party hereto
shall be terminated regarding any confidential or
proprietary information obtained or acquired if (i) such
information becomes known to the public generally through no
fault of the receiving party, (ii) disclosure is required by
Law or the order of any Governmental Authority under color
of Law, or (iii) the disclosing party reasonably believes
that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party; provided,
that prior to disclosing any information pursuant to clause
(i), (ii) or (iii) above, such party shall, if possible,
give prior written notice thereof to the other party and
provide the other party with the opportunity to contest such
disclosure.
5.2. Conduct of Business by MS Financial. Subject to the
limitations of that certain budget approved pursuant to the Bank
Loan Term Sheet, between the date hereof and the Effective Time,
unless otherwise contemplated by this Agreement, including,
without limitation, the provisions of Section 5.16, or agreed to
by Search in writing, MS Financial will, and will cause its
Subsidiary, to:
(a) carry on their respective businesses only in the
ordinary course of business consistent with past practice as
was in effect between July 1, 1996 and December 31, 1996 and
not introduce any new method of management, operation or
accounting;
(b) use all commercially reasonable efforts to
preserve substantially intact its business organization, to
keep available the services of its current officers,
management and marketing employees and to preserve its
current relationships with dealers, suppliers, lenders, and
other Persons with which any of them has a significant
business relationship;
(c) maintain their respective properties and
facilities, including those held under leases, in as good
working order and condition as at present, ordinary wear and
tear excepted;
(d) perform in a timely manner all of their
obligations under this Agreement and the Related Documents
to which they are a party and all other material agreements
relating to or affecting any of their respective assets, the
failure of which to perform would, when aggregated with all
other agreements not performed, have a Company Material
Adverse Effect.
(e) keep in full force and effect present insurance
policies or other comparable insurance coverage;
(f) use all commercially reasonable efforts to
maintain and preserve the goodwill associated with their
respective businesses, and their respective relationships
with customers and others having business relations with
them;
(g) maintain compliance with all Material Permits and
Laws;
(h) maintain present debt and lease instruments and
not enter into new or amended debt or lease instruments; and
(i) inform Search immediately if any event occurs that
may have a Company Material Adverse Effect.
5.3. Prohibited Activities. Without the prior written
consent of Search, between the date hereof and the Effective
Time, MS Financial will not, and will cause its Subsidiary not
to:
(a) amend any of the MS Charter Documents;
(b) (i) declare or pay any dividend, or make any other
distribution (whether in cash, stock or property) in respect
of any of their respective stock whether now or hereafter
outstanding, (ii) split, combine or reclassify any of their
respective capital stock, (iii) issue or authorize the
issuance of any shares of capital stock, or any options,
warrants, convertible securities or other rights of any kind
to acquire any shares of capital stock, or any other
ownership interest (including, without limitation, any
phantom interest), or (iv) purchase, redeem or otherwise
acquire or retire for value any shares of their respective
stock (including without limitation the right to acquire any
shares and any phantom interest), except that MS Financial
may issue shares of MS Financial Stock pursuant to Company
Options outstanding on the date of this Agreement and
pursuant to the MS Financial Employee Stock Purchase Plan;
(MS Financial acknowledges that any such a prohibited
occurrence which relates to the distribution of MS Financial
stock could affect Search's compliance with the relevant
securities laws in the distribution of the Search Common
Stock);
(c) incur or agree to incur any indebtedness other
than under the MS Loan Agreement or make any capital
expenditures in excess of $5,000 in the aggregate other than
those listed in Schedule 5.3(c), enter into any other
contract or commitment involving an expenditure in excess of
$5,000 (other than to purchase Finance Contracts), or
guarantee any indebtedness of a third party;
(d) except in the ordinary course of business
consistent with past practice, (i) increase the compensation
payable or to become payable to any officer, director,
stockholder, employee or agent, (ii) make any bonus or
management fee payment to any such Person, (iii) make any
loans or advances to any Person other than travel or
entertainment advances in the ordinary course of business to
employees and directors, (iv) adopt or amend any employee
benefit plan, (v) grant, or enter into any agreement
providing for, any severance or termination pay or (vi) in
any other manner increase the compensation payable, or
fringe benefits provided, to any of the aforesaid Persons;
(e) directly or indirectly make or cause to be made
any payment to an Affiliate other than in accordance with
existing agreements and then only in accordance with past
practices or enter into any new agreement with any
Affiliate;
(f) create or assume any mortgage, pledge or other
lien or encumbrance upon any assets or properties whether
now owned or hereafter acquired except pursuant to the MS
Financial Debt in the ordinary course of business;
(g) sell, assign, lease, pledge or otherwise transfer
or dispose of any property or equipment, except in the
ordinary course of business consistent with past practice;
(h) acquire or negotiate for the acquisition of (by
merger, consolidation, purchase of a substantial portion of
assets or otherwise) any business or the start-up of any new
business, or otherwise acquire or agree to acquire any
assets that are material, individually or in the aggregate,
to MS Financial and its Subsidiary taken as a whole;
(i) merge or consolidate or agree to merge or
consolidate with or into any other corporation;
(j) waive any material rights or claims ;
(k) commit a breach (or take any action that with
notice or the passage of time, or both, would cause a
breach) of, or amend or terminate, any agreement, permit,
license or other right;
(l) enter into (i) any material contracts or (ii) any
other transaction outside the ordinary course of business
consistent with past practice or prohibited hereunder;
(m) either (i) commence a lawsuit other than for
routine collection of Finance Contracts or (ii) settle or
compromise any pending or threatened litigation which would
result in a Company Material Adverse Effect;
(n) take, or agree (in writing or otherwise) to take,
any of the actions described in Sections 5.3(a) through (m)
above, or any action which would make any of the
representations and warranties of MS Financial contained in
this Agreement untrue and result in a Company Material
Adverse Effect.
(o) If MS Financial wishes to take any action
otherwise prohibited by paragraphs (a) through (n) of this
Section 5.3, it must notify Search in writing as provided
for in Section 7.9 of its intended prohibited action,
provide Search with a justification for the taking of such
action and request Search's consent to such prohibited
action. Search shall have two business days from receipt of
such notice and information it may reasonably request
regarding such prohibited action to consent to or deny such
request. If Search does not respond to MS Financial's
request by the end of said time period, Search shall be
deemed to have consented to such action.
5.4. No Solicitation of Transactions. Neither MS Financial,
nor its Subsidiary shall, directly or indirectly, through any
officer, director, employee, agent or otherwise, solicit,
initiate or encourage the submission of any proposal or offer
from any Person relating to any acquisition or purchase of all or
any material portion of the assets of, or any equity interest in,
MS Financial, Subsidiary of MS Financial or any Securitization
Trust, or any merger, consolidation, share exchange, business
combination or other similar transaction with MS Financial, the
Subsidiary of MS Financial or any Securitization Trust, or
participate in any negotiations or discussions regarding, or
furnish to any other Person any information with respect to, or
otherwise cooperate in any way with, or assist or participate in,
facilitate or encourage, any effort or attempt by any other
Person to do or seek any of the foregoing; provided, however,
that nothing contained in this Section 5.4 shall prohibit the
Board of Directors of MS Financial from authorizing MS Financial
or the Board's other designees to review, or to furnish
information to, or entering into discussions or negotiations
with, any Person in connection with an unsolicited proposal in
writing by such Person to acquire MS Financial pursuant to a
merger, consolidation, share exchange, business combination or
other similar transaction or to acquire all or substantially all
of the assets of MS Financial or any of its Subsidiaries received
by the Board of Directors of MS Financial after the date of this
Agreement, if, and only to the extent that, (a) the Board of
Directors of MS Financial, after consultation with its
independent legal and financial advisors and taking into
consideration the advice of such advisors, determines in good
faith that such action is required for the Board of Directors of
MS Financial to comply with its fiduciary duties to stockholders
imposed by Delaware Law and (b) prior to furnishing such
information to, or entering into discussions or negotiations
with, such Person, MS Financial (i) gives Search as promptly as
practicable prior oral and written notice of MS Financial's
intention to furnish such information or begin such discussions
and (ii) receives from such Person an executed confidentiality
agreement on terms no less favorable to MS Financial than those
contained in the Confidentiality Agreement between Search and MS
Financial dated October 15, 1996. MS Financial shall notify
Search promptly if any proposal or offer, or any inquiry or
contact with any Person with respect thereto, is made and shall,
in any such notice to Search, indicate in reasonable detail the
terms and conditions of such proposal, offer, inquiry or contact.
MS Financial agrees not to release any third party from, or waive
any provision of, any confidentiality or standstill agreement to
which MS Financial is a party. MS Financial immediately shall
cease and cause to be terminated all existing discussions or
negotiations with any Persons conducted heretofore with respect
to any of the foregoing.
5.5. Notification of Certain Matters. Each party hereto
shall give prompt notice to the other parties hereto of (a) the
occurrence or non-occurrence of any event the occurrence or
nonoccurrence of which would be likely to cause any
representation or warranty of it contained herein to be untrue or
inaccurate in any material respect at or prior to the Closing and
(b) any material failure of such party to comply with or satisfy
any covenant, condition or agreement to be complied with or
satisfied by such party hereunder. The delivery of any notice
pursuant to this Section 5.5 shall not, without the express
written consent of the other parties be deemed to (x) modify the
representations or warranties hereunder of the party delivering
such notice, (y) modify the conditions set forth in Article 6, or
(z) limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
5.6. Cooperation in Obtaining Required Consents and
Approvals. For all consents and approvals which MS Financial is
required to obtain pursuant to this Agreement, Search shall
cooperate and provide to MS Financial such documentation or other
information as MS Financial shall reasonably request. For all
consents and approvals which Search is required to obtain
pursuant to this Agreement, MS Financial shall cooperate and
provide to Search such documentation or other information as
Search shall reasonably request.
5.7. Tax Returns. MS Financial shall timely file, and shall
cause its Subsidiary to timely file, subject to any permissible
extensions, all federal and state income tax returns due before
the Effective Time for taxable periods ending on or prior to the
Closing and have paid or will pay all Taxes attributable to such
periods, subject to any permissible extensions. Such returns
will be prepared and filed in accordance with applicable Law and
in a manner consistent with past practices and shall be subject
to review by Search.
5.8. Registration Statement; Proxy Statement.
(a) As promptly as practicable after the execution of
this Agreement, Search shall prepare a Registration
Statement including therein a combined Proxy Statement and
Prospectus, in connection with the registration under the
Securities Act of the shares of Search Common Stock to be
issued to the stockholders of MS Financial pursuant to the
Merger. Search shall send the Registration Statement to MS
Financial for MS Financial's review and comment prior to the
filing of the Registration Statement and Proxy Statement
with the SEC. As promptly as practicable, MS Financial
shall review and approve the contents of the Registration
Statement and Proxy Statement, as they may be revised, its
approval not to be unreasonably withheld or delayed. As
promptly as practicable, Search shall file the Registration
Statement in the form approved by MS Financial with the SEC.
Search and MS Financial each shall use all reasonable
efforts to cause the Registration Statement to become
effective as promptly as practicable, and, prior to the
effective date of the Registration Statement, Search shall
take all or any action required under any applicable federal
or Blue Sky laws in connection with the issuance of shares
of Search Common Stock pursuant to the Merger. Each of MS
Financial and Search shall pay its own expenses incurred in
connection with the Registration Statement, Proxy Statement,
MS Financial Stockholders Meeting and Search Stockholders
Meeting, including, without limitation, the fees and
disbursements of their respective counsel, accountants and
other representatives, except that MS Financial and Search
each shall pay one-half of any printing, filing and other
fees and expenses incurred in connection with the
Registration Statement. MS Financial shall furnish all
information concerning MS Financial and the Stockholders as
Search may reasonably request in connection with such
actions and the preparation of the Registration Statement
and Proxy Statement. As promptly as practicable after the
Registration Statement shall have become effective, Search,
if required, and MS Financial shall mail the Proxy Statement
to their respective stockholders. The Proxy Statement shall
include the recommendations of the Boards of Directors of
Search, if required, and MS Financial in favor of the
Merger, unless otherwise prohibited by the applicable
fiduciary duties of such directors, as determined by such
directors in good faith after consultation with and duly
considering the written advice of independent legal counsel,
subject to Section 5.4.
(b) No amendment or supplement to the Proxy Statement
or the Registration Statement will be made by Search or MS
Financial without the approval of the other, which shall not
be unreasonably withheld. Search and MS Financial each will
advise the other, promptly after it receives notice thereof,
of the time when the Registration Statement has become
effective or any supplement or amendment has been filed, the
issuance of any stop order, the suspension of the
qualification of the Search Common Stock issuable in
connection with the Merger for offering or sale in any
jurisdiction, or any request by the SEC for amendment of the
Proxy Statement or the Registration Statement or comments
thereon and responses thereto or requests by the SEC for
additional information.
(c) Search shall promptly prepare and submit to the
NASD an application for quotation of the shares of Search
Common Stock issuable in the Merger on NASDAQ, and shall use
its reasonable best efforts to obtain, prior to the
Effective Time, approval for the quotation of such Search
Common Stock on NASDAQ, subject to official notice of
issuance. MS Financial shall cooperate with Search with
respect to such application.
(d) MS Financial, Search and Newco each hereby (i)
consents to the use of its name and, on behalf of its
Subsidiaries and Affiliates, the names of such Subsidiaries
and Affiliates and to the inclusion of financial statements
and business information relating to such party and its
Subsidiary and Affiliates (in each case, to the extent
required by applicable securities laws) in the Registration
Statement and the Proxy Statement, (ii) agrees to use all
reasonable efforts to obtain the written consent of any
Person or entity retained by it which may be required to be
named (as an expert or otherwise) in the Registration
Statement or the Proxy Statement, and (iii) agrees to
reasonably cooperate, and agrees to use all reasonable
efforts to cause its Subsidiary and Affiliates to reasonably
cooperate, with any legal counsel, investment banker,
accountant or other agent or representative retained by any
of the parties specified in clause (i) above in connection
with the preparation of any and all information required, as
determined after consultation with each party's counsel, to
be disclosed by applicable securities laws in the
Registration Statement or the Proxy Statement.
5.9. Stockholders Meetings. MS Financial shall call and
hold a meeting of its stockholders (the "MS Financial
Stockholders Meeting") as promptly as practicable for the purpose
of voting upon the adoption of this Agreement. If required by
the rules of the NASD, Search shall call and hold a meeting of
its stockholders (the "Search Stockholders Meeting") as promptly
as practicable for the purpose of voting upon the approval of the
issuance of additional shares of Search Common Stock pursuant to
the Merger. MS Financial and Search shall use all reasonable
efforts to hold the respective MS Financial Stockholders Meeting
and Search Stockholders Meeting on the same day and as soon as
practicable after the date on which the Registration Statement
becomes effective. MS Financial and Search shall use all
reasonable efforts to solicit from their respective stockholders
proxies in favor of the adoption of this Agreement in the case of
MS Financial, and in favor of the issuance of additional shares
of Search Common Stock pursuant to the Merger in the case of
Search, and shall take all other action reasonably necessary or
advisable to secure the vote or consent of stockholders required
by the Delaware Statutes to obtain such approvals (including
unanimously recommending such approval), unless otherwise
necessary and mandatory under the applicable fiduciary duties of
the directors of MS Financial or Search, as determined by such
directors in good faith under applicable Law after consultation
with and duly considering the written advice of independent legal
counsel, subject to Section 5.4.
5.10. Appropriate Action; Consents; Filings.
(a) MS Financial and Search shall use their best
reasonable efforts to (i) take, or cause to be taken, all
appropriate action, and do, or cause to be done, all things
necessary, proper or advisable under applicable Law or
required to be taken by any Governmental Authority or
otherwise to consummate and make effective the Transactions
as promptly as practicable, (ii) obtain from any
Governmental Authority any consents, licenses, permits,
waivers, approvals, authorizations or orders required to be
obtained or made by Search or MS Financial or any of their
Subsidiaries in connection with the authorization, execution
and delivery of this Agreement and the consummation of the
Transactions, including, without limitation, the Merger, and
(iii) as promptly as practicable, make all necessary
filings, and thereafter make any other required submissions
and responses to inquiries as promptly as possible, with
respect to this Agreement and the Merger required under or
by (A) the Securities Act and the Exchange Act, and any
other applicable federal securities or Blue Sky Laws, (B)
the rules and regulations of the NASD, (C) the Delaware
Statutes, (D) HSR and the Federal Trade Commission and the
Antitrust Division of the Department of Justice, and (E) any
other applicable Law or Governmental Authority; provided,
that Search and MS Financial shall cooperate with each other
in connection with the making of all such filings and
responses, including providing copies of all such documents
to the non-filing party and its advisors prior to filing or
responding to inquiries and, if requested, accepting all
reasonable additions, deletions or changes suggested in
connection therewith. MS Financial and Search shall use
reasonable best efforts to furnish to each other all
information required for any application or other filing to
be made pursuant to any applicable Law (including all
information required to be included in the Proxy Statement
and the Registration Statement) in connection with the
Transactions.
(b) Each of Search and MS Financial shall give (or
shall cause their respective Subsidiaries to give) any
notices to third parties, and use, and cause their
respective subsidiaries to use, their reasonable best
efforts to obtain any third party consents, (i) necessary to
consummate the Transactions, (ii) disclosed or required to
be disclosed in the Schedules hereto, or (iii) required to
prevent a Company Material Adverse Effect or a Search
Material Adverse Effect from occurring prior to or after the
Effective Time.
(c) In the event that Search or MS Financial shall
fail to obtain any third party consent described in
subsection (b) above, it shall use all reasonable efforts,
and shall take any such actions reasonably requested by the
other party, to minimize any adverse effect upon MS
Financial and Search, their respective Subsidiaries, their
respective stockholders, and their respective businesses
resulting, or which could reasonably be expected to result
after the Effective Time, from the failure to obtain such
consent.
(d) From the date of this Agreement until the
Effective Time, each party shall promptly notify the other
parties of any pending, or to the best knowledge of the
first party, threatened, action, proceeding or investigation
by or before any Governmental Authority or any other Person
(i) challenging or seeking material damages in connection
with the Merger or the conversion of MS Financial Stock into
Search Common Stock pursuant to the Merger or (ii) seeking
to restrain or prohibit the consummation of the Merger or
otherwise limit the right of Search or, the knowledge of
such first party, Newco or any other Search Subsidiary to
own or operate all or any portion of the businesses or
assets of MS Financial or its Subsidiary, which in either
case is reasonably likely to have a Company Material Adverse
Effect prior to the Effective Time, or a Search Material
Adverse Effect (including the Surviving Corporation) after
the Effective Time.
5.11. Obligations of Newco. Search shall take all
action necessary to cause Newco to perform its agreements,
covenants, and obligations under this Agreement and to consummate
the Merger on the terms and subject to conditions set forth in
this Agreement. This obligation of Search shall terminate at the
Effective Time.
5.12. Public Announcements. Search and MS Financial
shall consult with each other before issuing any press release or
otherwise making any public statements with respect to this
Agreement or the Transactions and shall not issue any such press
release or make any such public statement prior to such
consultation. The parties have agreed on the text of a joint
press release by which Search and MS Financial will announce the
execution of this Agreement.
5.13. Delivery of SEC Documents. Each of MS Financial
and Search shall promptly deliver to the other true and correct
copies of any report, statement or schedule filed by it with the
SEC subsequent to the date of this Agreement.
5.14. Further Action. At any time before or after the
Effective Time, and from time to time, each party to this
Agreement agrees, subject to the terms and conditions of this
Agreement, to take such actions and to execute and deliver such
documents as may be necessary to effectuate the purposes of this
Agreement at the earliest practicable time.
5.15. Indemnification.
(a) The Certificate of Incorporation of the Surviving
Corporation and its Subsidiary shall contain provisions that
acknowledge and agree that the provisions relating to
limitation on liability that are set forth in the MS Charter
Documents as of the date of this Agreement shall remain
effective for a period of four years from the Effective Time
with respect to individuals who at any time prior to the
Effective Time were directors, officers, employees,
fiduciaries or agents of MS Financial or any of its
Subsidiaries in respect of actions or omissions occurring at
or prior to the Effective Time, including, without
limitation, the Transactions, and the Surviving Corporation
shall not amend (in any manner that would materially
diminish the effect of such provisions) or repeal such
provisions for a period of four years from the Effective
Time.
(b) The Surviving Corporation shall use reasonable
efforts to maintain in effect for three years from the
Effective Time the current directors' and officers'
liability insurance coverage listed, and identified as such,
in Schedule 5.15(b) (provided, that the Surviving
Corporation may substitute therefor policies of at least the
same coverage and amounts containing terms and conditions
which are not materially less advantageous to such officers
and directors) with respect to individuals who at any time
prior to the Effective Time were directors, officers,
employees, fiduciaries or agents of MS Financial in respect
of actions or omissions occurring at or prior to the
Effective Time (including, without limitation, the matters
contemplated by this Agreement); provided, however, that in
no event shall the Surviving Corporation be required to
expend pursuant to this Section 5.15(b) more than $332,500
in the aggregate, including any amounts paid prior to the
Effective Time by MS Financial, for such coverage.
(c) If the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into
any other Person and shall not be the continuing or
surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its
properties and assets to any Person other than in the
ordinary course of business or as part of a securitization
transaction, then, and in each such case, proper provision
shall be made so that the successors and assigns of the
Surviving Corporation, or at Search's option, Search, shall
assume the obligations of the Surviving Corporation set
forth in this Section 5.15.
(d) The Certificate of Incorporation and Bylaws of the
Surviving Corporation shall contain provisions with respect
to indemnification and advancement of expenses no less
favorable than those that are set forth in the MS Charter
Documents as of the date of this Agreement, which provisions
shall not be amended, repealed or modified in any manner
that would diminish their effect, for a period of three
years from the Effective Time for all matters other than the
Proxy Statement described in Section 5.8 above, and for a
period of four years from the Effective Time with respect to
said Proxy Statement, with respect to individuals who at any
time prior to the Effective Time were directors, officers,
employees, fiduciaries or agents of MS Financial in respect
of actions or omissions occurring at or prior to the
Effective Time (including, without limitation, the matters
contemplated by this Agreement).
(e) The obligations of the Surviving Corporation under
this Section 5.15 shall not be terminated or modified in
such a manner as to adversely affect any director, officer,
employee, fiduciary or agent to whom this Section 5.15
applies without the consent of each affected director,
officer, employee, fiduciary and agent (it being expressly
agreed that the directors, officers, employees, fiduciaries
and agents to whom this Section 5.15 applies shall be third-party
beneficiaries of this Section 5.15).
(f) Notwithstanding the foregoing, any obligation of
the Surviving Corporation relating to indemnification shall
be subject to such liability first being satisfied out of
the directors' and officers' liability insurance coverage
referred to in Section 5.15(b) and second any Merger
Consideration held in escrow pursuant to the Stockholders
Agreement dated of even date herewith between the
Stockholders and Search (the "Stockholders Agreement"), if
applicable, and third, and then only to the extent that the
insurance does not fully cover such liability, shall the
Surviving Corporation be responsible for such
indemnification obligations.
5.16. Operations. Between the date hereof and the
Effective Time, subject to the fiduciary duties of MS Financial's
Board of Directors, MS Financial will use its best efforts to
conduct its business utilizing its current personnel and current
operating policies and procedures subject to the following
provisions:
(a) Beginning at the first to occur of either the
expiration or termination of the HSR waiting period, or, if
an HSR filing is not required, the execution of this
Agreement, MS Financial shall cause its President to consult
with Search's President and Chief Executive Officer or
Senior Executive Vice President - Operations Director on a
daily basis regarding the Company's day-to-day operations,
including, without limitation, implementation of such
marketing, servicing, collection and administrative
policies, procedures and programs as such officers of Search
shall approve, and take any and all suggestions into account
with respect the operations of MS Financial and its
Subsidiary. Except with regard to matters provided for in
subsections (b), and (d) below, MS Financial shall not be
required to implement any suggestion made by Search's
personnel, but agrees to take such suggestions into account
with respect to the Company's operations. In addition, MS
Financial agrees to permit Search's President and Chief
Executive Officer, its Senior Executive Vice President -
Operations Director, its Executive Vice President -
Operations and its Executive Vice President - Marketing
access to MS Financial and its Subsidiary and to the
operations of MS Financial and its Subsidiary in order to
observe and participate in the day-to-day operations of MS
Financial and its Subsidiary.
(b) No Finance Contracts will be purchased by MS
Financial or its Subsidiary unless such Finance Contracts
meet Search's underwriting criteria, a copy of which is
included in Schedule 5.16, or are otherwise approved by
either the President and Chief Executive Officer or the
Senior Executive Vice President - Operations Director of
Search. Search shall cause its Subsidiary, Search Funding
Corp., to abide by the letter agreement contained in
Schedule 5.16, pursuant to which it agrees to purchase
Finance Contracts that meet Search's underwriting criteria
from MS Financial.
(c) MS Financial will allow Search to monitor and
evaluate MS Financial's collection activities, policies and
procedures. Beginning at the first to occur of either the
expiration or termination of the HSR waiting period, or, if
an HSR filing is not required, the execution of this
Agreement, MS Financial agrees to implement those collection
policies, procedures and practices as shall be agreed upon
by MS Financial's President and either the President and
Chief Executive Officer or Senior Executive Vice President -
Operations Director of Search and to take any and all
suggestions into account with respect to the operations of
MS Financial and its Subsidiary. Such individuals will
cause an analysis of Finance Contracts owned by MS Financial
to be conducted to determine the amount of any additional
reserves or charge-offs to be recognized prior to the
Effective Time.
(d) MS Financial agrees not to change any existing
policies or procedures and not to implement any new policies
or procedures without the prior written approval of Search's
President and Chief Executive Officer or Senior Executive
Vice President - Operations Director.
(e) Day-to-day operations and operating policies and
procedures will be the responsibility of MS Financial's
President. No salary or other compensation increases other
than pursuant to Section 5.3(d) or employee terminations
will be made by MS Financial without the approval of MS
Financial's President, who will first consult with the
President and Chief Executive Officer or the Senior
Executive Vice President - Operations Director of Search.
(f) For Search's assistance as set forth in this
Section 5.16, MS Financial shall pay Search $100,000 per
month, payable on or before the first business day of each
month. This fee shall be included in Search's Expenses
unless previously paid. Any payments made pursuant to this
Section 5.16(f) shall be credited against the Search Fee and
shall not be taken into account when making the calculations
required by Section 1.2(g). The fee shall be pro rated for
the month in which this Agreement is executed and shall be
payable with respect to that month within three business
days of the date of this Agreement; and a similar pro ration
for the month in which this Agreement is terminated shall be
made and any excess portion shall be credited to the Search
Fee and/or Search's Expenses, or refunded to the Company by
Search if no Search Fee or Expenses are payable pursuant to
the terms of Article 7 below.
5.17. Tax Reorganization. After the date of this
Agreement, Search will not, prior to the Effective Time, and will
not permit the Surviving Corporation after the Effective Time, to
take any action inconsistent with the guidelines provided to
Search by MS Financial prior to the Effective Time, and accepted
by Search, acting reasonably, regarding spin-offs and other
corporate transactions that might affect the qualification of the
Transaction as a reorganization qualifying under the provisions
of Section 368(a) of the Code.
5.18. Search Stock. Search shall not, between the date
of this Agreement and the Effective Time, change the outstanding
shares of Search Common Stock into a different number of shares,
or a different class, by reason of any reclassification,
recapitalization, split-up, stock dividend, stock combination or
exchange of shares without the prior written consent of MS
Financial, which consent shall not be unreasonably withheld.
5.19. Directorship. The Board of Directors of Search
shall elect ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇. to the Board of Directors of Search
for a term expiring at the 1999 annual meeting of the
stockholders of Search, effective at the Effective Time.
6. CONDITIONS TO THE MERGER.
6.1. Conditions to the Obligations of Each Party. The
obligations of MS Financial, Search and Newco to consummate the
Merger are subject to the satisfaction of the following
conditions:
(a) this Agreement and the Transactions shall have
been approved and adopted by (i) the affirmative vote of the
stockholders of MS Financial in accordance with the Delaware
Statutes and MS Financial's Restated Certificate of
Incorporation, and (ii) if required by the rules of the
NASD, the stockholders of Search in accordance with the
Delaware Statutes, Search's Restated Certificate of
Incorporation and the rules of the NASD;
(b) the Registration Statement shall have been
declared effective, no stop order suspending the
effectiveness of the Registration Statement shall be in
effect and no proceeding for that purpose shall have been
initiated or threatened by the SEC;
(c) no Governmental Authority shall have issued,
enacted, promulgated, enforced or entered any order, stay,
decree, judgment or injunction (each an "Order") or Law
which is in effect and has the effect of making the Merger
illegal or otherwise prohibiting consummation of the Merger
and the other Transactions;
(d) the waiting period applicable to the Merger under
the HSR Act shall have expired or been terminated;
(e) Search and MS Financial each shall have received
an opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇, LLP, reasonably satisfactory
in form and substance to Search and MS Financial, to the
effect that the Merger will be treated for federal income
tax purposes as a reorganization qualifying under the
provisions of Section 368(a) of the Code, which shall be
dated on or about the date that is two business days prior
to the date the Proxy Statement is first mailed to
stockholders of MS Financial and which shall be updated as
of the Effective Time.
(f) the Stockholders Agreement shall be in full force
and effect at the Effective Time; and
(g) MS Financial shall have delivered to Search, prior
to the expiration or termination of the HSR pre-clearance
waiting period, a letter identifying all persons who are
anticipated to be, at the time of the MS Financial
Stockholders Meeting, Affiliates of MS Financial for
purposes of Rule 145 under the Securities Act. MS Financial
shall have used its best efforts to cause each Person who is
identified as an Affiliate in such letter to deliver, on or
before the date which is 30 days prior to the Effective
Time, a written agreement in connection with restrictions on
Affiliates under Rule 145 in substantially the form of
Schedule 6.1(g).
(h) On or before February 19, 1997 (i) Search and
MS Financial shall have entered into the Bank Loan Term
Sheet on terms acceptable to Search and MS Financial and
(ii) MS Financial shall receive from the Senior Bank Lenders
such Lenders' consent to the provisions of this Agreement
and the consummation of the Transactions by MS Financial.
A copy of the Bank Loan Term Sheet shall be attached hereto
as Exhibit 6.1(h) after the Bank Loan Term Sheet is fully
executed.
6.2. Conditions to the Obligations to Search and Newco. The
obligations of Search and Newco to consummate the Merger are
subject to the satisfaction of, or waiver by Search and Newco, at
or before the Closing, of the following further conditions:
(a) Representations and Warranties; Performance of
Obligations. All of the representations and warranties of
MS Financial contained in this Agreement shall be true,
correct and complete in all material respects on and as of
the Effective Time with the same effect as though such
representations and warranties had been made on and as of
such time, and all of the terms, covenants, agreements and
conditions of this Agreement shall have been complied with,
performed or satisfied by MS Financial, in all material
respects,
(b) No Litigation. No Order issued by any
Governmental Authority limiting or restricting the Company's
conduct or operation of its businesses following the Merger
shall be in effect, nor shall any proceeding brought by a
Governmental Authority seeking any such Order be pending.
There shall be no action, suit, claim or proceeding of any
nature pending, except as set forth on Schedule 3.23, or
threatened against Search, Newco or MS Financial or its
Subsidiary, their respective properties or any of their
officers or directors that could have a Company Material
Adverse Effect.
(c) Consents and Approvals. All necessary Company
Third Party Consents relating to the consummation of the
Transactions shall have been obtained.
(d) Cold Comfort Letter. Search shall have received
from MS Financial "cold comfort" letters of KPMG Peat
Marwick L.L.P. of the kind contemplated by the Statement of
Auditing Standards with respect to Letters for Underwriters
promulgated by the American Institute of Certified Public
Accountants (the "AICPA Statement") dated the date on which
the Registration Statement shall become effective and the
Effective Time, respectively, and addressed to Search, in
connection with the procedures undertaken by it with respect
to the financial statements of MS Financial and its
Subsidiaries contained in the Registration Statement and the
other matters contemplated by the AICPA Statement and
customarily included in comfort letters relating to
transactions similar to the Merger.
(e) Bank Financing. MS Financial, Search and MS
Financial's lenders shall have entered into the Acquisition
Date Amendment Documents, as that term is defined in the
Bank Loan Term Sheet included in Schedule 6.2(f), and there
shall have been no Event of Default, as such term is defined
in the Acquisition Date Amendment Documents.
(f) Insurance. The current directors' and officers'
liability insurance policy maintained by MS Financial shall
have been continued on a "tail" basis on terms reasonably
acceptable to Search for a period of three years after the
Effective Time with respect to matters occurring prior to
the Effective Time.
6.3. Conditions to the Obligations of MS Financial. The
obligations of MS Financial to effect the Merger are subject to
the satisfaction of, or waiver by MS Financial of, the following
conditions at or before the Closing:
(a) Representations and Warranties; Performance of
Obligations. All of the representations and warranties of
Search and Newco contained in this Agreement shall be true,
correct and complete, so as not to give rise to any Search
Material Adverse Effect, on and as of the Effective Time
with the same effect as though such representations and
warranties had been made on and as of such time, and all of
the terms, covenants, agreements and conditions of this
Agreement shall have been complied with, performed or
satisfied by Search and Newco in all material respects.
(b) No Litigation. There shall be no action, suit,
claim or proceeding of any nature pending or threatened
against Search, Newco or MS Financial or its Subsidiary,
their respective properties or any of their officers or
directors that could have a Company Material Adverse Effect
or a Search Material Adverse Effect, or which would prohibit
the Transactions.
(c) Consents and Approvals. All necessary Search
Third Party Consents relating to the consummation of the
Transactions shall have been obtained and made.
7. GENERAL
7.1. Termination. This Agreement may be terminated, and the
Transactions may be abandoned, at any time prior to the Effective
Time, notwithstanding any requisite approval and adoption of this
Agreement and the Transactions, as follows:
(a) by mutual written consent of the Boards of
Directors of Search and MS Financial;
(b) by either Search or MS Financial if the Effective
Time shall not have occurred on or before June 30, 1997;
provided, that the right to terminate this Agreement under
this Section 7.1(b) shall not be available to any party
whose material misrepresentation, breach of warranty or
failure to fulfill any obligation under this Agreement has
been the cause of, or resulted in, the failure of the
Effective Time to occur on or before such date;
(c) by (i) Search if there is or has been a breach,
failure to fulfill or default on the part of the Company of
any of its representations and warranties contained herein
or in the due and timely performance and satisfaction of any
of the covenants, agreements or conditions contained herein,
such that the conditions set forth in Articles 2 and 6 would
not be satisfied, and such default or failure shall not have
been cured or shall not reasonably be expected to be cured
before the Closing, and (ii) MS Financial if there has been
a Search Material Adverse Effect or is or has been a breach,
failure to fulfill or default on the part of Search or Newco
of any of its representations and warranties contained
herein or in the due and timely performance and satisfaction
of any of the covenants, agreements or conditions contained
herein, such that the conditions set forth in Articles 2 and
6 would not be satisfied, and such default or failure shall
not have been cured or shall not reasonably be expected to
be cured before the Closing;
(d) by either Search or MS Financial if there shall be
a final nonappealable order in effect preventing
consummation of the Merger, or there shall be any action
taken, or any Law or Order enacted, promulgated or issued or
deemed applicable to the Merger by any Governmental
Authority which would make consummation of the Merger
illegal (provided, that the right to terminate this
Agreement pursuant to this subsection (d) shall not be
available to any party which has not complied with its
obligations under Sections 5.10, 3.35, 3.36 and 4.14;
(e) by Search, if (i) the Board of Directors of MS
Financial shall have withdrawn, modified or changed its
recommendation of this Agreement or the Merger in a manner
adverse to Search or shall have resolved to do so, (ii) the
Board of Directors of MS Financial shall have recommended to
the stockholders of MS Financial any Business Combination
Transaction or resolved to do so, or (iii) a tender offer or
exchange offer for 50% or more of the outstanding shares of
capital stock of MS Financial is commenced, and the Board of
Directors of MS Financial shall have failed to recommend
against the stockholders of MS Financial tendering their
shares in such tender offer or exchange offer;
(f) by Search, if Section 262 of the Delaware Statutes
is applicable to the Merger and Dissenting Shares represent
more than ten percent (10%) of the MS Financial Stock issued
and outstanding immediately prior to the Effective Time;
(g) by MS Financial, if the Board of Directors of
Search shall have withdrawn its recommendation of approval
of the issuance of additional shares of Search Common Stock
pursuant to the Merger or shall have resolved to do so;
(h) by MS Financial, if, in the exercise of its good
faith judgment (subject to Section 5.4) as to its fiduciary
duties under the Delaware Statutes, the Board of Directors
of MS Financial in good faith under applicable Law
determines (after consultation with its financial advisers
and legal counsel and duly considering the written advice of
such legal counsel) that such termination is required by
such fiduciary duties by reason of a proposal that either
constitutes a Business Combination Transaction or may
reasonably be expected to lead to a Business Combination
Transaction (a "Business Combination Transaction Proposal");
provided that any termination of this Agreement by MS
Financial pursuant to this Section 7.1(h) shall be
conditioned on MS Financial paying the full Search Fee
required by Section 7.7 hereof;
(i) by either Search or MS Financial, if the
stockholders of MS Financial or Search shall have failed to
approve and adopt this Agreement, the Merger and the
Transactions at meetings duly convened therefor;
(j) by Search if either MS Financial or its Subsidiary
shall have filed a petition for liquidation or re-organization
in bankruptcy, or have become the subject of an
involuntary bankruptcy petition, which involuntary petition
is not rejected by a court having jurisdiction over such
proceedings within 30 days of the filing thereof; and
(k) by Search if KPMG has not completed its annual
audit of the Company and issued its opinion with respect to
such audit by March 10, 1997 or such later date to which
Search and MS financial may agree.
7.2. Effect of Termination. In the event of the termination
of this Agreement pursuant to Section 7.1, this Agreement shall
become void and, except as herein provided, there shall be no
liability or obligation on the part of any party hereto or its
officers, directors or stockholders. Notwithstanding the
foregoing sentence, (a) the provisions of this Section 7.2 and
Sections 5.1(b) and Article 7 shall remain in full force and
effect and survive any termination of this Agreement, and (b) MS
Financial as one party, and Search and Newco as one party, shall
remain liable to the other for any breach of this Agreement by
such party prior to this Agreement's termination.
7.3. Cooperation. MS Financial, and Search and Newco shall
each deliver or cause to be delivered to the other at the
Closing, and at such other times and places as shall be
reasonably agreed to, such additional instruments as the other
may reasonably request for the purpose of effectuating this
Agreement.
7.4. Successors and Assigns. This Agreement and the rights
of the parties hereunder may not be assigned (including by
operation of law) without the written consent of all parties.
7.5. Entire Agreement. This Agreement (which includes the
Schedules hereto) and the confidentiality agreement dated October
15, 1996 between Search and MS Financial set forth the entire
understanding of the parties hereto with respect to the
Transactions. It shall not be amended or modified except by a
written instrument duly executed by each of the parties hereto.
Any and all other previous agreements and understandings between
or among the parties regarding the subject matter hereof, whether
written or oral, are superseded by this Agreement.
7.6. Counterparts. This Agreement may be executed in any
number of counterparts and any party hereto may execute any such
counterpart, each of which when executed and delivered shall be
deemed to be an original and all of which counterparts taken
together shall constitute but one and the same instrument. This
Agreement shall become binding when one or more counterparts
taken together shall have been executed and delivered (which
deliveries may be by telefax) by the parties.
7.7. Fees and Expenses.
(a) MS Financial shall pay Search a fee (the "Search
Fee") of Seven Hundred Thousand ($700,000) in immediately
available funds, which amount is inclusive of all Expenses,
if:
(i) this Agreement is terminated pursuant to
Section 7.1(e) or (h), in which case the Search Fee
will be paid on the business day immediately following
such termination; or
(ii) this Agreement is terminated pursuant to
Section 7.1(i) as a result of the failure of the
stockholders of MS Financial to approve the Merger and
a Business Combination Transaction Proposal shall have
been made prior to such termination, and any Business
Combination Transaction involving MS Financial is
thereafter consummated within 18 months of such
termination, in which case the Search Fee will be paid
on the business day immediately following such
consummation.
(b) Search shall be entitled to receive its Expenses
in immediately available funds in the event that this
Agreement is terminated either by Search pursuant to Section
7.1(c) or (e) or by MS Financial pursuant to Section 7.1(h).
(c) Search shall pay MS Financial a fee (the "MS
Financial Fee") of Two Hundred Fifty Thousand Dollars
($250,000) in immediately available funds, which amount is
inclusive of all Expenses, if this Agreement is terminated
pursuant to Section 7.1(g); provided that nothing in this
Section 7.7(c) shall obligate Search to pay any or all of
the MS Financial Fee if Search's stockholders do not approve
the adoption of this Agreement and the Transactions after
Search's Board of Directors has approved the same.
(d) No termination of this Agreement pursuant to
Section 7.1(c) shall prejudice the ability of a non-breaching
party to seek damages from any other party for any
breach of this Agreement, including, without limitation,
attorneys' fees and the right to pursue any remedy at law or
in equity. If Search is required to file suit to seek the
Search Fee and it ultimately succeeds on the merits, it
shall be entitled to receive (in addition to the Search Fee
or any other Expenses) all expenses, including, without
limitation, attorneys' fees and expenses, which it has
incurred in enforcing its rights under Section 7.2. If
MS Financial is required to file suit to seek the
MS Financial Fee and it ultimately succeeds on the merits,
MS Financial shall be entitled to receive (in addition to
the MS Financial Fee) all expenses, including, without
limitation, attorneys' fees and expenses, which it has
incurred in enforcing its rights under Section 7.2.
(e) Except as set forth in this Section 7.7 and
Section 5.8(a), all costs and expenses incurred in
connection with this Agreement and the Transactions shall be
paid by the party incurring such expenses, whether or not
any transaction contemplated thereby is consummated.
Notwithstanding the foregoing, MS Financial shall pay to or
incur Expenses from only those Persons listed on Schedule
7.7(e), provided that such Persons may not include legal
counsel to the Stockholders.
7.8. Specific Performance; Remedies. Each party hereto
acknowledges that the other parties will be irreparably harmed
and that there will be no adequate remedy at law for any
violation by any of them of any of the covenants or agreements
contained in this Agreement, including without limitation, the
confidentiality obligations set forth in Section 5.1(b) and (b).
It is accordingly agreed that, in addition to any other remedies
which may be available upon the breach of any such covenants or
agreements, each party hereto shall have the right to obtain
injunctive relief to restrain a breach or threatened breach of,
or otherwise to obtain specific performance of, the other
parties' covenants and agreements contained in this Agreement.
7.9. Notices. Any notice, request, claim, demand, waiver,
consent, approval or other communication which is required or
permitted hereunder shall be in writing and shall be deemed given
if delivered personally or sent by facsimile transmission (with
confirmation of receipt), by registered or certified mail,
postage prepaid, or by recognized courier service, as follows:
If to Search or Newco to: Search Capital Group, Inc.
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇, ▇.▇. ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
Chairman, President & CEO and
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Executive Vice
President and General Counsel
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to: Riezman & Blitz, P.C.
▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile No.: 314-727-6458
If to MS Financial: MS Financial, Inc.
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to: Brunini, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇, PLLC
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
or to such other address as the Person to whom notice is to be
given may have specified in a notice duly given to the sender as
provided herein. Such notice, request, claim, demand, waiver,
consent, approval or other communication shall be deemed to have
been given as of the date so delivered, transmitted by facsimile,
mailed or dispatched and, if given by any other means, shall be
deemed given only when actually received by the addressees.
7.10. Governing Law . This Agreement shall be governed
by and construed, interpreted and enforced in accordance with the
laws of the State of Delaware applicable to contracts made and to
be performed wholly in that State.
7.11. Severability. If any provision of this Agreement
or the application thereof to any Person or circumstances is held
invalid or unenforceable in any jurisdiction, the remainder
hereof, and the application of such provision to such Person or
circumstances in any jurisdiction, shall not be affected thereby,
and to this end the provisions of this Agreement shall be
severable.
7.12. Absence of Third Party Beneficiary Rights. No
provision of this Agreement is intended, nor will be interpreted,
to provide or to create any third party beneficiary rights or any
other rights of any kind in any client, customer, Affiliate,
shareholder, employee, partner of any party hereto or any other
Person or entity.
7.13. Mutual Drafting. This Agreement is the mutual
product of the parties hereto, and each provision hereof has been
subject to the mutual consultation, negotiation and agreement of
each of the parties, and shall not be construed for or against
any party hereto.
7.14. Further Representations. Each party to this
Agreement acknowledges and represents that it has been
represented by its own legal counsel in connection with the
Transactions contemplated by this Agreement, with the opportunity
to seek advice as to its legal rights from such counsel. Each
party further represents that it is being independently advised
as to the tax consequences of the Transactions contemplated by
this Agreement and is not relying on any representation or
statements made by the other party as to such tax consequences.
7.15. Amendment; Waiver. This Agreement may be amended
by the parties hereto at any time prior to the Effective Time by
execution of an instrument in writing signed on behalf of each of
the parties hereto; provided, that after the approval and
adoption of this Agreement and the Transactions by the
stockholders of MS Financial, no amendment may be made that would
reduce the amount or change the type of consideration into which
each share of MS Financial Stock shall be converted upon
consummation of the Merger. At any time prior to the Effective
Time, any party may (a) extend the time for the performance of
any obligation of any other party, (b) waive any inaccuracy in
the representations and warranties of any other party and (c)
waive compliance with any agreement or conditions contained
herein. Any extension or waiver by any party of any provision
hereto shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
7.16. Survival of Certain Clauses. None of the
representations, warranties, covenants and indemnities made by MS
Financial, Search or Newco in or pursuant to this Agreement or in
any document delivered pursuant to this Agreement and the Related
Documents shall survive the Effective Time or any termination of
this Agreement pursuant to Section 7.1 except as follows: the
agreements set forth in Section 5.1(b), 5.15, and Sections 7.2
through 7.16 shall survive the Effective Time and shall remain in
effect indefinitely.
8. DEFINITIONS. When a capitalized term is used in this
Agreement and such term is not defined elsewhere in this
Agreement, such term shall have the meaning ascribed to it
pursuant to the following provisions of this Article 8:
8.1. "Acquisition Date Amendment Documents" is defined in
Section 6.2(f).
8.2. "Adjusted Decrease in Stockholders' Equity" is defined
in Section 1.2(g)(i).
8.3. "Adjusted Per Share Amount" is defined in Section
1.2(g)(ii).
8.4. "Adjusted Stockholders' Equity" is defined in Section
1.2(g).
8.5. "Adjustment Balance Sheet" is defined in Section
1.2(g)(i).
8.6. "Adjustment Income Statement" is defined in Section
1.2(g)(i).
8.7. "Affiliate" means each "Affiliate" or "associate" of
the applicable Person (as such terms are defined in Rule 12b-2
under the Exchange Act as of the Effective Time), whether or not
such Person is such an Affiliate or Associate as of the Effective
Time, and each officer and director of such Person.
8.8. "Agreement" is defined in the preamble.
8.9. "AICPA Statement" is defined in Section 6.2(e).
8.10. "Allowance for Losses" is defined in Section
1.2(g).
8.11. "Balance Sheet Date" is defined in Section 3.10.
8.12. "Bank Loan Term Sheet" means the bank loan term
sheet included as Exhibit 6.1(h) hereto.
8.13. "Benefit Plans" is defined in Section 3.21(a).
8.14. "Blue Sky Laws" means state securities or "blue
sky" laws.
8.15. "Business Combination Transaction" means any of
the following involving MS Financial or its Subsidiary: (1) any
merger, consolidation, share exchange, business combination or
other similar transaction (other than the transactions
contemplated hereby); (2) any sale, lease, exchanges, transfer or
other disposition (other than a pledge or mortgage) of 25% or
more of the assets of MS Financial and the Subsidiary, as
applicable, taken as a whole, in a single transaction or series
of transactions; or (3) the acquisition by a Person or entity or
any "group" (as such term is defined under Section 13(d) of the
Exchange Act and the rules and regulations thereunder) of
beneficial ownership of 50% or more of the shares of MS Financial
Stock, as applicable, whether by tender offer, exchange offer or
otherwise.
8.16. "Business Combination Transaction Proposal" is
defined in Section 7.1(h).
8.17. "Car Dealer" means any retail vendor of motor
vehicles with which MS Financial or its Subsidiary has an
agreement pursuant to which MS Financial or its Subsidiary
purchases Finance Contracts from such vendor.
8.18. "Car Dealer Agreement" means any agreement between
the Company and a Car Dealer, substantially in the form of
Schedule 3.14(l).
8.19. "Car Dealer Assignment" means any assignment
substantially in the form of Schedule 3.14(l).
8.20. "Certificate of Merger" is defined in Section 2.1.
8.21. "Company Hazardous Materials Activities" is
defined in Section 3.16(b).
8.22. "Certificate" means a stock certificate or
certificates which immediately prior to the Effective Time
evidenced outstanding shares of MS Financial Stock (other than
Dissenting Shares, if any, and shares to be canceled pursuant to
Section 1.2(b)).
8.23. "Closing" means a closing held at the offices of
Search in Dallas, Texas, or such other place and time as the
parties may agree.
8.24. "Closing Checklist" means the list of documents to
be delivered or provided in connection with the Transactions, in
the form of Schedule 8.24 hereto.
8.25. "Closing Certificate" means the certificates
described in sections 2.2(a) and 2.3(a) hereof.
8.26. "Closing Date" shall mean the date upon which the
Closing is to occur.
8.27. "Code" means the Internal Revenue Code of 1986, as
amended.
8.28. "Company" means MS Financial and its Subsidiary.
8.29. "Company Material Adverse Effect" means any
change, effect, or circumstance that is, individually or when
taken together with all other changes, effects and circumstances
that have occurred prior to the date of determination of the
occurrence of the Company Material Adverse Effect, is or is
reasonably likely to be material and adverse to the condition
(financial or otherwise), operations, properties, results of
operations, or business or prospects of MS Financial and its
Subsidiary, taken as a whole, or would materially impair the
ability of MS Financial and its Subsidiary, taken as a whole, to
perform its obligations under this Agreement or impede the
consummation of the Transactions.
8.30. "Company Options" means options to acquire MS
Financial Stock under the MS Financial Stock Option Plans.
8.31. "Company Third Party Consents" means all consents
of Persons not party to this Agreement required to be obtained by
MS Financial to prevent any breach of this Agreement by MS
Financial or to consummate the Transactions.
8.32. "Company SEC Reports" means all forms, reports and
documents required to be filed by MS Financial with the SEC since
January 1, 1995.
8.33. "Controlled Group Member" is defined in Section
3.21(b).
8.34. "Current Balance Sheet" is defined in Section
3.10.
8.35. "Current Income Statement" is defined in Section
3.10.
8.36. "Delaware Statutes" means the Delaware General
Corporation Law, as amended.
8.37. "Delinquency Rate Percentage" means, with respect
to a calendar month Period, the fraction, expressed as a
percentage, equal to the sum of the aggregate outstanding
principal balance of Finance Contracts owned and/or serviced by
the Company that are past due as of the end of such month for
more than 30 days divided by the aggregate outstanding principal
balance of Finance Contracts owned and/or serviced by the Company
as of the end of such calendar month.
8.38. "Determination Date" means the date that is five
business days prior to the date of the MS Financial Stockholders
Meeting or, if that date is not a NASDAQ trading day, the NASDAQ
trading day immediately preceding that date.
8.39. "Dissenting Shares" means any issued and
outstanding shares of MS Financial Stock which are held by
stockholders of MS Financial who have not voted in favor of the
Merger and who are entitled to file, and have filed, with MS
Financial, in full compliance with Section 262 of the Delaware
Statutes, prior to the taking of the vote of the stockholders of
MS Financial on the Merger, a written notice of intent to demand
appraisal of such shares of MS Financial Stock.
8.40. "Effective Time" means the date and time of the
filing of the Certificate of Merger with the Secretary, or such
later time as may be specified in the Certificate of Merger filed
with the Secretary.
8.41. "Engagement Letter" is defined in Section 3.30.
8.42. "Environmental Permits" is defined in Section
3.16(c).
8.43. "ERISA" is defined in Section 3.21(b).
8.44. "Exchange Act" means the Securities and Exchange
Act of 1934, as amended.
8.45. "Exchange Agent" means American Securities
Transfer, Inc.
8.46. "Exchange Fund" means certificates evidencing the
shares of Search Common Stock, issuable pursuant to Section 1.2
and an estimated amount of cash required to be delivered pursuant
to Article 1 in exchange for fractional shares of Search Common
Stock.
8.47. "Exchange Ratio" shall mean the number of shares
of Search Common Stock having a value equal to the Per Share
Amount, determined as of the Determination Date except as
otherwise provided in Sections 1.2(d), (e), (g) and (h) The
number of shares having a value equal to the Per Share Amount
determined as of the Determination Date shall be determined by
dividing the Per Share Amount by the Valuation Period Market
Value.
8.48. "Expenses" means all out-of-pocket expenses and
fees actually incurred or accrued by Search, Newco or MS
Financial, as applicable, or on their respective behalf in
connection with the Transactions prior to the termination of this
Agreement (including, without limitation, all fees and expenses
of counsel, financial advisors, banks or other entities providing
financing to Search (including financing, commitment and other
fees payable thereto), accountants, environmental and other
experts and consultants, and all registration fees and expenses
and all printing and advertising expenses) and in connection with
the negotiation, preparation, execution, performance and
termination of this Agreement, the structuring of the
Transactions, any agreements relating thereto, and any filings to
be made in connection therewith.
8.49. "Finance Contract" means a motor vehicle
installment sales contract assigned to MS Financial or owned by
a Securitization Trust that is secured by title to, security
interests in, or liens on a motor vehicle under applicable
provisions of the motor vehicle or other similar Law of the
jurisdiction in which the motor vehicle is titled and registered
by the purchaser at the time the contract is originated.
8.50. "GAAP" means United States generally accepted
accounting principles applied on a consistent basis.
8.51. "Governmental Authority" shall mean any United
States (federal, state or local) or foreign (to the extent having
any jurisdiction over the parties or the Transactions)
government, or governmental, regulatory or administrative
authority, agency, department, board, bureau, instrumentality
commission or court of competent jurisdiction.
8.52. "Hazardous Material" is defined in Section
3.16(a).
8.53. "HSR" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976 (Antitrust Improvements Act) Pub.L. 94-435,
Sept. 30, 1976, 90 Stat. 1383, as amended.
8.54. "KPMG" means KPMG Peat Marwick L.L.P.
8.55. "Law" means statutes, rules, regulations,
ordinances, orders, judgments or decrees of any Governmental
Authority.
8.56. "Liens" is defined in Section 3.24(h).
8.57. "Material Contracts" is defined in Section
3.18(a).
8.58. "Material Permits" means licenses, franchises,
consents, approvals, orders, permits and other governmental
authorizations, including without limitation titles (including
without limitation motor vehicle titles and current
registrations), fuel permits, certificates, trademarks, trade
names, patents, patent applications and copyrights, necessary to
conduct the businesses of MS Financial or its Subsidiary and the
failure of MS Financial or its Subsidiary to hold or possess
would have a Company Material Adverse Effect.
8.59. "Merger" is defined in the preamble.
8.60. "Merger Consideration" means certificates
evidencing the number of whole shares of Search Common Stock and
cash (in lieu of fractional shares) to which a holder of MS
Financial Stock is entitled as the result of the Merger.
8.61. "Most Recent Financial Statements" is defined in
Section 1.2(g)(i).
8.62. "MS Financial" is defined in the preamble.
8.63. "MS Charter Documents" is defined in Section 3.1.
8.64. "MS Financial Employees' Equity Incentive Plan"
means the MS Financial Amended and Restated Employees' Equity
Incentive Plan substantially in the form of Schedule 8.63 hereto.
8.65. "MS Financial Fee" is defined in Section 7.7(c).
8.66. "MS Financial Stock" means the common stock of MS
Financial, par value $.001 per share.
8.67. "MS Financial Stock Option Plans" means the MS
Financial Employees' Equity Incentive Plan and the Non-Employee
Directors Stock Option Plan.
8.68. "MS Financial Stockholders Meeting" is defined in
Section 5.9.
8.69. "MS Loan Agreement" is defined in Section 3.26(r).
8.70. "Net Managed Receivables" is defined in Section
1.2(g).
8.71. "Non-Employee Directors Stock Option Plan" means
the stock option plan substantially in the form of Schedule 8.70
hereto.
8.72. "NASD" means the National Association of
Securities Dealers, Inc. or any successor entity.
8.73. "NASDAQ" means the NASD Automated Quotations
-National Market System.
8.74. "Newco" is defined in the preamble.
8.75. "Newco Stock" means the common stock of Newco, par
value $.01 per share.
8.76. "Order" is defined in Section 6.1(c).
8.77. "Per Share Amount" means $2.00, or such amount
adjusted pursuant to Section 1.2(e) or Section 1.2(g) if such an
adjustment is to be made.
8.78. "Person" means any individual, firm, corporation,
partnership or other entity, including without limitation, any
"person" or "group" within the meaning of Section 13(d) under the
Exchange Act.
8.79. "Proxy Statement" means the proxy statement, which
may be a joint proxy statement, to be sent to the stockholders of
Search, if required, and MS Financial.
8.80. "Registration Statement" means a registration
statement on Form S-4 (together with all amendments thereto)
filed by Search in respect of the issuance of Search Common Stock
pursuant to this Agreement.
8.81. "Related Documents" is defined in Section 3.2.
8.82. "Related Security" means all security documents,
including, without limitation, Uniform Commercial Code Financing
statements, evidencing a security interest in a Finance Contract.
8.83. "Returns" is defined in Section 3.24(a).
8.84. "Reviewed Financials" is defined in Section 3.10.
8.85. "Search" is defined in the preamble.
8.86. "Search Charter Documents" is defined in Section
4.1.
8.87. "Search Common Stock" means the common stock of
Search, $.01 par value per share.
8.88. "Search Fee" is defined in Section 7.7(a).
8.89. "Search Material Adverse Effect" means any change,
effect or circumstance that, individually, or when taken together
with all other changes, effects and circumstances that have
occurred prior to the date of determination of the occurrence of
the Search Material Adverse Effect (i) is or is reasonably likely
to be material and adverse to the condition (financial or
otherwise), operations, properties, results of operations,
business or prospects of Search, or (ii) would or is reasonably
likely to impair Search's ability to perform its obligations
under this Agreement or impede the consummation of the
Transactions.
8.90. "Search Material Permits" means licenses,
franchises, consents, approvals, orders, permits and other
governmental authorizations, including without limitation titles
(including without limitation motor vehicle titles and current
registrations), fuel permits, certificates, trademarks, trade
names, patents, patent applications and copyrights, necessary to
conduct the businesses of Search or its Subsidiaries and the
failure of Search or its Subsidiaries to hold or possess would
have a Search Material Adverse Effect.
8.91. "Search SEC Reports" means all forms, reports and
documents required to be filed by Search with the SEC since
December 31, 1993.
8.92. "Search Stockholders Meeting" is defined in
Section 5.9.
8.93. "Search Third Party Consents" means all consents of
Persons not party to this Agreement required to be obtained by
Search or Newco to prevent any breach of this Agreement by
Search.
8.94. "SEC" means the Securities and Exchange
Commission.
8.95. "Secretary" means the Secretary of State of the
State of Delaware.
8.96. "Securities Act" means the Securities Act of 1933,
as amended.
8.97. "Securitization Trusts" means MS Auto Grantor
Trust 1995-1, MS Auto Grantor Trust 1994-1, and MS Auto Grantor
Trust 1993-1.
8.98. "Senior Bank Lender" means the lenders referred to
in the Bank Loan Term Sheet.
8.99. "Stockholders" means MS Diversified Corporation,
MS Financial Services, Inc., and ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇,
L.P.
8.100. "Stockholders Agreement" is defined in Section
5.15(f).
8.101. "Subsidiary" means, with respect to any Person, an
Affiliate controlled by such person directly, or indirectly
through one or more intermediaries.
8.102. "Surviving Corporation" is defined in Section
1.1(a).
8.103. "Tax" means any tax or similar governmental
charge, import or levy (including without limitation income
taxes, franchise taxes, transfer taxes or fees, sales taxes, use
taxes, gross receipts taxes, value added taxes, employment taxes,
excise taxes, ad valorem taxes, property taxes, withholding
taxes, payroll taxes, minimum taxes or windfall profit taxes)
together with any related penalties, fines, additions to tax or
interest imposed by any Governmental Authority.
8.104. "Transactions" means the Merger and all other
actions or events described or required by this Agreement.
8.105. "Unaudited Financials" is defined in Section 3.10.
8.106. "Valuation Period Market Value" means the average
of the closing prices of a share of Search Common Stock, as
quoted on NASDAQ for the 10 NASDAQ trading days immediately
preceding and including the Determination Date or, if the Search
Common Stock is not quoted on NASDAQ, the average of the high bid
and low ask prices of a share of Search Common Stock as quoted in
the over-the-counter market for such 10 trading day period.
8.107. "Warehouse Loans" means loans pursuant to the
transaction entered into pursuant to that certain Repurchase
Agreement dated as of April 1, 1995 between the Company and
Telluride Funding Corp. and certain other related documents, as
such may be amended, modified, supplemented, extended, renewed or
replaced, in connection with which Financial Security Assurance
Inc. issued a financial guaranty insurance policy.
IN WITNESS WHEREOF, the parties hereto have signed this
Agreement as of the day and year first above written.
SEARCH CAPITAL GROUP, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman, President and
Chief Executive Officer
SEARCH CAPITAL ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Senior Executive Vice President_
MS FINANCIAL, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: President Chief
Operating Officer