Exhibit 2.01
PURCHASE AND SALE AGREEMENT
by and among
MONEY MANAGEMENT ASSOCIATES, INC.,
MONEY MANAGEMENT ASSOCIATES (LP), INC.,
MONEY MANAGEMENT ASSOCIATES, L.P.,
RUSHMORE TRUST AND SAVINGS, FSB,
▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇
and
THE LIMITED PARTNERS OF MONEY MANAGEMENT ASSOCIATES, L.P.
NAMED HEREIN
Dated: October 20, 1999
PURCHASE AND SALE AGREEMENT
TABLE OF CONTENTS
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Page
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ARTICLE I SALE AND PURCHASE OF INTERESTS AND STOCK......................... 2
1.1. Sale and Purchase.............................................. 2
1.2. Time and Form of Delivery...................................... 3
1.3. Pre-Closing Liquidation and Distributions Closing.............. 3
1.4. Purchase Price................................................. 3
ARTICLE II REPRESENTATIONS AND WARRANTIES OF BUYERS AND FBR................ 4
2.1. Organization and Authority..................................... 4
2.2. Authorization.................................................. 4
2.3. Accuracy of Representations and Documents...................... 5
2.4. Brokers and Finders............................................ 5
2.5. Litigation and Other Proceedings............................... 5
2.6. Certain Information Provided by Buyers......................... 6
2.7. No Unfair Burden............................................... 6
2.8. Financial Ability; Regulatory Matters.......................... 6
2.9. No Other Representations or Warranties......................... 7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF MMA, RTS AND PRINCIPAL
SELLERS........................................................ 7
3.1. Organization and Authority..................................... 7
3.2. Authorization.................................................. 7
3.3. Capitalization of MMA; Beneficial Ownership.................... 8
3.4. Accuracy of Representations and Documents...................... 9
3.5. Certain Information Provided by MMA, RTS, each
Subsidiary and each Fund.................................... 9
3.6. Brokers and Finders............................................ 10
3.7. Contracts...................................................... 10
3.8. No Defaults under Contracts or Agreements...................... 11
3.9. Real Estate and Assets......................................... 11
3.10. Assets Under Management........................................ 13
3.11. Financial Statements........................................... 14
3.12. Taxes.......................................................... 15
3.13. Loans; Accounts Receivable..................................... 16
3.14. Absence of Certain Changes..................................... 17
3.15. Ordinary Course................................................ 18
3.16. Banking Relations.............................................. 18
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3.17. Intellectual Property.......................................... 18
3.18. Litigation..................................................... 19
3.19. Business: Registrations and Compliance with Laws............... 19
3.20. Insurance...................................................... 21
3.21. Copies of Documents............................................ 21
3.22. Transactions with Interested Persons........................... 21
3.23. Employee Benefit Programs...................................... 21
3.24. Officers and Employees......................................... 24
3.25. Non-Foreign Status............................................. 25
3.26. Transfer of Interests, Stock or Subsidiary Stock............... 25
3.27. No Unfair Burden............................................... 25
3.28. Additional Representations and Warranties relating
to each Fund................................................ 25
3.29. Absence of Certain Changes..................................... 28
ARTICLE IV ADDITIONAL REPRESENTATIONS AND WARRANTIES OF SELLERS............ 29
4.1. Ownership of Interests.......................................... 29
4.2. Authorization................................................... 30
ARTICLE V CONDUCT OF BUSINESS PRIOR TO THE CLOSING.......................... 30
5.1. Conduct Prior to Closing........................................ 30
5.2. Consents and Approvals.......................................... 34
ARTICLE VI COMPLIANCE WITH FEDERAL SECURITIES LAWS.......................... 34
6.1. Management Contract; Proxy Statement............................ 34
6.2. Required Actions................................................ 35
6.3. Section 15(f)................................................... 35
ARTICLE VII COVENANTS....................................................... 36
7.1. Current Information............................................. 36
7.2. Access.......................................................... 37
7.3. Information..................................................... 37
7.4. Qualification of each Fund...................................... 38
7.5. Forms........................................................... 38
7.6. Exclusivity..................................................... 38
7.7. Taxes........................................................... 39
7.8. Waiver.......................................................... 39
7.9. Regulatory Matters.............................................. 40
7.10. Proxy Statement................................................. 40
7.11. Press Releases, Etc............................................. 41
7.12. Minority Stock.................................................. 41
7.13. Tax Cooperation................................................. 41
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7.14. Name Change..................................................... 41
ARTICLE VIII CONDITIONS..................................................... 42
8.1. Conditions to Each Party's Obligations to Consummate............ 42
8.2. Conditions to Obligation of Buyers to Consummate................ 43
8.3. Conditions to Obligation of MMA to Consummate................... 46
ARTICLE IX INDEMNIFICATION AND REMEDIES..................................... 48
9.1. No Waivers...................................................... 48
9.2. Indemnification................................................. 48
9.3. Claims Procedures............................................... 50
ARTICLE X TERMINATION....................................................... 52
10.1. Termination..................................................... 52
10.2. Effect of Termination and Abandonment........................... 53
ARTICLE XI GENERAL PROVISIONS............................................... 53
11.1. Survival of Representations, Warranties and Agreements.......... 53
11.2. Notices......................................................... 53
11.3. Counterparts.................................................... 54
11.4. Governing Law................................................... 54
11.5. Expenses........................................................ 55
11.6. Waiver, Amendment............................................... 55
11.7. Entire Agreement; No Third-Party Beneficiaries; Etc............. 56
11.8. Assignment...................................................... 56
11.9. Further Assurances.............................................. 56
11.10. Consent to Jurisdiction......................................... 56
11.11. Seller Representative........................................... 56
11.12. Title Insurance................................................. 58
11.13. Survey.......................................................... 58
11.14. Tenant Estoppel Certificates.................................... 59
11.15. Non-Disturbance Agreement....................................... 59
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Schedules
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Schedule 1.1 Capitalization, Beneficial Ownership and Allocations
Schedule 3.1 Subsidiary Organization; Foreign Qualifications
Schedule 3.2(b) Noncontravention
Schedule 3.3 Capitalization; Beneficial Ownership
Schedule 3.7 Contracts and Agreements
Schedule 3.7(c) Consent for Assignment
Schedule 3.9(a) Real Estate
Schedule 3.9(b) Assets
Schedule 3.9(c) Compliance with Environmental Laws
Schedule 3.10 Assets Under Management; Mutual Fund Agreements
Schedule 3.11 Financial Statements
Schedule 3.12 Taxes
Schedule 3.13 Loans; Accounts Receivable
Schedule 3.14 Absence of Certain Changes
Schedule 3.16 Banking Relations
Schedule 3.18 Litigation
Schedule 3.19 Regulatory Agreements
Schedule 3.20 Insurance
Schedule 3.22 Transactions with Interested Persons
Schedule 3.23 Employee Benefit Programs
Schedule 3.24(a) Officers and Employees
Schedule 3.24(b) Employment Arrangements
Schedule 3.28(a) Compliance with Laws
Schedule 3.28(c) Restrictions
Schedule 3.28(h) Fund Litigation
Schedule 3.28(i) Compliance with Laws
Schedule 3.29(h) Accounting Policies
Schedule 4.1(b) Noncontravention
Schedule 6.2 Fund Service Agreements
Schedule 7.5 Broker-Dealer Registration
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Exhibits
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Exhibit 1.2(a) Form of Assignment of General Partnership Interest
Exhibit 1.2(b) Form of Assignment of Limited Partnership Interest
Exhibit 1.4 Form of Note, Escrow Agreement and Deed of Trust
Exhibit 6.1(a) Form of New Management Contract
Exhibit 6.2 Form of Fund Service Agreements
Exhibit 8.2(c) Form of Consulting and Noncompetition Agreement
Exhibit 8.2(f) Form of Opinion of Counsel to MMA and Sellers
Exhibit 8.2(g) Form of Opinion of Counsel to each Fund
Exhibit 8.3(e) Form of Opinion of Counsel to Buyers
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PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (the "Agreement"), for (i) all of the
outstanding interests ("Interests") of Money Management Associates, L.P., a
District of Columbia limited partnership ("MMA") and the controlling shareholder
of Rushmore Trust and Savings, FSB, a federal stock savings bank ("RTS"), and
(ii) all of the outstanding capital stock of RTS (the "Stock") not owned by MMA
(the "Minority Stock"), made this 20th day of October, 1999, by and among MMA,
RTS, Money Management Associates, Inc., a Delaware corporation ("MMA Buyer"),
Money Management Associates (LP), Inc., a Delaware corporation ("LP Buyer" and,
together with MMA Buyer, the "Buyers"), ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇, the sole general
partner of MMA (the "General Partner") and the owner of all of the general
partnership interest in MMA (the "General Partnership Interest"), the owners of
all of the outstanding limited partnership interests of MMA (the "Limited
Partnership Interests") named on Schedule 1.1 (collectively, the "Limited
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Partners" and, each individually a "Limited Partner" and, together with the
General Partner, the "Sellers" and each individually a "Seller") and, solely for
purposes of Article II and Sections 1.4, 10.2 and 11.5, Friedman, Billings,
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▇▇▇▇▇▇ Group, Inc., a Virginia corporation ("FBR").
Background
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A. MMA is registered under the Investment Advisers Act of 1940, as
amended (the "Advisers Act"), as an investment adviser and (i) provides or
procures advisory and/or other compliance and administrative services to The
Rushmore Fund, Inc., Fund for Tax-Free Investors, Inc., Fund for Government
Investors and American Gas Index Fund, Inc. (each a "Fund" and collectively, the
"Funds"), each of which is a registered investment company under the Investment
Company Act of 1940, as amended (the "Investment Company Act"); and (ii)
provides or procures compliance and administrative services for the ▇▇▇▇▇▇▇▇▇-
▇▇▇▇▇▇▇▇ Trust. MMA currently serves as investment adviser to the Funds
pursuant to management contracts between the Funds and MMA, as listed on
Schedule 3.10 (the "Management Contracts").
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B. MMA is a savings and loan holding company and is the controlling
shareholder of RTS.
C. RTS, a federal savings bank, provides, among other things,
directly or indirectly, transfer agency, shareholder servicing and custodial and
portfolio accounting services to the Funds, the ▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇ Trust,
Navellier Series Fund and Navellier Performance Funds, and trust and accounting
services to other entities.
D. Each of MMA and RTS is registered as a transfer agent under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
▇. ▇▇▇▇▇▇▇ are the owners of all of the Interests, of which ▇▇▇▇▇▇ ▇.
▇'▇▇▇▇▇▇, owns 100% of the General Partnership Interest and ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇'▇▇▇▇▇▇ and
▇▇▇▇ ▇▇▇▇▇▇ (the "Principal Sellers") own, in the aggregate,
90.0% of the Limited Partnership Interests. MMA Buyer desires to purchase from
the General Partner, and the General Partner desires to sell to MMA Buyer, 100%
of the General Partnership Interest, and LP Buyer desires to purchase from the
Limited Partners, and the Limited Partners desire to sell to LP Buyer, 100% of
the Limited Partnership Interests, all upon the terms and conditions set forth
in this Agreement. MMA is the owner of all of the Stock other than the Minority
Stock. The General Partner and certain other stockholders (the "Additional
Stockholders" and, together with MMA and the General Partner, the
"Stockholders") are the beneficial and record owners of all of the Minority
Stock. MMA Buyer desires to purchase the Minority Stock upon the terms and
conditions set forth in this Agreement.
F. MMA is the owner of all of the issued and outstanding capital
stock (the "Subsidiary Stock") of Rushmore Investment Brokers, Inc., a Delaware
corporation ("RIB") and Rushmore Services, Inc., a Maryland corporation ("RSI"
and together with RIB, the "Subsidiaries").
G. FBR has agreed to become a party to this Agreement for the limited
purposes of making certain representations and warranties and agreeing to
unconditionally guarantee (i) timely reimbursement to MMA, or direct payment, of
the MMA Transaction Expenses (as hereinafter defined), (ii) payment of MMA
Liquidated Damages (as hereinafter defined) to MMA, if any, from MMA Buyer
pursuant to this Agreement, and (iii) payment and performance of the Note (as
hereinafter defined).
Terms
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In consideration of the premises and the mutual promises hereinafter
set forth and intending to be legally bound, the parties hereby agree as
follows:
ARTICLE I
SALE AND PURCHASE OF INTERESTS AND STOCK
1.1. Sale and Purchase.
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Subject to the terms and conditions set forth in this Agreement, at
the closing of the transactions contemplated by this Agreement (the "Closing"),
(a) the General Partner shall sell, transfer, assign and deliver to MMA Buyer,
and MMA Buyer shall purchase from the General Partner, the General Partnership
Interest set forth on Schedule 1.1, free and clear of any liens, security
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interests, charges, encumbrances, claims, pledges, equities, options,
restrictions, assignments or other transfers of rights or obligations thereunder
("Liens"), (b) the Limited Partners shall sell, transfer, assign and deliver to
LP Buyer, and LP Buyer shall purchase from the Limited Partners, the Limited
Partnership Interests set forth on Schedule 1.1, which together with the General
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Partnership Interest represent all of the outstanding Interests, free and clear
of any Liens and (c) the General Partner shall sell, transfer, assign and
deliver to MMA Buyer, and
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MMA Buyer shall purchase from the General Partner, the Minority Stock owned by
the General Partner as set forth on Schedule 1.1, representing all of the
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outstanding Stock other than the Stock owned beneficially and of record by MMA
and the Additional Stockholders, free and clear of any Liens. The Stock owned by
MMA is also set forth on Schedule 1.1 and is owned beneficially and of record by
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MMA, free and clear of any Liens.
1.2. Time and Form of Delivery
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The Sellers shall transfer, assign and deliver the Interests by
delivering to MMA Buyer and LP Buyer, respectively, at the Closing, duly
executed Assignments of Partnership Interest in the forms of Exhibit 1.2(a)
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(General Partnership Interest) and Exhibit 1.2(b) (Limited Partnership
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Interests) and such other appropriate instruments of transfer reasonably
satisfactory in form and substance to MMA Buyer and LP Buyer (as the case may
be). The General Partner and, to the extent applicable, the Additional
Stockholders shall transfer, assign and deliver the Minority Stock by delivering
to MMA Buyer at the Closing duly executed certificates representing the Minority
Stock accompanied by stock powers duly endorsed in blank or duly executed
instruments of transfer and such other appropriate instruments of transfer
reasonably satisfactory in form and substance to MMA Buyer.
1.3. Pre-Closing Liquidation and Distributions; Closing.
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(a) Prior to the Closing, (i) MMA shall liquidate and dissolve RSI and
distribute to MMA all of RSI's then current assets including any tax
benefit relating to the net operating loss carryovers of RSI, (ii) RIB
shall distribute all of its then current assets to MMA other than $5,000 in
cash, and (iii) MMA shall distribute all of its then current assets
(including those received from RSI and RIB) to Sellers which then current
assets shall consist solely of cash, notes and accounts receivable and the
desks and computers then used by the General Partner, ▇▇▇▇▇▇ ▇'▇▇▇▇▇▇ and
▇▇▇▇ ▇▇▇▇▇▇; provided, however, no claims or rights against MMA, RTS or RIB
shall be distributed hereunder. Other than the current assets described in
the preceding sentence, Buyers shall acquire all right, title and interest
in and to all of material tangible and intangible assets of MMA used in the
business of MMA, RTS and RIB as currently conducted.
(b) The Closing shall take place at the offices of Dechert Price & ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇▇▇▇, ▇.▇. at 10:00 a.m., Eastern time, on the
first business day of the calendar month next following the satisfaction or
waiver of the conditions set forth in Article VIII or at such other time as
the parties may agree (the "Closing Date"). The Closing shall be deemed
effective as of 9:00 a.m., Eastern time, on the Closing Date.
1.4. Purchase Price.
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(a) On the Closing Date, Sellers shall sell, transfer and deliver to MMA Buyer
and LP Buyer, and MMA Buyer and LP Buyer, shall purchase from Sellers the
General Partnership Interest and the Limited Partnership Interests,
respectively, in exchange for an amount in immediately available funds
equal to Seventeen Million Five Hundred Thousand
3
Dollars ($17,500,000) less the book value of the Minority Stock (the
"Minority Stock Purchase Price") as of the day immediately preceding the
Closing Date as reasonably determined by the parties based on the current
book value of the Minority Stock of $ , adjusted to reflect any
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changes occurring in the ordinary course of business (the "Initial
Payment") and an installment note of MMA Buyer (the "Note," together with
the Initial Payment, the "Purchase Price for the Interests") and
unconditionally guaranteed as to payment and performance by FBR in the
principal amount of Nine Million Seven Hundred Thousand Dollars
($9,700,000) and secured by all of the Stock pursuant to an escrow
agreement to be entered into among MMA Buyer, MMA, the Sellers and PNC
Bank, National Association, as escrow agent (the "Escrow Agreement") and by
a first indemnity deed of trust on land and improvements owned by RTS and
known as 4916, 4918, 4920 and ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ (the "Deed
of Trust"). Each of the Note, the Pledge and Security Agreement and the
Deed of Trust shall be in the form attached as Exhibit 1.4.
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(b) On the Closing Date, the General Partner and the Additional Stockholders,
to the extent applicable, shall sell, transfer and deliver to MMA Buyer,
and MMA Buyer shall purchase from the General Partner and the Additional
Stockholders, to the extent applicable, the Minority Stock, in exchange for
the Minority Stock Purchase Price in immediately available funds.
(c) On the Closing Date, the Purchase Price for the Interests shall be
allocated among the Sellers as set forth in Schedule 1.1.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF BUYERS AND FBR
Buyers and FBR, jointly and severally, represent and warrant to MMA and
Sellers as follows:
2.1. Organization and Authority.
--------------------------
Each of the Buyers and FBR is duly organized under the laws of and in
good standing in the jurisdiction of its incorporation, and has (i) all
necessary power, right and authority to carry out its obligations under this
Agreement, to own its properties and assets, and to conduct its business, and
(ii) all necessary governmental authorizations to own or lease its properties
and assets and to conduct its business as currently conducted.
2.2. Authorization.
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(a) This Agreement and each document, agreement and instrument to be executed
by Buyers or FBR (as the case may be) pursuant to or as contemplated by
this Agreement, has been duly authorized, by Buyers or FBR (as the case may
be) and no further proceedings on the part of Buyers or FBR (as the case
may be) are necessary to authorize this Agreement and the transactions
contemplated hereby and thereby. This Agreement and each
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document, agreement and instrument to be executed by Buyers or FBR (as the
case may be) pursuant to or as contemplated by this Agreement, when so
executed and delivered, shall constitute the legal, valid and binding
obligation of each Buyer or FBR (as the case may be) enforceable against it
in accordance with its respective terms.
(b) Neither the execution, delivery and performance of this Agreement and each
document, agreement and instrument to be executed by each Buyer or FBR (as
the case may be) pursuant to or as contemplated by this Agreement nor the
consummation by each Buyer or FBR of the transactions contemplated hereby
and thereby, will (i) violate, conflict with, or result in a breach of any
provisions of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under, or the creation of any Lien
upon any of the properties or assets of any Buyer or FBR under any of the
terms, conditions or provisions of (x) the organizational documents or
bylaws of any Buyer or FBR or (y) any note, bond, mortgage, indenture, deed
of trust, license, lease, agreement or other instrument or obligation to
which any Buyer or FBR may be bound, or to which any Buyer or FBR or the
properties or assets of any Buyer or FBR may be subject, or (ii) violate
any judgment, ruling, order, writ, injunction, decree, statute, rule or
regulation applicable to any Buyer or FBR or to any of the properties or
assets of any Buyer or FBR.
(c) Except as set forth in Sections 6.1 and 6.2 or to, with or of the OTS or
--------------------
other banking or regulatory authority, no notice to, filing with,
authorization of, exemption by, or consent or approval of, any regulatory
authority or other person is necessary for the consummation by Buyers or
FBR of the transactions contemplated by this Agreement.
2.3. Accuracy of Representations and Documents.
-----------------------------------------
No representation, warranty or certification made by or on behalf of
Buyers or FBR in this Agreement or any certificate provided for under this
Agreement is false or misleading in any material respect or contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained herein or therein not misleading.
2.4. Brokers and Finders.
-------------------
None of Buyers or FBR or any of their respective officers, directors or
employees has employed any broker or finder or incurred any liability for any
financial advisory fees, brokerage fees, commissions or finder's fees, and no
broker or finder has acted, directly or indirectly, for Buyers or FBR (or any of
their respective officers, directors or employees) in connection with this
Agreement or the transactions contemplated hereby.
2.5. Litigation and Other Proceedings.
--------------------------------
There is no litigation or action, suit, proceeding or investigation at
law or in equity pending or, to the knowledge of Buyers and FBR, threatened in
any court or before or by any federal, state, municipal or other governmental
department, commission, bureau, board,
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agency or instrumentality, regulatory or self-regulatory body, domestic or
foreign (a "Governmental Authority") or before any arbitrator, by or against any
Buyer or FBR relating to their activities, or any event, circumstance or
condition (i) affecting any Buyer or FBR which would prevent the consummation of
the transactions contemplated by this Agreement (a "Buyer Material Adverse
Effect"), or (ii) which would prevent or prohibit MMA Buyer through MMA or other
appropriately registered entity from acting as an investment adviser to each
Fund.
2.6. Certain Information Provided by Buyers.
---------------------------------------
(a) The information supplied by Buyers that is included in (i) the materials
provided to the Board of Directors/Trustees of each Fund in connection with
the approvals described in Article VI, and (ii) the proxy solicitation
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materials to be distributed to the shareholders of each Fund in connection
with the approvals described in Article VI, is complete in all material
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respects and does not contain (at the time it is distributed, filed or
provided, as the case may be) any statement which, at the time and in the
light of the circumstances under which it is made, is false or misleading
with respect to any material fact, and will not omit to state any material
fact necessary in order to make the statements therein not false or
misleading or (with respect to information supplied by Buyers and included
in proxy statements) necessary to correct any statement or any earlier
communication with respect to the solicitation of a proxy for the same
meeting or subject matter which has become false or misleading.
(b) The information supplied by Buyers or FBR that is included in any
application or notice to or filing with the OTS or other banking authority
satisfies the requirements of Sections 5(q) and 10 of the Home Owners' Loan
Act and such materials and information are complete in all material
respects and do not contain (at the time distributed or filed, as the case
may be) any statement which, at the time and in the light of the
circumstances under which it is made, is false or misleading with respect
to any material fact, and will not omit to state any material fact
necessary in order to make the statements therein not false or misleading.
2.7. No Unfair Burden.
----------------
In connection with the transactions contemplated by this Agreement,
none of Buyers or any "interested person" (as such term is defined in the
Investment Company Act) of Buyers has imposed and Buyers and their "interested
persons" do not intend to, directly or indirectly, impose, an unfair burden on
any of the Funds as a result of any such transactions, or as a result of any
express or implied terms, conditions, or understandings applicable to any such
transactions within the meaning of Section 15(f) of the Investment Company Act.
2.8. Financial Ability; Regulatory Matters. The Buyers have, or FBR will
-------------------------------------
cause the Buyers to timely have, sufficient cash to fund the Initial Payment and
the Minority Stock Purchase Price in immediately available funds at the Closing.
As of the date hereof, none of Buyers or FBR is aware of any reason that any
approvals contemplated by Section 8.1(a) will not be received on a basis
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consistent with transactions of a similar nature or will be received subject to
the imposition of any non-standard condition or requirement of any non-standard
commitment
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that is unduly burdensome or any event, circumstance or condition which would
prevent or prohibit MMA Buyer through MMA or other appropriately registered
entity from acting as an investment adviser to each Fund.
2.9. No Other Representations or Warranties.
--------------------------------------
None of Buyers or FBR makes any representations or warranties to MMA
and Sellers other than as set forth above in this Article II.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MMA, RTS AND PRINCIPAL SELLERS
MMA, RTS and Principal Sellers, jointly and severally, represent and
warrant to Buyers and FBR as follows:
3.1. Organization and Authority.
--------------------------
MMA is duly organized as a limited partnership and in good standing
under the laws of the District of Columbia, is duly registered as a savings and
loan holding company of RTS and is in compliance in all material respects with
all applicable rules and regulations of the OTS. RTS is duly organized as a
federal stock savings bank and is in existence under the laws of the United
States of America. RTS is a member in good standing at the Federal Home Loan
Bank of Atlanta, a qualified thrift lender in accordance with Section 10(m) of
the Home Owners' Loan Act, an insured depository institution under the Federal
Deposit Insurance Act and has received OTS approval under Section 5(q) of the
Home Owners' Loan Act to engage in each fiduciary activity in which it currently
engages. Each of the Subsidiaries is duly organized as a corporation and in
good standing under the laws of the jurisdiction of its incorporation and such
jurisdictions are listed on Schedule 3.1. Each of MMA and RTS has (i) all
------------
necessary power, right and authority to enter into and carry out its obligations
under this Agreement, to own or lease its properties and assets and to conduct
its business, and (ii) all necessary governmental authorizations to own or lease
its properties and assets and to conduct its business as currently conducted.
Each of the Subsidiaries has all necessary power, right and authority, and all
necessary governmental authorizations, to own or lease its properties and assets
and to conduct its business as currently conducted except where the failure to
have any governmental authorizations would not have an MMA Material Adverse
Effect. None of MMA, RTS or the Subsidiaries is required to qualify to do
business in any state or foreign jurisdiction where not already so qualified and
such jurisdictions are listed on Schedule 3.1 except where the failure to be so
------------
qualified would not have an MMA Material Adverse Effect.
3.2. Authorization.
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(a) This Agreement and each document, agreement and instrument to be executed
by MMA or RTS (as the case may be) pursuant to or as contemplated by this
Agreement, has been duly authorized by MMA or RTS (as the case may be) and
no further
7
proceedings on the part of MMA or RTS (as the case may be) are necessary to
authorize this Agreement and the transactions contemplated hereby. This
Agreement and each document, agreement and instrument to be executed by MMA
or RTS (as the case may be) pursuant to or as contemplated by this
Agreement, when so executed and delivered, shall constitute the legal,
valid and binding obligation of MMA or RTS (as the case may be),
enforceable against it in accordance with its terms.
(b) Neither the execution, delivery and performance of this Agreement and each
document, agreement and instrument to be executed by MMA pursuant to or as
contemplated by this Agreement nor the consummation by MMA of the
transactions contemplated hereby, will (i) violate, conflict with, or
result in a breach of any provisions of, or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a
default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or
acceleration under, or the creation of any Lien upon any of the properties
or assets of MMA, RTS, any Subsidiary or the Funds under any of the terms,
conditions or provisions of (x) the organizational documents of MMA, RTS,
any Subsidiary or any Fund, or (y) except as set forth in Schedule 3.2(b),
---------------
the Mutual Fund Agreements or agreements terminable by it without premium
or penalty upon thirty days' or less written notice or that impose an
obligation for monetary expense in an amount equal to or less than $12,000
per year, any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which MMA, RTS, any
Subsidiary or any Fund is a party or by any of them may be bound, or to
which MMA, RTS, any Subsidiary or any Fund, or the properties or assets of
MMA, RTS, any Subsidiary or any Fund, may be subject, or (ii) violate any
judgment, ruling, order, writ, injunction, decree, statute, rule or
regulation applicable to MMA, RTS or any Fund or to any of the properties
or assets of MMA, RTS, any Subsidiary or any Fund.
(c) Except as contemplated by Schedule 3.7(c), Article VI or to, with or of the
--------------- ----------
OTS or other banking or regulatory authority, no notice to, filing with,
authorization of, exemption by, or consent or approval of, any regulatory
authority or other person is necessary for the consummation by MMA, RTS,
any Subsidiary or any Fund of the transactions contemplated by this
Agreement.
(d) Except as contemplated by Article VI, no action of the shareholders of any
----------
Fund is required in connection with the transactions contemplated by this
Agreement.
3.3. Capitalization of MMA; Beneficial Ownership.
-------------------------------------------
(a) Each Seller owns beneficially and of record the Interests set forth
opposite such Seller's name on Schedule 1.1. Each Seller is the only
------------
beneficial and record holder of the Interests set forth opposite such
Seller's name on Schedule 1.1. Any and all transfers of Limited
-------------
Partnership Interests to the Limited Partners were made with the consent of
the General Partner to the extent required by MMA's partnership agreement
(the "Partnership Agreement"). Except as set forth in Schedule 3.3, there
------------
are no outstanding options, warrants, rights, commitments, preemptive
rights or agreements of any kind for the issuance or sale of, or
outstanding securities
8
convertible into, any Interests. None of the Interests has been issued in
violation of any applicable federal and state securities or "blue-sky" laws
and regulations.
(b) Schedule 3.3 sets forth the authorized capital stock of RTS and the
------------
Subsidiaries including the number of shares of common stock, par value per
share, and the number of shares which are presently issued and outstanding
or held in its treasury. All of such outstanding shares have been duly
authorized, validly issued and are fully paid and nonassessable, were not
issued in violation of the terms of any agreement or other understanding
binding upon RTS and the Subsidiaries, and, to the knowledge of MMA and
Sellers, were issued in compliance with all applicable federal and state
securities or "blue-sky" laws and regulations. Except as set forth in
Schedule 3.3, there are no outstanding options, warrants, rights,
------------
commitments, preemptive rights or agreements of any kind for the issuance
or sale of, or outstanding securities convertible into, any Stock or
Subsidiary Stock.
(c) Each of MMA and the General Partner owns beneficially and of record the
Stock set forth opposite its or his name on Schedule 1.1 To the knowledge
------------
of MMA and Sellers, the Additional Stockholders own beneficially and of
record all of the Minority Stock that is not owned by the General Partner
and the number of shares of such Minority Stock owned by the Additional
Stockholders does not exceed 170 shares. The Stockholders are the only
beneficial and record holders of the Stock. MMA owns beneficially and of
record all of the Subsidiary Stock.
3.4. Accuracy of Representations and Documents.
-----------------------------------------
No representation, warranty or certification made by or on behalf of
MMA, RTS or the Principal Sellers in this Agreement, the Schedules hereto, or
any certificate provided for under this Agreement is false or misleading in any
material respect or contains any untrue statement of material fact or omits to
state a material fact necessary to make the statements contained herein or
therein not misleading.
3.5. Certain Information Provided by MMA, RTS, each Subsidiary and each
------------------------------------------------------------------
Fund.
----
(a) The information supplied by MMA, RIB, RTS and each Fund (as the case may
be) that is included in (i) the proxy solicitation materials to be
distributed to the shareholders of each Fund in connection with the
approvals described in Article VI, and (ii) Forms ADV, ▇▇▇-▇▇▇, ▇▇, ▇▇-▇▇▇,
----------
TA-1 and TA-Y2K of MMA or RIB (as the case may be), and concerning MMA and
its representatives and beneficial owners, satisfy in all material respects
the requirements of Section 14 of the Exchange Act and the regulations
thereunder, Sections 15 and 20 of the Investment Company Act and the
regulations thereunder, and such Forms ADV, ▇▇▇-▇▇▇, ▇▇, ▇▇-▇▇▇, TA-1 and
TA-Y2K and such materials and information are and will be complete in all
material respects and do not contain (at the time distributed or filed, as
the case may be) any statement which, at the time and in the light of the
circumstances under which it is made, is false or misleading with respect
to any material fact, and will not omit to state any material fact
necessary in order to make the statements therein not false or misleading
or (with respect to information supplied by MMA, RTS, the Subsidiaries and
each
9
Fund and included in proxy statements) necessary to correct any statement
or any earlier communication with respect to the solicitation of a proxy
for the same meeting or subject matter which has become false or
misleading.
(b) The information supplied by MMA and RTS that is included in any application
or notice to or filing with the OTS or other banking authority satisfies
the requirements of Sections 5(q) and 10 of the Home Owners' Loan Act and
such materials and information are complete in all material respects and do
not contain (at the time distributed or filed, as the case may be) any
statement which, at the time and in the light of the circumstances under
which it is made, is false or misleading with respect to any material fact,
and will not omit to state any material fact necessary in order to make the
statements therein not false or misleading.
3.6. Brokers and Finders.
-------------------
None of MMA, RTS, the Subsidiaries or the Sellers has employed any
broker or finder or incurred any liability for any financial advisory fees,
brokerage fees, commissions or finder's fees, and no broker or finder has acted,
directly or indirectly, for MMA, RTS, any Subsidiary (or any of their
representatives or employees) or Sellers in connection with this Agreement or
the transactions contemplated hereby.
3.7. Contracts.
---------
(a) Other than the Mutual Fund Agreements (including the Management Contracts),
the Partnership Agreement, the real estate leases for office space in the
property located at 4916, 4918, 4920 and ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇, the deposit accounts and Federal Home Loan Bank advances of RTS, and
the other agreements described on Schedule 3.7 (with copies of such other
------------
agreements attached thereto), none of MMA, RTS or any of the Subsidiaries
is a party to any material agreement that is not terminable by it without
penalty or premium upon thirty days' or less written notice (other than the
payment of severance, accrued vacation and accrued sick pay upon
termination of an employee's service consistent with past practices). For
purposes hereof, a "material agreement" means any agreement, contract,
arrangement, commitment or understanding that (i) imposes an obligation on
MMA, RTS or any Subsidiary for a monetary expense in excess of $12,000 per
year, (ii) imposes an obligation on MMA, RTS or any Subsidiary to supply
goods, services, surety or warranty, (iii) limits the freedom of MMA, RTS
or any Subsidiary to compete either in any line of business or with any
person or entity, (iv) was not entered into in the ordinary course of
business consistent with past practice or (v) is a "material contract"
within the meaning of Item 601(b)(10) of Regulation S-K of the Securities
and Exchange Commission ("SEC").
(b) Except as set forth on Schedule 3.7, RTS is not a party to, bound by or
------------
subject to any agreement, contract, arrangement, commitment or
understanding that (i) limits the freedom of RTS to engage or compete
either in any line of business permitted by a federal savings bank or with
any person or entity, or (ii) provides any employee or consultant with the
right to continue his or her services or to the payment of severance upon
termination of
10
employment (other than severance generally available consistent with
historical practices of RTS applied on a uniform basis or as set forth in
RTS' current employee handbook or manual).
(c) Other than the Mutual Fund Agreements (including the Management Contracts)
and agreements terminable by it without premium or penalty upon thirty
days' or less written notice or that impose an obligation for monetary
expense in an amount equal to or less than $12,000 per year, any contract,
agreement, lease, arrangement or understanding which requires the consent
of a party in the event of an assignment is listed on Schedule 3.7(c).
---------------
3.8. No Defaults under Contracts or Agreements.
-----------------------------------------
None of MMA, RTS, the Subsidiaries or the Funds is in default in any
material respect under any lease, contract, mortgage, promissory note, deed of
trust, loan, guaranty or other commitment or arrangement to which such person is
a party or by which it is bound, and to the knowledge of MMA and Sellers, no
other party to any of the foregoing is in default in any material respect
thereunder and, except as set forth on Schedule 3.2(b), no event has occurred or
---------------
condition exists that with notice or the passage of time would constitute such a
default.
3.9. Real Estate and Assets.
----------------------
(a) (i) Schedule 3.9(a) sets forth a list of all of the real estate owned by
---------------
MMA, RTS or any Subsidiary (such real estate, together with all
appurtenant easements and other appurtenances thereto and with all
buildings, structures and other improvements thereon and all fixtures
attached thereto or forming a part thereof, is collectively referred
to herein as the "Owned Real Estate"). Except as set forth on
Schedule 3.9(a), MMA, RTS and each Subsidiary has good, valid,
---------------
marketable and indefeasible fee simple title to the Owned Real Estate
owned by it, free and clear of all Liens, encroachments (by or onto
the Owned Real Estate), covenants, easements, mortgages, deeds of
trust, rights of first refusal, options, leases and subleases,
licenses and title defects of any nature (collectively, "Real Estate
Encumbrances"), except for the following (collectively, "Permitted
Exceptions"): (x) the Real Estate Encumbrances, listed on Schedule B-
-----------
II to Commitment for Title Insurance number 8163-11 issued by
--
Fidelity National Title Insurance Company of New York dated August
31, 1999, a copy of which attached to and hereby made a part of
Schedule 3.9(a), none of which materially interferes with the use of
---------------
the affected property or the conduct of the business therein as
currently conducted, (y) the leases (the "Lessor Leases") listed on
Schedule 3.9(a), and (z) liens for ad valorem real property taxes and
---------------
assessments not yet due and payable. The water, gas, electricity and
other utilities serving the Owned Real Estate have been and are
currently adequate to service the normal operations conducted thereon
consistent with past practice. The Sellers have made available to MMA
Buyer true, correct and complete copies of all (i) title reports,
title insurance policies and commitments therefore, (ii) surveys, and
(iii) licenses, certificates of occupancy, plans, specifications and
permits, pertaining to the Owned Real Estate that are in the
possession or control of any of MMA, RTS or any Subsidiary.
(ii) MMA, RTS or a Subsidiary is in actual, exclusive possession of the
Owned Real Estate subject only to the rights of the tenants under the
Lessor Leases. True,
11
complete and accurate copies of all of the Lessor Leases have been
made available to MMA Buyer, each of the Lessor Leases is in full
force and effect and none of the Lessor Leases has been amended or
otherwise modified except as set forth in Schedule 3.9(a). No tenant
---------------
or other person has any right other than as set forth in the Lessor
Leases and the other Permitted Exceptions. All tenant improvement and
similar work to be performed under any of the Lessor Leases by MMA,
RTS or any Subsidiary or to be performed by any other person but paid
for by any of them, has been fully performed and paid for. None of
MMA, RTS or any Subsidiary is, and to knowledge of MMA and Sellers,
no other party to any Lessor Lease is, in default under any Lessor
Lease and no event has occurred which, with the giving of notice, the
passage of time or both would constitute such a default. All security
deposits required under the Lessor Leases have been posted and are
held by RTS in accordance with the Lessor Leases and are properly
reflected on the financial books and records of RTS.
(iii) All of the real estate leased by MMA, RTS and any Subsidiary is
identified in Schedule 3.9(a) (the "Leased Real Estate"). All leases
---------------
of the Leased Real Estate (collectively, the "Real Estate Leases")
are identified in Schedule 3.9(a), and true and complete copies
---------------
thereof have been made available to MMA Buyer. Each of the Real
Estate Leases has been duly executed by the parties thereto and is in
full force and effect. None of MMA, RTS or the Subsidiaries is in
default in any material respect under any of the Real Estate Leases,
nor, except as set forth in Schedule 3.2(b), has any event occurred
---------------
which, with the giving of notice or the passage of time, or both,
would give rise to such a default. To the knowledge of MMA, RTS and
Sellers, the other party to each of the Real Estate Leases is not in
default in any material respect thereunder and there is no event
which, with the giving of notice or the passage of time, or both,
would give rise to such a default.
(iv) Except as set forth in Schedule 3.9(a), MMA, RTS or a Subsidiary is
---------------
in actual, exclusive possession of the Leased Real Estate and has
good and valid leasehold title thereto, free and clear of all Real
Estate Encumbrances, except Permitted Exceptions and Real Estate
Encumbrances upon landlord's fee estate.
(v) Except as set forth on Schedule 3.9(a), during the past seven years,
---------------
none of MMA, RTS or any Subsidiary has received any written or, to
the knowledge of MMA and Sellers, oral notice or order from any
Governmental Authority, insurance company which has issued a policy
with respect to any of the Owned or Leased Real Estate or any board
of fire underwriters or other body performing similar functions or
any other person which (a) relates to or alleges a violation of or
nonconformity with any zoning, building, safety, subdivision,
wetlands or other similar law, code, rule, regulation, ordinance,
permit, license, certificate, covenant, restriction or condition with
respect to any of the Owned or Leased Real Estate, or (b) requests
the performance of any material repairs, alterations or other work
that have not yet been cured or performed, as applicable. During the
past seven years, none of MMA, RTS or any Subsidiary has received any
written notice from any Governmental Authority or other person of any
condemnation action, eminent domain proceeding or other similar
proceeding concerning any of the Owned or Leased Real Estate. To the
knowledge of MMA, RTS and the Sellers, there is no pending
condemnation, expropriation, eminent domain, or similar proceeding
affecting any
12
of the Owned or Leased Real Estate and, to the knowledge of MMA, RTS
and Sellers, no such action, proceeding or litigation is threatened.
All of the buildings and improvements situated upon the Owned or
Leased Real Estate are operable and in good condition and repair,
subject to ordinary wear and tear and to the items set forth on
Schedule 3.9(a).
---------------
(vi) The Owned and Leased Real Estate include all of the real estate used
in, and is the only real estate necessary for, the conduct of the
business of MMA, RTS and the Subsidiaries as currently conducted.
(b) Except as set forth in Schedule 3.9(b), as of the date hereof, each of MMA,
---------------
RTS and each Subsidiary owns all of its material fixed assets, free and
clear of any Liens and such fixed assets include all of the fixed assets
used in, and are all of the fixed assets necessary for, the conduct of the
respective businesses of MMA, RTS and the Subsidiaries as currently
conducted.
(c) Except as set forth in Schedule 3.9(c), there are no legal, administrative,
---------------
arbitral or other proceedings, claims, actions, causes of action, private
or governmental investigations or remediation activities of any nature
seeking to impose, or that reasonably could be expected to result in the
imposition, on MMA, RTS or any Subsidiary of any liability or obligation
arising under common law or statutory standards or requirements relating to
environmental protection, human health or safety or under any local, state
or federal environmental statute, regulation or ordinance, including,
without limitation, the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended (collectively, the "Environmental
Laws"), pending or, to the knowledge of MMA and Sellers, threatened,
against MMA, RTS or any Subsidiary, which liability or obligation would
have or would reasonably be expected to have an MMA Material Adverse Effect
(as hereinafter defined). To the knowledge of MMA and Sellers, there is no
reasonable basis for any such proceeding, claim, action or governmental
investigation that would impose any liability or obligation that would have
or would reasonably be expected to have an MMA Material Adverse Effect. To
the knowledge of MMA and Sellers, during or prior to the period of (i)
ownership or operation of any of current or former properties by MMA, RTS
or any Subsidiary, (ii) participation in the management of any property by
MMA, RTS or any Subsidiary, or (iii) holding of a security interest or
other interest in any property by MMA, RTS or any Subsidiary, there were no
releases or threatened releases of hazardous, toxic, radioactive or
dangerous materials or other materials regulated under Environmental Laws,
in, on, under, from or affecting any such property which would reasonably
be expected to have an MMA Material Adverse Effect. Neither MMA, RTS nor
any Subsidiary is subject to any agreement, order, judgment, decree, letter
or memorandum by or with any court, Governmental Authority, arbitrator or
third party imposing any material liability or obligation pursuant to or
under any Environmental Law that would have or would reasonably be expected
to have an MMA Material Adverse Effect.
3.10. Assets Under Management.
-----------------------
The aggregate net assets under management by MMA ("Aggregate Net
Assets") and the aggregate management fees net of discounts, rebates, fee
reimbursements and waivers
13
collected by MMA ("Net Management Fees") for the periods ended December 31, 1998
and June 30, 1999, are accurately set forth in Schedule 3.10. Set forth in
--------------
Schedule 3.10 is a list as of December 31, 1998, June 30, 1999 and September 30,
-------------
1999, of all investment advisory agreements, administrative services agreements
and other service agreements, if any, to which MMA, RTS or a Subsidiary was a
party as of those dates (collectively, "Mutual Fund Agreements") setting forth
the name of the client under each such contract, the aggregate net assets
subject to each such contract, the fee schedule in effect with respect to each
such contract (and with respect to the list as of September 30, 1999, any
material adjustments to the effective fees made since June 30, 1999 (it being
understood and agreed that adjustments in excess of the lesser of 10% of the
effective fees or $100,000 are material)), the consent required for the
assignment by MMA, RTS or a Subsidiary of each such contract other than those
that by their express terms terminate upon assignment (which are so identified).
Except as set forth in Schedule 3.10 and expressly described thereon, there are
-------------
no contracts, arrangements or understandings pursuant to which MMA, RTS or a
Subsidiary has undertaken or agreed to limit, waive or reimburse any or all fees
or charges payable by any of the clients set forth in Schedule 3.10 or pursuant
to any of the contracts set forth in Schedule 3.10. Except as is set forth in
-------------
Schedule 3.10, as of the date hereof, no client of MMA, RTS or a Subsidiary has
-------------
provided any written notice to terminate or reduce its relationship with MMA,
RTS or a Subsidiary or adjust the fee schedule with respect to any contract in a
manner which would reduce the fee to MMA, RTS or a Subsidiary.
3.11. Financial Statements.
--------------------
(a) MMA has delivered to MMA Buyer the audited balance sheets of RTS at
December 31, 1997 and December 31, 1998, and audited statements of its
operations and cash flows for each of the two (2) years then ended, copies
of which are attached to Schedule 3.11 (the "1997 and 1998 RTS Financial
-------------
Statements"). The 1997 and 1998 RTS Financial Statements have been
prepared in accordance with generally accepted accounting principles
("GAAP"), applied consistently during the periods covered thereby, present
fairly, in all material respects, the financial position of RTS at the
dates of said statements and the results of its operations for the periods
covered thereby.
(b) Except for liabilities and obligations set forth in the balance sheet to
the 1998 RTS Financial Statements or the footnotes thereto and liabilities
and obligations incurred by RTS in the ordinary course of business since
December 31, 1998, as of the date hereof, RTS does not have any
liabilities of any nature, whether accrued, absolute, contingent or
otherwise, asserted or unasserted, known or unknown (including, without
limitation, liabilities as guarantor or otherwise with respect to
obligations of others, or liabilities for taxes due or then accrued or to
become due or contingent or potential liabilities) that are required to be
reflected in an audited balance sheet or notes thereto in accordance with
GAAP.
(c) As of the close of business on the day preceding the Closing Date, neither
MMA nor any of the Subsidiaries will have any liabilities or obligations,
absolute, contingent or otherwise, except for prospective obligations and
duties under the Real Estate Leases, the Mutual
14
Fund Agreements (including the Management Contracts), employment and
consulting arrangements entered into in connection with this Agreement, the
payment of compensation and benefits to employees for services on or after
the Closing Date, honoring accrued vacation and sick pay of the employees,
severance to employees who are terminated after Closing consistent with
past practices, accrued and/or unbilled MMA Transaction Expenses,
prospective obligations to reimburse RTS for services and overhead provided
by it or its employees to MMA or any Subsidiary consistent with current
practice, and obligations under contracts that are terminable on thirty
days' or less written notice without penalty or premium.
3.12. Taxes.
-----
(a) MMA, RTS and each Subsidiary has paid or caused to be paid all federal,
state, local, foreign, and other taxes, government fees or the like,
including, without limitation, income taxes, estimated taxes, alternative
minimum taxes, franchise taxes, capital stock taxes, unincorporated
business taxes, sales taxes, use taxes, ad valorem or value added taxes,
employment and payroll-related taxes, withholding taxes, property taxes
and transfer taxes, whether or not measured in whole or in part by net
income, and all deficiencies, or other additions to tax, interest, fines
and penalties (including, without limitation, all penalties relating to
information reporting) owed by it (collectively, "Taxes" and, each
individually, a "Tax"), required to be paid by it through the date hereof,
whether disputed or not. Unpaid Taxes of RTS are accrued quarterly on
their respective financial books and records in accordance with GAAP and
there are no unpaid Taxes of the Subsidiaries. All Taxes required to be
withheld by MMA, RTS or any Subsidiary including, but not limited to,
Taxes arising as a result of payments or allocations (including guaranteed
payments) to foreign persons or to employees of MMA, RTS or any Subsidiary
have been collected and withheld, and have either been paid to the
respective governmental agencies, set aside in accounts for such purpose,
or accrued, reserved against, and entered on the financial books and
records of MMA, RTS or the Subsidiaries (as the case may be).
(b) MMA, RTS and each Subsidiary has, in accordance with applicable law, filed
all federal, state, local and foreign Tax returns (including all schedules
thereto) required to be filed by it, and all such returns, to the
knowledge of MMA and Sellers, correctly and accurately set forth the
amount of any Taxes relating to the applicable period. No Seller has or
will, on a Tax return of the Seller, treat a partnership Tax item of MMA
in a manner inconsistent with the treatment of such item on a Tax return
of MMA. A list of all federal, state, local and foreign income Tax returns
filed with respect to MMA, RTS and each Subsidiary for taxable periods
ended on or after December 31, 1995, is set forth in Schedule 3.12, and
-------------
said Schedule indicates those returns that have been audited or subject to
administrative or judicial proceedings or currently are the subject of an
audit or administrative or judicial proceeding. For each taxable period of
MMA, RTS and each Subsidiary ended on or after December 31, 1995, MMA has
delivered to MMA Buyer correct and complete copies of all federal, state,
local and foreign income Tax returns, examination reports and statements
of deficiencies assessed against or agreed to by MMA, RTS and each
Subsidiary. Sellers will arrange for the preparation and timely filing of
the final partnership Tax returns for the final taxable year of MMA ending
on the
15
Closing Date (including any required Internal Revenue Service ("IRS") Form
8308) and supplying required tax information to MMA, any such filings
shall be complete and correct, and Sellers shall arrange for the timely
payment of any amounts shown or required to be shown as due thereon.
(c) Neither the IRS nor any other Governmental Authority responsible for the
imposition or collection of any Tax (a "Taxing Authority") is now
asserting or, to the knowledge of MMA and Sellers, threatening to assert
against MMA, RTS or any Subsidiary any deficiency or claim for additional
Taxes or to initiate any examination or proceedings with respect to any
partnership Tax items. No claim has ever been made by a Taxing Authority
in a jurisdiction where MMA, RTS or any Subsidiary does not file reports
and returns that any of them (or any of the Sellers, by reason of their
investment in MMA) is or may be subject to taxation by that jurisdiction.
There are no liens or security interests (unrecorded or recorded) on any
of the assets of MMA, RTS or any Subsidiary that arose in connection with
any failure (or alleged failure) by MMA, RTS, any Subsidiary or any of the
Sellers to pay any Taxes. None of MMA, RTS or any Subsidiary has ever
entered into a settlement or closing agreement with the IRS or any
comparable agreement with any other Taxing Authority.
(d) No extension of time with respect to any date on which a Tax return was or
is to be filed by MMA, RTS or any Subsidiary is currently in effect, and
no waiver or agreement by MMA, RTS or any Subsidiary is currently in
effect for an extension of time for the assessment or payment of any Taxes
or adjustment of any partnership Tax items.
(e) MMA has never been (nor has it ever had any liability for unpaid Taxes
because it once was) a member of an "affiliated group" (as defined in
Section 1504(a) of the Internal Revenue Code of 1986, as amended (the
"Code")). None of RTS or the Subsidiaries has ever been (nor has RTS or
the Subsidiaries ever had any liability for unpaid Taxes because it once
was) a member of an "affiliated group" (as defined in Section 1504(a) of
the Code. None of MMA, RTS or the Subsidiaries has ever filed, nor have
they ever been required to file, a consolidated, combined or unitary tax
return with any other entity, other than tax returns with each other. None
of MMA, RTS or the Subsidiaries is a party to any tax sharing agreement.
3.13. Loans; Accounts Receivable.
--------------------------
All of the loans extended by RTS are listed on Schedule 3.13 and are
-------------
valid and enforceable in accordance with their respective terms and subject to
no setoff or counterclaim. None of MMA, RTS and each Subsidiary has any
accounts receivable or loans receivable from any person, firm or corporation or
other entity which is affiliated with MMA, RTS or any Subsidiary or from any
director, officer or employee of MMA, RTS or any Subsidiary except as disclosed
in Schedule 3.13. Nothing in this Section 3.13 is intended as a representation
------------- ------------
or warranty as to the creditworthiness of any borrower or guarantor or the
current value or collectibility of any loan.
16
3.14. Absence of Certain Changes.
--------------------------
Except as disclosed in Schedule 3.14, since December 31, 1998 to the
-------------
date hereof, there has not been:
(a) with respect to MMA, RTS, any Subsidiary, any Fund or the ▇▇▇▇▇▇▇▇▇-
▇▇▇▇▇▇▇▇ Trust, any event, circumstance or condition (A) that has caused
or could reasonably be expected to cause a material adverse effect
(whether taken individually or in the aggregate with all other such
effects) on the financial condition or business or results of operations
of MMA, RTS, any Subsidiary or any Fund, taken as a whole, or (B)
affecting MMA, RTS, any Subsidiary or any Fund which would prevent the
consummation of the transactions contemplated by this Agreement or have a
material adverse effect on the assets of MMA, RTS, each Subsidiary or each
Fund, taken as a whole, except for (i) conditions, events or circumstances
generally affecting the economy as a whole or (ii) any decrease in
Aggregate Net Assets from market fluctuations, redemptions or otherwise
(an "MMA Material Adverse Effect");
(b) any amendment or termination or, to the knowledge of MMA and Sellers,
proposed or threatened amendment or termination, whether written or oral,
of any Mutual Fund Agreement, Partnership Agreement, Real Estate Lease or
any agreement listed in Schedule 3.7;
------------
(c) any material claim placed on any of the properties or assets of MMA, RTS
or any Subsidiary;
(d) any cancellation of any material debt or material claim owing to, or
waiver of any material right of, MMA, RTS or any Subsidiary;
(e) any purchase, sale or other disposition, or any agreement or other
arrangement for the purchase, sale or other disposition, of any of the
material properties or assets of MMA, RTS or any Subsidiary other than in
the ordinary course of business consistent with past practices;
(f) any material damage, destruction or loss, whether or not covered by
insurance, to the assets of MMA, RTS or any Subsidiary;
(g) any declaration, setting aside or payment of any dividend or distribution
by RTS or the making of any other distribution in respect of Stock or any
direct or indirect redemption, purchase or other acquisition of the
Interests, Stock or Subsidiary Stock other than distributions and
dividends made by RTS in the ordinary course and consistent with past
practices;
(h) any change in the compensation payable or to become payable by MMA, RTS or
any Subsidiary to any of its representatives, employees, agents or
independent contractors other than (x) normal increases in accordance with
its usual practices or (y) any non-recurring bonus payment or arrangement
made to or with any of such representatives, employees, agents or
independent contractors;
17
(i) any obligation or liability incurred by MMA, RTS or any Subsidiary to any
of its representatives, employees, or any Seller or Stockholder or any
loans or advances made by MMA, RTS or any Subsidiary to any of its
representatives, employees, or any Seller or Stockholder except normal
compensation and expense allowances payable to representatives or
employees in the ordinary course of business consistent with past
practices and MMA Transaction Expenses;
(j) any payment or discharge of a material lien or liability of MMA, RTS or
any Subsidiary other than in the ordinary course of business consistent
with the past practices of MMA, RTS or any Subsidiary;
(k) any change in accounting methods or practices (except as required by
applicable law or GAAP), or billing or collection policies used by MMA,
RTS or any Subsidiary; or
(l) any capital expenditures incurred by RTS in excess of $25,000 in the
aggregate, other than expenditures necessary to maintain existing assets
in good repair.
(m) any agreement or understanding, whether in writing or otherwise, for MMA,
RTS or any Subsidiary to take any of the actions specified in paragraphs
(a) through (l) above.
3.15. Ordinary Course.
---------------
Except as otherwise specifically contemplated by this Agreement, since
December 31, 1998 to the date hereof, each of MMA, RTS and RSI has conducted its
business only in the ordinary course and consistently with its prior practices
and RIB has not engaged in active business.
3.16. Banking Relations.
-----------------
All of the arrangements which MMA, RTS, each Subsidiary and each Fund
has with any banking institution are, in all material respects, accurately
described in Schedule 3.16, indicating with respect to each of such arrangements
-------------
the type of arrangement maintained (such as checking account or borrowing
arrangements) and the person or persons authorized in respect thereof.
3.17. Intellectual Property.
---------------------
(a) None of MMA, RTS or any Subsidiary has any patents, copyrights, trade
secrets, trademarks, trade names, service marks, formulas, designs,
inventions or other proprietary rights (collectively, "Intellectual
Property") except for readily available Intellectual Property licensed
from others, customer lists and related data and rights in and to the
names in their areas of use of "Money Management Associates" and "Rushmore
Trust and Savings," rights in and to the logo and the service marks, and
such rights in and to the service marks are
18
listed in Schedule 3.17. MMA owns the registration for each of the service
-------------
marks "Rushmore," "The Rushmore Fund, Inc." and "Rushmore Investment
Brokers, Inc." filed with the United States Patent and Trademark Office.
Neither MMA nor Sellers have knowledge of any infringement by others of
any Intellectual Property rights of MMA, RTS or any Subsidiary.
(b) The business of MMA, RTS or any Subsidiary does not, to the knowledge of
MMA and Sellers, infringe any rights of any other person in Intellectual
Property. No proceeding charging MMA, RTS or the Subsidiaries with
infringement of any Intellectual Property of any other person has been
filed or, to the knowledge of MMA and Sellers, is threatened to be filed.
None of MMA, RTS or the Subsidiaries or, to the knowledge of MMA and
Sellers, any of their respective employees have any agreements or
arrangements with any person related to confidential information or trade
secrets of such persons or restricting any such employee's ability to
engage in business activities of any nature. The activities of the
employees on behalf of MMA, RTS or any Subsidiary do not violate any such
agreements or arrangements known to MMA or Sellers.
3.18. Litigation.
----------
Except as set forth on Schedule 3.18, there is no litigation, action,
-------------
suit or proceeding pending or, to the knowledge of MMA and Sellers, threatened
against MMA, RTS or any Subsidiary or any of their assets at law or in equity,
or before any Governmental Authority (including, without limitation, any
voluntary or involuntary proceedings under the Bankruptcy Code or any action,
suit, proceeding or investigation under any federal or state securities law,
rule or regulation), in which MMA, RTS or any Subsidiary is a party, or to the
knowledge of MMA and Sellers, with which any of them is threatened. There are
no proceedings pending or, to the knowledge of MMA and Sellers, threatened,
relating to the termination of, or limitation of, the rights of MMA under its
registration under the Advisers Act as an investment adviser or under the
Exchange Act as a transfer agent, the rights of RIB under its registration under
the Exchange Act as a broker-dealer, the rights of RTS as a federal savings bank
under the Home Owners' Loan Act, as a transfer agent under the Exchange Agent or
as an FDIC insured institution under the Federal Deposit Insurance Act or any
similar or related rights under any registrations or qualifications with various
states or other jurisdictions, or under any other investment and banking laws
and regulations. There are no judgments, injunctions, orders or other judicial
or administrative mandates outstanding against or affecting MMA, RTS, any
Subsidiary or the Principal Sellers or, to the knowledge of MMA, RTS and
Sellers, any representative thereof or any Seller other than the Principal
Sellers relating to the activities of or affecting MMA, RTS or any Subsidiary.
3.19. Business: Registrations and Compliance with Laws.
------------------------------------------------
(a) MMA is duly registered as an investment adviser under the Advisers Act and
a transfer agent under the Exchange Act. RIB is duly registered as a
broker-dealer under the Exchange Act and is a member in good standing of
the National Association of Securities Dealers, Inc. ("NASD"). MMA is duly
registered, licensed and qualified as an investment adviser, RIB is duly
registered, licensed and qualified as a broker-dealer, and MMA and RTS are
19
each duly registered, licensed and qualified as a transfer agent in all
jurisdictions where such registration, licensing or qualification is
required in order to conduct its business, except where the failure to be
so registered, licensed or qualified would not have an MMA Material
Adverse Effect. MMA, RTS and each Subsidiary is, and, since its inception,
has been, and all of their real properties and other assets are currently,
except for any material non-compliance prior to the date hereof which has
been cured, in compliance in all material respects with all applicable
federal, state and local laws, rules, regulations, codes, ordinances and
orders. MMA has delivered to MMA Buyer true and complete copies of its
most recent Form ADV and Form TA-1, the Form BD of RIB and the Form TA-1
of RTS, each as amended to date, and has made available copies of all
foreign and state registration forms, likewise as amended to date. The
information contained in such forms was true and complete at the time of
filing and MMA, RIB and/or RTS (as the case may be) has made all
amendments to such forms as it is required to make under any applicable
laws. None of MMA, RIB, RTS or, to the knowledge of MMA and Sellers, a
"person associated with" (as defined under Section 202(a)(17) of the
Advisers Act and Sections 3(a)(18) and 3(a)(49) of the Exchange Act) MMA,
RIB or RTS, has been convicted of any crime or is or has engaged in any
conduct that would be a basis for denial, suspension or revocation of the
registration of MMA as an investment adviser, RIB as a broker-dealer or
MMA or RTS as a transfer agent (as the case may be), and to the knowledge
of MMA and Sellers, there is no proceeding or investigation that is
reasonably likely to become the basis for any such disqualification,
denial, suspension or revocation. MMA (as investment advisor) and each
"person associated with" MMA (as defined in Section 202(a)(17) of the
Advisers Act), including any investment adviser representatives (as such
term is defined in Rule 203A-3(a) under the Advisers Act), MMA (as
transfer agent), RIB, RTS and each "person associated with" MMA, RIB or
RTS (as defined under Sections 3(a)(18) and 3(a)(19) of the Exchange Act)
and each Subsidiary has, and after giving effect to the Closing will have,
all permits, registrations, licenses, franchises, certifications and other
approvals (collectively, the "Licenses") required from, and has filed all
reports required by, Governmental Authorities in order for it to conduct
the businesses presently conducted by MMA (as investment adviser and
transfer agent), RTS or any Subsidiary (as the case may be) in the manner
presently conducted by them and to own, use and operate its properties in
the manner currently owned, used and operated, except for any such
Licenses which are required solely by reason of Buyers' participation in
the transactions contemplated hereby. None of MMA, RTS or the Subsidiaries
is subject to any limitation imposed in connection with one or more of the
Licenses which would have an MMA Material Adverse Effect.
(b) Except as set forth in Schedule 3.19, neither MMA, RTS nor any of its
-------------
Subsidiaries is subject to any cease-and-desist or other order issued by,
or is a party to any written agreement, consent agreement, supervisory
agreement or memorandum of understanding with, or is a party to any
commitment letter or similar undertaking to, or is subject to any order or
directive by, or has adopted by board resolutions at the request of (each,
whether or not set forth in Schedule 3.19, a "Regulatory Agreement"), any
-------------
Governmental Authority that restricts the conduct of its business or that
in any manner relates to its capital adequacy, its credit policies, its
management or its business, nor has MMA, RTS or any of its Subsidiaries
been advised by
20
any Governmental Authority that it is considering issuing or requesting
any Regulatory Agreement.
3.20. Insurance.
---------
RTS has in full force and effect such insurance as is customarily
maintained by companies of similar size in the same or a similar business with
respect to its business, properties and assets and each of MMA, RTS and the
Subsidiaries has in full force and effect such insurance and bonds as are
required by any contract to which it is a party or applicable law, all as listed
in Schedule 3.20. None of MMA, RTS or the Subsidiaries is in material default
-------------
under any such insurance policy.
3.21. Copies of Documents.
-------------------
Except as otherwise provided herein, to the knowledge of MMA and
Sellers, MMA has or has caused to be made available for inspection and copying
by MMA Buyer and its counsel and advisors true and correct copies of all
documents referred to in this Agreement or in the Schedules delivered to MMA
Buyer in connection herewith.
3.22. Transactions with Interested Persons.
------------------------------------
Except as set forth in Schedule 3.22, none of MMA, RTS, the Subsidiaries,
-------------
any employee of any of them (as the case may be), any Seller or Stockholder, or,
to the knowledge of MMA and Sellers, any of their respective spouses or family
members, is a party to any material transaction or material contract or
arrangement with MMA, RTS or any Subsidiary or owns directly or indirectly on an
individual or joint basis any interest (excluding passive investments in the
shares of any enterprise which are publicly traded provided his or her holdings
therein, together with any holdings of his or her Affiliates and family members,
do not exceed five percent (5%) of the outstanding shares or comparable interest
in such entity) in, or serves as an officer or director or in another similar
capacity of, any competitor or client of MMA, RTS or any Subsidiary or any
organization which has a material contract or arrangement with MMA, RTS or any
Subsidiary.
3.23. Employee Benefit Programs.
-------------------------
(a) Schedule 3.23 lists every Employee Program (as defined below) that has
-------------
been maintained (as defined below) by MMA, RTS or any Subsidiary at any
time during the three-year period ending on the date of the Closing.
(b) Each Employee Program which has been maintained by MMA, RTS or any
Subsidiary during the past seven years and which has at any time been
intended to qualify under Section 401(a) or 501(c)(9) of the Code has
received a favorable determination or approval letter from the IRS
regarding its qualification under such section and no such determination
or approval letter has been revoked nor, to the knowledge of MMA and
Sellers, is there any reason for such revocation from the effective date
of such Employee Program through and including the
21
Closing (or, if earlier, the date that all of such Employee Program's
assets were distributed). No event or omission has occurred which would
cause any such Employee Program to lose its qualification under the
applicable Code section.
(c) Neither MMA nor Sellers knows or has reason to know of any failure of any
party to comply in any material respect with any laws applicable to the
Employee Programs that have been maintained by MMA, RTS or any Subsidiary.
To the knowledge of MMA and Sellers, each Employee Program that has been
maintained by MMA, RTS or any Subsidiary has been maintained, operated and
administered in compliance in all material respects with its terms and
with any related documents or agreements. With respect to any Employee
Program ever maintained by MMA, RTS or any Subsidiary, there has occurred
no "prohibited transaction," as defined in Section 406 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or Section
4975 of the Code, or breach of any duty under ERISA or other applicable
law (including, without limitation, any health care continuation
requirements or any other tax law requirements, or conditions to favorable
tax treatment, applicable to such plan), which could result, directly or
indirectly, in any material taxes, penalties or other liability to Buyers,
MMA, RTS or any Subsidiary. No litigation, arbitration, or governmental
administrative proceeding (or investigation) or other proceeding (other
than those relating to routine claims for benefits) is pending or
threatened with respect to any such Employee Program.
(d) All contributions to, and payments from, any Employee Program maintained
by MMA, RTS or any Subsidiary that may have been required in accordance
with the terms of such Employee Program have been timely made or are
properly accrued, to the extent required. Any insurance premium under any
insurance policy related to an Employee Program for any period up to and
including the Closing Date shall have been paid before the Closing Date.
(e) None of MMA, RTS, any Subsidiary or any ERISA Affiliate (as defined below)
while an ERISA Affiliate (i) has, at any time after January 1, 1992,
maintained any Employee Program which has been subject to Title IV of
ERISA (including, but not limited to, any Multiemployer Plan (as defined
below)) or (ii) has ever provided health care or any other non-pension
benefits to any employees after their employment is terminated (other than
as required by part 6 of subtitle B of title I of ERISA) or has ever
promised to provide such post-termination benefits that could impose a
monetary obligation or material non-monetary obligation after Closing upon
Buyers, MMA, RTS or any Subsidiary.
(f) With respect to each Employee Program maintained by MMA, RTS or any
Subsidiary within the three (3) years preceding the Closing, complete and
correct copies of the following documents (if applicable to such Employee
Program) have previously been delivered to MMA Buyer: (i) all documents
embodying or governing such Employee Program, and any funding medium for
the Employee Program (including, without limitation, trust agreements) as
they may have been amended; (ii) the most recent IRS determination or
approval letter with respect to such Employee Program under Code Sections
401 or 501(c)(9), and any applications for determination or approval
subsequently filed with the IRS; (iii) the three (3) most recently
22
filed IRS Forms 5500, with all applicable schedules and accountants'
opinions attached thereto; (iv) the summary plan description for such
Employee Program (or other descriptions of such Employee Program provided
to employees) and all modifications thereto; (v) any insurance policy
(including any fiduciary liability insurance policy) related to such
Employee Program; (vi) any documents evidencing any loan to an Employee
Program that is a leveraged employee stock ownership plan; and (vii) all
other materials reasonably necessary for MMA Buyer to perform any of its
responsibilities with respect to any Employee Program subsequent to the
Closing (including, without limitation, health care continuation
requirements).
(g) Each Employee Program listed on Schedule 3.23 may be amended, terminated,
-------------
modified or otherwise revised by MMA, RTS or any Subsidiary (as the case
may be) subject to compliance with applicable law.
(h) For purposes of this section:
(i) "Employee Program" means (A) all employee benefit plans within the
meaning of ERISA Section 3(3), including, but not limited to,
multiple employer welfare arrangements (within the meaning of ERISA
Section 3(4)), plans to which more than one unaffiliated employer
contributes and employee benefit plans (such as foreign or excess
benefit plans) which are not subject to ERISA; and (B) all stock
option plans, bonus or incentive award plans, severance pay policies
or agreements, deferred compensation agreements, supplemental income
arrangements, vacation plans, and all other employee benefit plans,
agreements, and arrangements not described in (A) above. In the case
of an Employee Program funded through an organization described in
Code Section 501(c)(9), each reference to such Employee Program shall
include a reference to such organization.
(ii) An entity "maintains" an Employee Program if such entity sponsors,
contributes to, or provides (or has promised to provide) benefits
under such Employee Program, or has any obligation (by agreement or
under applicable law) to contribute to or provide benefits under such
Employee Program, or if such Employee Program provides benefits to or
otherwise covers employees of such entity, or their spouses,
dependents, or beneficiaries.
(iii) An entity is an "ERISA Affiliate" of MMA, RTS or any Subsidiary
during any period in which it is, or was, considered a single
employer with MMA, RTS or any Subsidiary under ERISA Section 4001(b)
or part of the same "controlled group" as MMA, RTS or any Subsidiary
for purposes of Code Section 414 or ERISA Section 302(d)(8)(C).
(iv) "Multiemployer Plan" shall have the meaning set forth in ERISA Section
3(37).
23
3.24. Officers and Employees.
----------------------
(a) Schedule 3.24(a) contains a true and complete list of all current officers
----------------
and employees of MMA, RTS or the Subsidiaries. In each case, such
Schedule includes the current job title and annual salary of each such
individual.
(b) Except as set forth in Schedule 3.23 or Schedule 3.24(b), none of MMA, RTS
------------- ----------------
or the Subsidiaries has any obligation, contingent or otherwise, under (a)
any collective bargaining or other similar labor agreement, (b) any
written agreement containing severance or termination pay arrangements,
(c) any deferred compensation agreement, retainer or consulting
arrangements, (d) any pension or retirement plan, any bonus or profit-
sharing plan, any stock option or stock purchase plan, or (e) any other
written non-terminable (whether with or without penalty) employment
arrangement (each an "Employment Arrangement"). None of MMA, RTS or the
Subsidiaries is in default with respect to any material term or condition
of any Employment Arrangement, nor will the Closing (or the transactions
contemplated hereby or thereby) result in any such default, including,
without limitation, after the giving of notice, lapse of time or both.
None of MMA, RTS or the Subsidiaries is delinquent in payments to any of
its employees for any wages, salaries, commissions, bonuses or other
direct compensation for any services performed for it to the date hereof
or amounts required to be reimbursed to such employees. Except as set
forth in Schedule 3.24(b), upon termination of the employment of any of
----------------
said employees, none of MMA, RTS or the Subsidiaries could, by reason of
the transactions contemplated by this Agreement or any act or omission
occurring prior to the Closing, be liable to any of said employees for so-
called "severance pay" or any other payments. None of MMA, RTS or the
Subsidiaries is obligated to make any payments, nor is it a party to any
agreement that could obligate MMA, RTS or any Subsidiary to make any
payments, that will not be deductible under Section 280G of the Code.
Except as set forth in Schedule 3.24(b), none of MMA, RTS or the
----------------
Subsidiaries has any written policy, plan or program of paying severance
pay or any form of severance compensation in connection with the
termination of employment. MMA, RTS and each Subsidiary is in compliance
in all material respects with all applicable laws and regulations
respecting labor, employment, fair employment practices, work place safety
and health, terms and conditions of employment, and wages and hours. There
are no charges of employment discrimination or unfair labor practices
against or involving MMA, RTS or any Subsidiary. There are no grievances,
complaints or charges that have been filed against MMA, RTS or any
Subsidiary under any dispute resolution procedure that would have an MMA
Material Adverse Effect, and there is no arbitration or similar proceeding
pending and no claim therefor has been asserted. MMA, RTS and each
Subsidiary has in place all employee policies required by applicable laws,
rules and regulations, the failure of which to have in place would have an
MMA Material Adverse Effect, and there have been no material violations or
alleged violations of any of such policies. None of MMA, RTS or the
Subsidiaries has received any written notice indicating that any of its
employment policies or practices is currently being audited or
investigated by any Governmental Authority. MMA, RTS and each Subsidiary
is, and at all times since November 6, 1986 has been, in compliance with
the requirements of the Immigration Reform Control Act of 1986.
24
3.25. Non-Foreign Status.
------------------
None of the Sellers, MMA, RTS or the Subsidiaries is a nonresident
alien individual or foreign corporation for purposes of Section 897 of the Code.
RTS is not a United States real property holding corporation within the meaning
of Section 897(c)(ii) of the Code.
3.26. Transfer of Interests, Stock or Subsidiary Stock.
------------------------------------------------
No current holder of Interests, Stock or Subsidiary Stock has at any
time transferred any of such Interests, Stock or Subsidiary Stock or any right
or obligation thereunder to any employee of MMA, RTS or any Subsidiary which
transfer constituted compensation for services rendered to MMA, RTS or any
Subsidiary by said employee.
3.27. No Unfair Burden.
----------------
In connection with the transactions contemplated by this Agreement,
none of MMA, RTS, the Subsidiaries, Sellers or any "interested person" (as such
term is defined in the Investment Company Act) of MMA, RTS, the Subsidiaries or
Sellers has imposed and MMA, RTS, the Subsidiaries and Sellers, and the
"interested persons" of each, do not intend to, directly or indirectly, impose,
an unfair burden on the Funds as a result of any such transactions, or as a
result of any express or implied terms, conditions, or understandings applicable
to any such transactions within the meaning of Section 15(f) of the Investment
Company Act.
3.28. Additional Representations and Warranties relating to each Fund
---------------------------------------------------------------
(a) Since inception, each Fund has been and continues to be a duly registered
investment company in material compliance with the Investment Company Act
and the rules and regulations promulgated thereunder and duly registered
or licensed and in good standing under the laws of each jurisdiction in
which such qualification is necessary. To the knowledge of MMA and
Sellers, each Fund, since its inception, has been, except for any material
non-compliance prior to the date hereof which has been cured, in
compliance in all material respects with all applicable federal and state
laws, rules, regulations and orders, except as set forth on Schedule
--------
3.28(a). Since their initial offering, shares of each Fund have been duly
-------
qualified for sale under the securities laws of each jurisdiction in which
they have been sold or offered for sale at such time or times during which
such qualification was required except where the failure to be so
registered or licensed would not have an MMA Material Adverse Effect. The
offering and sale of shares of each Fund have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), during such
period or periods for which such registration is required, the related
registration statement has become effective under the Securities Act, no
stop order suspending the effectiveness of such registration statement has
been issued and no proceedings for that purpose have been instituted or,
to the knowledge of MMA and Sellers, are contemplated. As the same pertain
to each Fund, to the knowledge of MMA and Sellers, the registration
statement of the Fund under the Investment Company Act and/or the
Securities Act has, at all times when such registration statement was
effective, complied in all material respects with the requirements of the
Investment Company Act and the Securities Act then in effect and
25
neither such registration statement nor any amendments thereto contained
at the time such registration statement became effective and during which
time that the registration statement was in use, an untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Copies of the
current registration statement of each Fund under the Investment Company
Act and/or the Securities Act which was filed ____________, 199_, (the
"Registration Statement") have been made available to MMA Buyer. All
shares of each Fund were sold pursuant to an effective registration
statement to the extent required by the Securities Act and have been duly
authorized and, when issued, were validly issued, fully-paid and non-
assessable against each Fund. Each Fund's investments made since inception
have been made in all material respects in accordance with its investment
objective, investment policies and restrictions set forth in its
registration statement in effect at the time the investments were made
(except where any violation of the foregoing has been cured and the Fund
has been made whole for any resulting losses) and have been held in
accordance with its respective investment policies and restrictions, to
the extent applicable and in effect at the time such investments were
held.
(b) As to each Fund, there has been in full force and effect an investment
advisory agreement at all times since the inception of each Fund. Each
agreement pursuant to which MMA, RTS or any Subsidiary has received
compensation respecting its activities in connection with each Fund was
duly approved and has been duly renewed in accordance with the applicable
provisions of the Investment Company Act.
(c) Except as set forth on Schedule 3.28(c), there are no special
----------------
restrictions, consent judgments or SEC or judicial orders on or with
regard to any Fund currently in effect.
(d) Since its inception, each Fund has continuously elected and qualified to
be treated as a "regulated investment company" under Subsection M of the
Code and has continuously been eligible to compute, and has for each
taxable year computed, its federal income tax under Section 852 of the
Code. None of MMA, RTS, any Subsidiary or, to the knowledge of MMA and
Sellers, any Fund, has received any notice or other communication relating
to or affecting such status.
(e) At the Closing Date, each Fund will have timely filed all Tax returns,
reports and other filings (including information returns, declarations and
reports) (the "Mutual Fund Tax Returns") required to be filed by it on or
before such date, any such Mutual Fund Tax Returns shall be, to the
knowledge of MMA and Sellers, complete and correct, and each Fund will
have paid, or withheld and paid over, all Taxes shown or required to be
shown as due on such Mutual Fund Tax Returns. No such Mutual Fund Tax
Return is currently under audit, no assessment has been asserted with
respect to such Mutual Fund Tax Returns, and no requests for waivers of
the time to make any such assessment are pending. None of the Funds is
delinquent in the payment of any Tax, assessment or governmental charge.
(f) None of MMA, RTS, any Subsidiary or any person who is an "affiliated
person" (as defined in the Investment Company Act) or an "interested
person" (as defined in the Investment Company Act) of MMA, RTS or any
Subsidiary, receives or is entitled to receive any
26
compensation directly or indirectly (i) from any person in connection with
the purchase or sale of securities or other property to, from or on behalf
of such Fund, other than as broker in connection with the purchase or sale
of securities in compliance with Section 17(e) of the Investment Company
Act and regulations thereunder, or (ii) from any Fund or its security
holders for other than bona fide investment advisory, administrative or
other services. Accurate and complete disclosure of all such compensation
arrangements has been made in the Registration Statement filed under the
federal securities laws.
(g) MMA has made available to MMA Buyer correct and complete copies of the
audited financial statements, prepared in accordance with GAAP, of each
Fund for the past five fiscal years, and unaudited financial statements,
prepared in accordance with GAAP, of each Fund as of its most recent semi-
annual stub period (the "1999 Unaudited Financials") (each hereinafter
referred to as a "Mutual Fund Financial Statement"). Each of the Mutual
Fund Financial Statements is consistent with the books and records of such
Fund, is complete and correct in all material respects and presents fairly
the financial position of such Fund in accordance with GAAP applied on a
consistent basis (except as otherwise noted therein) at the respective
date of such Mutual Fund Financial Statements and the results of
operations and cash flows for the respective periods indicated (except in
the case of the 1999 Unaudited Financials, the absence of footnotes and
customary year end adjustments). The Mutual Fund Financial Statements
reflect and disclose all material changes in accounting principles and
practices adopted by each Fund during the periods covered by each Mutual
Fund Financial Statement.
(h) Except as set forth on Schedule 3.28(h), there is no litigation or action,
----------------
suit, proceeding or investigation at law or in equity pending or, to the
knowledge of MMA and Sellers, threatened in any court or before or by any
Governmental Authority, or before any arbitrator, by or against each Fund,
or, to the knowledge of MMA and Sellers, any officer or director thereof,
MMA, RTS or any Subsidiary relating to the activities of any Fund, that,
if successful, would result in any disqualification of MMA under Section
9(a) of the Investment Company Act, or any event which would require MMA
to give an affirmative response to any of the questions in Item 11 of
MMA's Form ADV (or any similar or successor form) or Item 3 of the SEC
Supplement to Form TA-1 (or any similar successor form) or require an
affirmative response from RIB under Item 7 of RIB's Form BD (or any
similar or successor form) or from RSI under Item 3 of the SEC Supplement
to Form TA-1 (or any similar successor form). There are no judgments,
injunctions, orders or other judicial or administrative mandates
outstanding against or affecting any Fund or, to the knowledge of MMA and
Sellers, any officer or director thereof relating to the activities of or
affecting any Fund.
(i) Except as set forth on Schedule 3.28(i), to the knowledge of MMA and
----------------
Sellers, each Fund complies, and has been maintained in compliance, in all
material respects, with all applicable requirements, including all
reporting and disclosure requirements, prescribed by any and all
applicable laws or regulations and orders thereunder.
(j) The exhibit list in the Registration Statement includes all of the
documents that would be required to be included thereon if such
Registration Statement were being refiled.
27
(k) MMA has furnished to MMA Buyer, with respect to each Fund, complete and
correct copies of (i) Annual and Semi-Annual Reports and proxy statements
of the Fund pertaining to the last five years of the Fund, each in the
form delivered to the Fund's shareholders, as well as any additional
report or other material generally delivered to such shareholders since
the delivery of such Annual Report or Semi-Annual Report, as the case may
be; (ii) all Prospectuses, together with Statements of Additional
Information of each Fund, filed with the SEC in the last five years and
(iii) all reports of each Fund on Form N-SAR together with any and all
exhibits annexed thereto from the last five years of each Fund; each in
the form filed with the SEC (all of the foregoing documents referred to in
(i), (ii) and (iii) being collectively referred to herein as the "Fund
Statements"). To the knowledge of MMA and Sellers, the information
contained in the Fund Statements does not 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 any material statement made therein,
in light of the circumstances, not misleading. The financial statements,
including, without limitation, the Statement of Assets and Liabilities,
the Statement of Operations and the Statement of Changes in Net Assets,
and the notes thereto set forth in any such Annual or Semi-Annual Report
fairly present the financial position of each Fund as at the dates of such
statements and the results of its operations for the periods covered
thereby in accordance with GAAP consistently applied (except as noted
therein). Since the end of the period covered by any such Annual or Semi-
Annual Report, there has occurred no event or condition which would (i)
require any Fund to file an additional amendment, registration statement,
prospectus, prospectus supplement, report or other document with the SEC,
which document has not been so filed with the SEC and delivered to Buyers
or (ii) require any Fund to conduct a meeting of its shareholders, in each
case other than with respect to the transactions contemplated by this
Agreement.
3.29. Absence of Certain Changes.
--------------------------
Since the date of the most recent Mutual Fund Financial Statements of
each Fund to the date hereof, no event or development has occurred that has had
or would reasonably be expected to have an MMA Material Adverse Effect on any
Fund. During such period, neither MMA (as pertains to its management of each
Fund) nor any Fund has:
(a) declared, set aside, made or paid any dividend or other distribution in
respect of its capital stock or other equity interests or otherwise
purchased or redeemed, directly or indirectly, any shares of its capital
stock or other equity interests, except in the ordinary course of its
business consistent with past practice;
(b) had any action taken by the Board of Directors/Trustees of any Fund, other
than actions in the ordinary course of business;
(c) adopted, or amended in any material respect, any employment, collective
bargaining, bonus, profit-sharing, compensation, stock option, pension,
retirement, deferred compensation or other plan, agreement, trust, fund or
arrangement for the benefit of any Director/Trustee of the Funds;
28
(d) amended or terminated or, to the knowledge of MMA and Sellers, proposed or
threatened amendment or termination, whether written or oral, of any
agreement or contract involved in the operation of any Fund;
(e) amended its Articles of Incorporation, Declaration of Trust or by-laws or
any other organizational documents;
(f) waived any right of material value;
(g) changed in any material respect its investment objective, policies, or
restrictions;
(h) except as set forth on Schedule 3.29(h), changed its accounting practices,
----------------
policies or principles, except as may be required under applicable law or
GAAP;
(i) operated its business in any manner other than in the ordinary course of
business consistent with past practice; or
(j) except as otherwise contemplated herein, taken any action or omitted to
take any action that is reasonably likely to result in the occurrence of,
or agreed or committed to do, any of the foregoing.
ARTICLE IV
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF SELLERS
Each Seller, on his or her own behalf only, represents and warrants to
Buyers as follows:
4.1. Ownership of Interests.
----------------------
(a) Each Seller (i) is the sole record and beneficial owner of the Stock
and/or Interests set forth opposite his, her or its name on Schedule 1.1,
------------
free and clear of all Liens; and (ii) has full legal right, power and
authority to enter into this Agreement and to sell such Stock and/or
Interests to Buyers without the need for the consent of any other person.
(b) Neither the execution, delivery and performance of this Agreement and each
document, agreement and instrument to be executed by Sellers pursuant to
or as contemplated by this Agreement nor the consummation by Sellers of
the transactions contemplated hereby, will (i) violate, conflict with, or
result in a breach of any provisions of, or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a
default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or
acceleration under, or the creation of any Lien upon any of the properties
or assets of MMA, RTS, any Subsidiary or the Funds under any of the terms,
conditions or provisions of (x) the organizational documents of MMA, RTS,
any Subsidiary or
29
any Fund, or (y) except as set forth in Schedule 3.2(b) or Schedule
--------------- --------
4.1(b), any note, bond, mortgage, indenture, deed of trust, license,
------
lease, agreement or other instrument or obligation to which MMA, RTS, any
Subsidiary or any Fund is a party or by which MMA, RTS, any Subsidiary or
any Fund may be bound, or to which MMA, RTS, any Subsidiary or any Fund,
or the properties or assets of MMA, RTS, any Subsidiary or any Fund, may
be subject, or (ii) violate any judgment, ruling, order, writ, injunction,
decree, statute, rule or regulation of any governmental, regulatory or
self-regulatory authority applicable to MMA, RTS, any Subsidiary or any
Fund or to any of the properties or assets of MMA, RTS, any Subsidiary or
any Fund.
4.2. Authorization.
-------------
This Agreement and each document, agreement and instrument to be
executed by Sellers pursuant to or as contemplated by this Agreement, has been
duly authorized, executed and delivered by Sellers, and no further proceedings
on the part of Sellers are necessary to authorize this Agreement and the
transactions contemplated hereby. This Agreement and each document, agreement
and instrument to be executed by Sellers (as the case may be) pursuant to or as
contemplated by this Agreement, is the legal, valid and binding obligation of
Sellers, enforceable in accordance with its terms.
ARTICLE V
CONDUCT OF BUSINESS PRIOR TO THE CLOSING
5.1. Conduct Prior to Closing.
------------------------
MMA hereby covenants and agrees with Buyers that, prior to the
Closing, unless the prior written consent of MMA Buyer shall have been obtained
and except as otherwise expressly contemplated in this Agreement or requested by
MMA Buyer (and agreed to by MMA), MMA, RTS, each Subsidiary and each Fund shall
operate its business only in the usual, regular and ordinary course and in
accordance with past practice and conduct its business in a manner comporting
with the standards of service quality and compliance heretofore met by it, shall
use its best efforts to operate its business in compliance in all material
respects with applicable laws and shall use its commercially reasonable efforts
to preserve intact its business organization and assets and maintain its rights,
franchises and business and customer relations necessary to run the business as
currently run. To the extent this Section 5.1 (or any of its subsections
hereinafter set forth) is applicable to the Funds, MMA's obligation shall be
limited to not taking any action (except as directed by the governing board of a
Fund) or recommending that the Funds take any action inconsistent with the
following covenants and agreeing to promptly advise MMA Buyer of any action
taken by a Fund's officers or governing board that would be inconsistent with
the following covenants. From the date hereof until the Closing, MMA shall
ensure, subject to the foregoing, that without the prior written consent of MMA
Buyer and except as otherwise expressly contemplated by this Agreement:
30
(a) MMA, RTS, each Subsidiary and each Fund shall not incur any indebtedness
for borrowed money, except in the ordinary course of business consistent
with prior practice, issue or sell any debt securities or prepay any debt;
(b) MMA, RTS, each Subsidiary and each Fund shall not, except in the ordinary
course of business consistent with past practice, sell, transfer, lease,
mortgage, pledge or hypothecate any of its properties or assets, tangible
or intangible; provided, that in any event RTS shall not sell, transfer,
lease or encumber the Owned Real Estate or any interest therein or portion
thereof or enter into any contract, agreement or understanding to do the
same;
(c) MMA, RTS, each Subsidiary and each Fund shall not, except where required
in the exercise of its fiduciary obligations, take any action (other than
in connection with the transactions contemplated hereby), other than
actions in the ordinary course of business;
(d) MMA, RTS, each Subsidiary and each Fund shall not forgive or cancel any
debts or claims, or waive any rights, or discharge any lien or liability
except for fair value or in the ordinary course of business consistent
with past practice;
(e) MMA, RTS and each Subsidiary shall not recommend that any Fund change its
investment objective, policies, or restrictions;
(f) MMA, RTS, each Subsidiary and each Fund shall not, except as provided in
Section 5.1(l) or as may be required by applicable law and after notice to
--------------
MMA Buyer, adopt, or amend in any material respect, any employment,
collective bargaining, bonus, profit-sharing, compensation, stock option,
pension, retirement, deferred compensation or other plan, agreement,
trust, fund or arrangement for the benefit of employees or officers of
MMA, RTS, any Subsidiary or the Directors/Trustees of each Fund;
(g) except (i) such changes or terminations as may be proposed by MMA Buyer
(and agreed to by MMA), (ii) as may be required by applicable law and
after notice to Buyers, (iii) as expressly provided by this Agreement or
(iv) any renewal of an expiring agreement for which MMA, RTS, each
Subsidiary and each Fund shall obtain the prior consent of MMA Buyer which
consent shall not be unreasonably withheld, MMA, RTS, each Subsidiary and
each Fund shall not amend or terminate the Partnership Agreement, any Real
Estate Lease, any agreement or contract involved in the operation of the
Funds, any material agreement, Articles of Incorporation, Declaration of
Trust or bylaws (as the case may be) or any other organizational
documents, or file any tax election, claim for refund on an amended return
(in the case of RTS or RIB only), or request for ruling or determination
with any taxing authority;
(h) MMA, RTS, each Subsidiary and each Fund shall not change in any respect
its accounting practices, policies or principles, except as may be
required by applicable law or GAAP and after notice to MMA Buyer;
(i) MMA, RTS, each Subsidiary and each Fund shall not incur any liability or
obligation (whether absolute, accrued, contingent or otherwise and whether
direct or as guarantor
31
or otherwise with respect to the obligations of others), except in the
ordinary course of business consistent with past practice or as otherwise
permitted hereunder; provided, however, that in no event shall any of RTS
or the Funds incur any such debt obligations in an amount in excess of
$25,000 without providing prior notice to MMA Buyer (other than deposit
accounts or Federal Home Loan Bank advances with a term of one year or
less);
(j) MMA, RTS, each Subsidiary and each Fund shall not make any material
changes in policies or practices relating to the sale of its shares
(including accounting practices relating thereto) or in policies or
practices of employment unless required by applicable law or GAAP and
after notice to MMA Buyer;
(k) MMA, RTS, each Subsidiary and each Fund shall not enter into any type of
business not conducted as of the date of this Agreement or create or
organize any subsidiary or enter into or participate in any joint venture
or partnership;
(l) MMA, RTS, each Subsidiary and each Fund shall not make any change in the
compensation payable or to become payable to any of its representatives,
employees, agents or independent contractors except with respect to its
employees (exclusive of any of the Sellers) for (i) normal annual
increases in accordance with past practices or (ii) annual bonus payments
or arrangements in the ordinary course of business not to exceed $200,000
per year in the aggregate;
(m) RTS, each Subsidiary and each Fund shall not adjust, split, combine or
reclassify any capital stock except as set forth in Section 7.12; set any
------------
record or payment dates for the payment of any dividends or distributions,
or pay any dividend or make any distribution, on its capital stock except
in the ordinary and usual course of business consistent with past
practice; directly or indirectly redeem, purchase or otherwise acquire,
any shares of its capital stock (except with respect to the Funds as
required by the provisions of the Investment Company Act) or any
securities or obligations convertible into or exchangeable for any shares
of its capital stock or grant any stock appreciation rights or grant any
individual, corporation or other entity any right to acquire any shares of
its capital stock; MMA shall not make any transfer or distribution of its
property to the Sellers in respect of any Interests except to the extent
and in the manner provided in Section 1.3 and except that MMA shall not be
-----------
prohibited from redeeming, purchasing or otherwise acquiring the Limited
Partnership Interests of the Sellers other than the Principal Sellers;
(n) MMA, RTS, each Subsidiary and each Fund shall not, except for transactions
in the ordinary course of business consistent with past practice, make any
material acquisition or investment either by purchase of stock or
securities, merger or consolidation, contributions to capital, property
transfers, or purchases of any property or assets of any other individual,
corporation or other entity other than a wholly-owned subsidiary thereof;
provided, however, that, notwithstanding anything to the contrary
contained herein, none of MMA, RTS or the Subsidiaries shall make any
acquisition that would require it or MMA Buyer to register as a bank
holding company under the Bank Holding Company Act of 1956, as amended;
32
(o) RTS shall not enter into, renew or terminate any contract or agreement,
other than loans, deposit accounts and Federal Home Loan Bank advances with
a term of one year or less made in the ordinary course of business, that
calls for aggregate annual payments in excess of $50,000 individually or
$200,000 in the aggregate and which is not either (i) terminable at will on
60 days or less notice without payment of a penalty or (ii) has a term of
one year or less; or make any material change in or terminate any of its
leases or contracts, other than renewals of contracts or leases for a term
of one year or less without materially adverse changes to the terms
thereof;
(p) RTS shall not make any capital expenditures in excess of $25,000 in the
aggregate without the prior written consent of MMA Buyer which will not be
unreasonably withheld, other than expenditures necessary to maintain
existing assets in good repair;
(q) RTS shall not make application for the opening, relocation or closing of
any, or open, relocate or close any, branch or loan production office;
(r) RTS shall not make or acquire any loan or issue a commitment for any loan
except for loans and commitments that are made in the ordinary course of
business consistent with past practice or issue or agree to issue any
letters of credit or otherwise guarantee the obligations of any other
persons except in the ordinary course of business in order to facilitate
the sale of real property acquired by foreclosure or deed in lieu of
foreclosure;
(s) RTS shall not foreclose upon or otherwise acquire (whether by deed in lieu
of foreclosure or otherwise) any real property without the prior written
consent of MMA Buyer which will not be unreasonably withheld (other than 1-
to-4 family residential properties in the ordinary course of business);
(t) RTS shall not change its investment securities portfolio policy, or the
manner in which the portfolio is classified or reported except as required
by applicable law or GAAP;
(u) RTS shall not engage in the business of making or make any Veterans'
Administration guaranteed or Federal Housing Administration insured
mortgage loans;
(v) RTS shall not enter into any contracts or agreements or amendments or
supplements thereto pertaining to any further development of specialized
software without the prior written consent of MMA Buyer which will not be
unreasonably withheld;
(w) RTS shall maintain its loan loss reserves in an amount that is not less
than the amount reflected on the 1998 RTS Financial Statements to the
extent permitted by GAAP;
(x) MMA, RTS, each Subsidiary and each Fund shall not enter into any agreement,
commitment or other transactions or make any amendment or modification to
any such agreement or agree or commit to do any of the foregoing unless it
is entered into in the ordinary course of business or required by
applicable law or GAAP and after notice to MMA Buyer.
33
5.2. Consents and Approvals.
----------------------
Subject to the terms and conditions herein provided, each of the
parties hereto agrees to cooperate with the other and use its commercially
reasonable efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things necessary, proper or advisable under all applicable
laws, regulations and contractual arrangements to consummate and make effective
the transactions contemplated by this Agreement at the earliest practicable
time. The parties hereto shall take no action, and MMA shall use its
commercially reasonable efforts not to permit each Subsidiary and each Fund,
without in any way limiting the ability of the Board of Directors/Trustees of
each Fund to fulfill its fiduciary obligations, to take any action (i) with
respect to each Subsidiary and each Fund, which would render any of the
representations and warranties contained herein untrue in any material respect
at and as of the Closing Date, (ii) with respect to RTS, which would render any
of the representations and warranties of RTS untrue resulting in an RTS Material
Adverse Effect (as defined herein) at and as of the Closing Date, or (iii) which
would materially and adversely affect the ability of the parties to satisfy any
of the conditions set forth in Article VIII.
------------
ARTICLE VI
COMPLIANCE WITH FEDERAL SECURITIES LAWS
6.1. Management Contract; Proxy Statement.
------------------------------------
(a) In anticipation of the Closing, and thereafter as necessary, the parties
hereto shall cooperate, in a manner in compliance with the Investment
Company Act, with one another to obtain approvals for each Fund to enter
into a new management contract with MMA substantially the form attached
hereto as Exhibit 6.1(a) (the "New Management Contract"). MMA shall, in a
--------------
manner in compliance with the Investment Company Act, use its commercially
reasonable efforts to induce each Fund to call a meeting of its Board of
Directors/Trustees and a meeting of its shareholders to consider and
approve the entering by each Fund into the New Management Contract.
(b) If the New Management Contract is approved by the Board of
Directors/Trustees of each Fund, MMA shall assist each Fund to prepare and
file with the SEC as soon as is reasonably practicable any proxy materials
relating to the transactions contemplated by this Agreement that are
required to be prepared and filed (the "Proxy Statement"). Any material
provided by MMA or the Funds that is included in the Proxy Statement shall
comply as to form in all material respects with all applicable requirements
of federal securities laws and shall be accurate and complete and not
contain any untrue statement of material fact, or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances in which they were
made, not misleading. MMA shall assist, in a manner in compliance with the
federal securities laws and other applicable law, in the solicitation of
proxies for the required shareholder meetings and shall use its
commercially reasonable efforts to obtain approval from the shareholders
and the Board of Directors/Trustees of each Fund of the matters referred to
herein.
34
6.2. Required Actions.
----------------
MMA shall use its commercially reasonable efforts, in a manner in
compliance with the Investment Company Act, to induce the Board of
Directors/Trustees of each Fund and of the ▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇ Trust, acting in
accordance with its fiduciary obligations to approve (i) entering into such
written fund service agreements (as comply with the Investment Company Act)
substantially in the form attached as Exhibit 6.2 and (ii) terminating the
-----------
existing agreements listed on Schedule 6.2, at the time the replacement service
------------
agreements become effective.
6.3. Section 15(f).
-------------
(a) MMA and MMA Buyer intend to structure and complete the transactions
contemplated by this Agreement, and MMA Buyer intends thereafter to conduct
the affairs of each Fund through MMA, in such a manner as to obtain the
benefits and protections of Section 15(f) of the Investment Company Act.
(b) MMA and MMA Buyer have entered into this Agreement in reliance upon the
benefits and protections provided by Section 15(f) of the Investment
Company Act, and each of MMA and MMA Buyer shall use its respective
commercially reasonable efforts to assist each Fund to solicit proxies and
otherwise take such actions as may be necessary or appropriate to induce
the Board of Directors/Trustees of each Fund to be reconstituted, to the
extent necessary, to satisfy the condition set forth in Section 15(f)(1)(A)
of the Investment Company Act on or before the Closing Date, and otherwise,
through the Closing Date, to conduct its business and the business of each
Fund.
(c) MMA Buyer covenants and agrees to use its commercially reasonable efforts
to ensure that:
(i) for a period of three years from and after the Closing Date, at least
75% of the members of the Board of Directors/Trustees of each Fund are
not interested persons of MMA Buyer, MMA or any other investment
manager of each Fund appointed after the Closing; and
(ii) for a period of two years from and after the Closing Date, there is
not imposed on the Funds an "unfair burden" as a result of the
transactions contemplated by this Agreement, any payments in
connection therewith, or understandings applicable thereto.
(d) From and after the Closing Date, MMA Buyer shall use, and shall cause MMA
to use, its commercially reasonable efforts to encourage and assist each
Fund and its Board of Directors/Trustees to conduct the business of each
Fund in accordance with Section 6.3(c).
--------------
35
(e) The terms used in this Section 6.3 shall have the meanings set forth in
-----------
Section 15(f) of the Investment Company Act.
ARTICLE VII
COVENANTS
7.1. Current Information.
-------------------
(a) Prior to Closing, MMA shall promptly notify MMA Buyer of (i) any material
change in the normal course of the business of each Fund or of any
complaints from a governmental or regulatory authority or a self-regulatory
body, investigations or hearings (or communications indicating that the
same may be contemplated), or the institution or the threat of any
litigation that comes to its attention which would, in any manner,
challenge, prevent, alter or materially delay any of the transactions
contemplated hereby, and MMA will keep MMA Buyer fully informed with
respect to such events, (ii) any event which would cause or constitute a
breach or default, or would have caused or constituted a breach or default
had such event occurred or been known to MMA, RTS or Sellers prior to the
date hereof, of any of the representations, warranties or covenants of MMA,
RTS or Sellers contained in or referred to in this Agreement or any
Schedule or Exhibit referred to in this Agreement, in which case MMA shall
give detailed written notice thereof to MMA Buyer and MMA, RTS and Sellers
shall use its and their respective commercially reasonable efforts to
prevent or promptly remedy the same, and (iii) the status of regulatory
applications, third party consents, shareholder approvals and registration
amendments required pursuant to Article VI or any application or notice to
----------
or filing with the OTS or other banking authority.
(b) Prior to Closing, MMA Buyer shall promptly notify MMA of (i) any complaints
from a governmental or regulatory authority or a self-regulatory body,
investigations or hearings (or communications indicating that the same may
be contemplated), or the institution or the threat of any litigation that
comes to its attention with respect to Buyers which would, in any manner,
challenge, prevent, alter or materially delay any of the transactions
contemplated hereby, and MMA Buyer will keep MMA fully informed with
respect to such events, (ii) any event which would cause or constitute a
breach or default, or would have caused or constituted a breach or default
had such event occurred or been known to Buyers prior to the date hereof,
of any of the representations, warranties or covenants of Buyers or FBR
contained in or referred to in this Agreement or any Schedule or Exhibit
referred to in this Agreement, in which case MMA Buyer shall give detailed
written notice thereof to MMA and Buyers shall use their commercially
reasonable efforts to prevent or promptly remedy the same, and (iii) the
status of regulatory applications, third party consents, shareholder
approvals and registration amendments required pursuant to Article VI or
----------
any application or notice to or filing with the OTS or other banking
authority. MMA Buyer shall also provide to MMA prior to the filing all
proposed applications and other documents and material responses that it
intends to file with any Governmental Authority relating to any of the
transactions contemplated by this Agreement, together with copies of any
responses, comments, denials or approvals issued by any Governmental
Authority
36
promptly upon its receipt thereof. Notwithstanding the foregoing, nothing
herein shall obligate MMA Buyer to provide to MMA any confidential
information to be filed or filed with the OTS or any other banking
authority, such as MMA Buyer's business plan for RTS or the financial or
biographical information of any management official or senior executive of
MMA Buyer, FBR or any of their affiliates.
7.2. Access.
------
MMA, RTS and the Subsidiaries shall upon reasonable notice afford
(and, with respect to the Funds, shall use its best efforts to make available)
to Buyers and their representatives such access during normal business hours
throughout the period prior to the Closing Date to MMA's, RTS's and each
Subsidiary's books, records and Owned and Leased Real Estate and each Fund's
books, records, properties, and to such other information as MMA Buyer may
reasonably request that pertain to the operation of MMA, RTS, each Subsidiary or
each Fund, provided, such access does not unreasonably interfere with the
business of MMA, RTS, each Subsidiary or each Fund. Without limiting the
foregoing, MMA acknowledges that MMA Buyer shall make requests necessary to
afford MMA Buyer the opportunity to complete its due diligence review of the
operations, books and records of the Funds.
7.3. Information.
-----------
Each of Buyers, MMA (on behalf of itself and the Subsidiaries) and RTS
shall hold, and shall cause its respective directors, officers, employees,
agents, consultants and advisors to hold, in strict confidence, unless
disclosure to a regulatory authority is necessary in connection with any
necessary regulatory approval or unless compelled to disclose by judicial or
administrative process or by other requirement of law or the applicable
requirements of any regulatory agency or relevant stock exchange, all nonpublic
records, books, contracts, instruments, computer data and other data and
information (collectively, the "Information") concerning Buyers, MMA, RTS, the
Subsidiaries or the Funds furnished to Buyers or MMA (as the case may be) by the
other or the Funds or their respective representatives pursuant to this
Agreement (except to the extent that such information can be shown to have been
(a) previously known by such party on a non-confidential basis, (b) in the
public domain through no fault of such party or (c) later lawfully acquired from
other sources by the party to which it was furnished), and none of Buyers, MMA
(on behalf of itself and the Subsidiaries) or RTS (as the case may be) shall
release or disclose such Information to any other person, except its auditors,
attorneys, financial advisors, other consultants and advisors and, to the extent
permitted above, regulatory authorities. In the event of the termination of
this Agreement, each of Buyers, MMA (on behalf of itself and the Subsidiaries)
and RTS shall return to the other party or destroy all information furnished to
it and its representatives and all analyses, compilations, data, studies other
documents prepared by them or their representatives containing or based in whole
or in part on any such furnished information (including information reflecting
MMA Buyer's review of each Fund). Neither Sellers on one hand nor Buyers on the
other hand shall, directly or indirectly, defame, disparage, make derogatory
statements about or attempt knowingly to create
37
any negative inference regarding the business of MMA, RTS, Sellers, the Funds or
Buyers and their respective affiliates.
7.4. Qualification of each Fund.
--------------------------
Subject to applicable fiduciary duties of the Board of Directors/Trustees
of the Funds to each Fund, MMA will use its commercially reasonable efforts to
cause each Fund to take no action (i) that would prevent each Fund from
qualifying as a "regulated investment company", within the meaning of Section
851 of the Code or being eligible to compute its income under Section 852 of the
Code or so computing its income, or (ii) that would be inconsistent with each
Fund's prospectus and other offering, advertising and marketing materials.
7.5. Forms.
-----
Prior to the Closing, MMA and RTS shall, and MMA shall cause the
Subsidiaries to, cooperate with MMA Buyer in the preparation and filing of all
forms and amendments to forms, including, without limitation, Forms ADV, BD and
TA-1 of MMA Buyer to be filed with federal agencies and self-regulatory
organizations and the state securities commissions, and all other documents
required to be filed or delivered under applicable federal and state laws, and
regulations promulgated thereunder, including, without limitation, the Advisers
Act and the Exchange Act and applicable related state acts and insurance laws,
as a result of the consummation of the transactions contemplated by this
Agreement and in order to put MMA Buyer in the position to operate the business
of MMA, RTS and RIB after the Closing Date in the same manner as they are
currently conducting business. Each of MMA and RTS shall use, and MMA shall
cause RIB to use, its respective commercially reasonable efforts to obtain as
promptly as practicable all licenses, permits, approvals and authorizations, and
to complete all applications and make all filings necessary (subject to MMA
Buyer's prior approval) to (i) enable MMA Buyer to operate the business of MMA,
RTS and RIB and shall provide MMA Buyer with copies of all such materials prior
to submission and a reasonable opportunity to comment thereon and (ii) prepare
RIB's registration and license under the Exchange Act and state laws as a
broker-dealer and maintain RIB's membership in the NASD. In this regard, MMA
shall provide on Schedule 7.5 a list of all states and other jurisdictions where
------------
RIB is registered or otherwise qualified to conduct business as a broker-dealer.
After the Closing, MMA Buyer will maintain in good condition all presently
existing books, records, files and documents of MMA for the time periods and in
the locations required by the Advisers Act and the rules thereunder including,
without limitation, Rule 204-2, or by Governmental Authorities.
7.6. Exclusivity.
-----------
None of MMA (on behalf of itself and the Subsidiaries), RTS, or the
Sellers will accept, negotiate, solicit, initiate or encourage the submission of
any proposal or offer from any person other than Buyers relating to the
acquisition of all or substantially all of the Interests, Stock, Subsidiary
Stock or assets of MMA, RTS or the Subsidiaries (including any acquisition
structured as a merger, consolidation, or share exchange). Each of MMA and
Sellers shall
38
promptly notify MMA Buyer of the terms of any such proposal or offer and provide
to MMA Buyer a copy of any written offer or proposal with respect to the
foregoing prior to the Closing Date.
7.7. Taxes.
-----
(a) Each Seller shall be liable for all transfer taxes which are due as a
result of his, her or its transfer of Interests and/or Stock pursuant to
this Agreement.
(b) Sellers shall cause MMA not to amend any Tax return (including any schedule
thereto) filed as of the date of this Agreement, unless required by
applicable law and disclosed in Schedule 3.12 (as such schedule may be
-------------
amended at any time prior to the Closing Date by notice to Buyers).
Sellers, on behalf of MMA, shall prepare and file the final partnership Tax
returns for the final taxable year of MMA ending on the Closing Date
required to be filed after the date hereof in a manner that such returns
shall be consistent with returns for prior years.
(c) Sellers shall cause MMA to make a timely election under Code Section 754 to
adjust the basis of partnership property in the manner provided in Code
Sections 734 and 743 for the final taxable year of MMA ending on the
Closing Date, and, in doing so, to include with the final partnership Tax
returns of MMA for such final year any "Section 754 Forms" that are
required to be so included on account of the election under Code Section
754. Sellers and Buyers shall cooperate fully, and in good faith, with
each other in making this election, determining the fair market value of
each asset of MMA and allocating the Purchase Price for the Interests among
those assets in accordance with Sections 755 and 1060(d) of the Code.
"Section 754 Forms" shall mean all returns, documents, statements, and
other forms that are required to be submitted to the IRS in connection with
a Code Section 754 election made by a partnership with respect to which
there has been an applicable asset acquisition within the meaning of Code
Section 1060(d), and any analogous forms that are required to be filed for
state or local tax purposes.
(d) Any failure by Buyers to withhold monies from the Purchase Price for the
Interests that results in Taxes being assessed against Buyers shall be
treated as taxes for which Buyers are entitled to indemnification pursuant
to this Agreement.
(e) In no event will Buyers or any of their affiliates be responsible for any
Tax liability that arises as a result of the transfer of Interests or Stock
pursuant to this Agreement, including any state or local Tax liability
resulting in connection with such transfer; any such liability shall be the
responsibility of Sellers.
7.8. Waiver.
------
Each Seller waives any and all rights under the Partnership Agreement,
including, but not limited to rights of first refusal ("ROFR") and tag along
rights ("TAR"). In addition, Seller waives any and all notice provisions and
waiting periods contemplated by the Partnership
39
Agreement including, but not limited to such notice provisions and waiting
periods associated with the ROFR, TAR and sale of partnership provisions.
7.9. Regulatory Matters.
------------------
(a) The parties hereto shall cooperate with each other and use commercially
reasonable efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings,
to obtain as promptly as practicable all permits, consents, approvals and
authorizations of all third parties and Governmental Authorities that are
necessary or advisable to consummate the transactions contemplated by this
Agreement and to comply with the terms and conditions of all such permits,
consents, approvals and authorizations of all such Governmental
Authorities.
(b) Except as limited by Section 7.1(b), MMA shall have the right to review in
--------------
advance all the information relating to MMA and its Subsidiaries that
appears in any filing made with, or written materials submitted to, any
third party or any Governmental Authority in connection with the
transactions contemplated by this Agreement. In exercising the foregoing
right, MMA shall act reasonably and as promptly as practicable. The
parties hereto agree that they will consult with each other with respect to
the obtaining of all permits, consents, approvals and authorizations of all
third parties and Governmental Authorities necessary or advisable to
consummate the transactions contemplated by this Agreement and each party
will keep the other apprised of the status of matters relating to
completion of the transactions contemplated herein.
(c) MMA and Buyers shall, upon request, furnish each other with all information
concerning itself, its Subsidiaries, representatives, stockholders,
partners and affiliates and such other matters as may be reasonably
necessary or advisable in connection with any other statement, filing,
notice or application made by or on behalf of Buyers, MMA, RTS or any
Subsidiary to any Governmental Authority in connection with the
transactions contemplated by this Agreement.
(d) MMA Buyer and MMA shall promptly advise each other upon receiving any
communication from any Governmental Authority whose consent or approval is
required for consummation of the transactions contemplated by this
Agreement which causes such party to believe that there is a reasonable
likelihood that any regulatory approval will not be obtained or that the
receipt of any such approval will be materially delayed.
7.10. Proxy Statement.
----------------
Prior to mailing to the shareholders of each Fund, MMA Buyer and MMA
shall prepare proxy materials which are subject to regulation under the Exchange
Act or the Investment Company Act and which are to be used for any shareholders'
meeting directly or indirectly relating to the transaction. MMA Buyer and MMA
shall use their best efforts to finalize the proxy statement to their mutual
satisfaction. If the requisite percentage of shareholders of each Fund fails to
approve any one or more of the proposals for which approval was being sought at
the shareholder meeting, and any adjournment thereof, MMA Buyer may, in
40
its sole discretion, elect in writing within five days after the failure to
approve, time being of the essence, not to consummate the transaction and
terminate this Agreement. If MMA Buyer timely elects to terminate this Agreement
as provided herein, no party shall have any liability to the other hereunder.
7.11. Press Releases, Etc.
--------------------
MMA Buyer and MMA shall consult with each other as to the form,
substance and timing of any press release or other public disclosure of matters
related to this Agreement or any of the transactions contemplated hereby and no
such press release or other public disclosure shall be made without the consent
of the other party or parties, which shall not be unreasonably withheld or
delayed; provided, however, that the parties may make such disclosures as are
required by law after making reasonable efforts in the circumstances to consult
in advance with the other parties.
7.12. Minority Stock.
--------------
The General Partner shall use its good faith efforts to acquire as
promptly as practicable the Minority Stock of the Additional Stockholders. In
the event that the General Partner has not acquired all of the Minority Stock
owned by the Additional Stockholders within three months after the date hereof,
then at the request of MMA Buyer, MMA shall cause RTS to undertake a reverse
merger, reverse stock split or similar action, to the extent not prohibited by
applicable law, to convert the Minority Stock then owned by Additional
Stockholders to a right to receive cash or dissenter or appraisal rights.
7.13. Tax Cooperation.
---------------
Buyers and Sellers shall reasonably cooperate with each other in
connection with the preparation of Tax returns (including the Mutual Fund Tax
Returns) of MMA, RTS, the Subsidiaries and the Funds and MMA, RTS, RIB or the
Sellers (on behalf of RSI and themselves) shall preserve all information,
returns, books, records and documents relating to any liabilities for Taxes with
respect to a taxable period until the later of the expiration of all applicable
statutes of limitation and extensions thereof, or a final determination with
respect to Taxes for such period and shall not destroy or otherwise dispose of
any record without first providing the other party with a reasonable opportunity
to review and copy the same.
7.14. Name Change.
-----------
In the event of termination of this Agreement, as soon as practicable,
each Buyer shall change its name so that it no longer contains any reference to
the name "Money Management Associates."
41
ARTICLE VIII
CONDITIONS
8.1. Conditions to Each Party's Obligations to Consummate.
----------------------------------------------------
The respective obligations of each party to consummate the
transactions contemplated by this Agreement shall be subject to the fulfillment
or waiver at or prior to the Closing Date of the following conditions:
(a) Regulatory Approvals. The transactions contemplated by this Agreement
--------------------
shall have been approved by all Governmental Authorities, the approval of
which is required to permit consummation thereof, without the imposition of
any non-standard condition or requirement of any non-standard commitment
which is unreasonably burdensome in the reasonable judgment of the parties
hereto; and all waiting periods arising under applicable law shall have
duly lapsed or been terminated.
(b) No Orders. None of Buyers, MMA, RTS, any Subsidiary or any Fund shall be
---------
subject to any order, decree or injunction of a court or agency of
competent jurisdiction which enjoins or prohibits the consummation of any
of the transactions contemplated by this Agreement or prevents MMA Buyer
from operating the business of MMA, RTS and the Subsidiaries upon Closing
in the same manner as the business is currently operating.
(c) Litigation. No action or proceeding shall have been instituted or
----------
threatened by any court, Governmental Authority, self-regulatory body or
other person or entity and remain pending before any court, governmental
body or self-regulatory body or be threatened, to restrain or prohibit or
to recover damages in respect of any or all of the transactions
contemplated by this Agreement which is reasonably likely to have a Buyer
Material Adverse Effect or an MMA Material Adverse Effect (as the case may
be) with respect to any of the parties hereto, or would hinder MMA Buyer's
ability to conduct the business of MMA, RTS and RIB upon Closing in the
same manner as the business is currently being conducted; nor shall any
Governmental Authority or other person or entity have notified any party to
this Agreement or any of its affiliates that consummation of any or all of
the transactions contemplated by this Agreement would constitute a
violation of the laws of any jurisdiction or that it intends to commence
any action or proceeding to restrain or prohibit or to recover damages in
respect of any or all of the transactions contemplated by this Agreement,
unless such Governmental Authority or other person or entity shall have
withdrawn such notice and abandoned such action or proceeding.
(d) Third Party Consents. All authorizations, consents and approvals of third
--------------------
parties and of the Boards of Directors/Trustees of the Funds and the
▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇ Trust and the shareholders of each Fund that are
required to be obtained in connection with the transactions contemplated
hereby, including those specified in Sections 6.1, 6.2 and 7.9 and Schedule
----------------- --- --------
3.7(c), shall have been obtained.
------
42
8.2. Conditions to Obligation of Buyers to Consummate.
------------------------------------------------
The obligation of Buyers to consummate the transactions contemplated
hereby shall be subject to the fulfillment or waiver at or prior to the Closing
Date of the following additional conditions:
(a) Representations and Warranties. The representations and warranties of MMA,
------------------------------
RTS and Sellers set forth in Articles III and IV shall be true and correct
------------ --
in all material respects (other than (i) the representations and warranties
contained in Sections 3.1, 3.2(a) and 3.3 and Article IV and the
------------ ------ --- ----------
representations and warranties qualified as to "material," "materiality" or
"MMA Material Adverse Effect" which shall, subject to such qualifications,
be true and correct in all respects, and (ii) in the case of RTS,
inaccuracies in the representations and warranties of RTS based on an event
occurring after the date hereof and prior to Closing and disclosed to MMA
Buyer (A) that has not resulted in and is not reasonably expected to result
in a material adverse effect (whether taken individually or in the
aggregate with all other such effects) on the financial condition or
business or results of operations of RTS, including, without limitation,
any cease and desist order applicable to RTS that limits its activities or
any other supervisory order applicable to RTS that limits in any material
respect its activities, (B) affecting RTS that would prevent the
consummation of the transactions contemplated by this Agreement or have a
material adverse effect on the assets of RTS, except for conditions, events
or circumstances generally affecting the economy as a whole including
changes in prevailing interest rates or changes in laws affecting insured
depository institutions, generally (an "RTS Material Adverse Effect")) as
of the Closing Date as though made at and as of the Closing Date (it being
understood that representations and warranties that speak as of a specified
date shall continue to speak only as of the date specified), and Buyers
shall have received a signed certificate of MMA from its General Partner,
of RTS from ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇ and its Chief Financial Officer and of
Sellers to that effect.
(b) Performance of Obligations. MMA (on behalf of itself and any Subsidiary),
--------------------------
RTS and each Seller shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior
to the Closing Date, and Buyers shall have received a signed certificate of
MMA from its General Partner, of RTS from ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇ and its Chief
Financial Officer and of Sellers to that effect.
(c) Consulting and Noncompetition Agreements. On the date hereof, ▇▇▇▇▇▇ ▇.
----------------------------------------
▇'▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇'▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇ each shall have duly executed and
delivered a Consulting and Noncompetition Agreement substantially in the
form attached hereto as Exhibit 8.2(c), each such agreement to be effective
--------------
as of Closing.
(d) New Management Contract and Fund Services Agreements. The shareholders and
----------------------------------------------------
the Board of Directors/Trustees of each Fund shall have approved the New
Management Contract, and the New Management Contract shall have been duly
executed and delivered by each Fund, and the Board of Directors/Trustees of
each Fund or the ▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇ Trust, as appropriate, shall have
approved the fund service agreements attached as
43
Exhibit 6.2 and the fund services agreements shall have been duly executed
-----------
and delivered by each Fund or the ▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇ Trust, as appropriate.
(e) Assets Under Management; Net Management Fees. As of the close of business
--------------------------------------------
two days prior to the Closing Date, MMA shall have Aggregate Net Assets
(excluding any assets with respect to which, at the time of calculation
thereof, MMA had received notice that the contract or arrangement pursuant
to which such assets were being administered was being terminated) and Net
Management Fees, respectively, of at least 80% of (i) the arithmetic daily
average of Aggregate Net Assets and Net Management Fees, respectively, for
the period from June 30, 1999 to September 30, 1999 (the "Initial Period")
plus (ii) the arithmetic daily average of Aggregate Net Assets and Net
----
Management Fees, respectively, for the period from October 1, 1999 to
December 31, 1999 (or the close of business two days prior to the Closing
Date, if earlier) divided by (iii) 2 (the "Initial Average"); provided,
----------
however, in the event that the Closing Date has not occurred by October 2,
2000, if (i) the arithmetic daily average of Aggregate Net Assets and Net
Management Fees, respectively, for the Initial Period plus (ii) the
----
arithmetic daily average of Aggregate Net Assets and Net Management Fees,
respectively, for the period from June 30, 2000 to September 30, 2000
divided by (iii) 2 (the "Final Average") is less than the Initial Average,
----------
MMA shall have Aggregate Net Assets (excluding any assets with respect to
which, at the time of calculation thereof, MMA had received notice that the
contract or arrangement pursuant to which such assets were being
administered was being terminated) and the Net Management Fees,
respectively, of 80% of the Final Average. MMA Buyer shall receive a
signed certificate of MMA certifying that Aggregate Net Assets and Net
Management Fees equal 80% of the Initial Average or, if applicable, the
Final Average.
(f) Opinion of Counsel to MMA and Sellers. Buyers shall have received the
-------------------------------------
opinion of Breyer & Associates PC, counsel to MMA and Sellers, or other
counsel reasonably acceptable to Buyers, dated the Closing Date, addressed
to Buyers substantially in the form set forth in Exhibit 8.2(f) (which
--------------
opinion may rely upon the opinion of counsel to each Fund or any other
counsel acceptable to Buyers).
(g) Opinion of Counsel to each Fund. Buyers shall have received the favorable
-------------------------------
opinion of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP, special counsel to each Fund, dated
the Closing Date, addressed to Buyers substantially in the form set forth
in Exhibit 8.2(g) (which opinion may rely upon the opinion of any other
--------------
counsel acceptable to Buyers).
(h) Delivery. Sellers shall have caused to be executed and/or delivered to MMA
--------
Buyer the following:
(i) certified copies of all resolutions, consents and approvals of the
General Partner and the Limited Partners (and if any of the Limited
Partners are entities requiring such resolutions, consents and
approvals, certified copies of such resolutions, consents and
approvals) of MMA authorizing the execution of this Agreement and the
transfer of the Interests and Stock and each of the agreements,
documents and instruments contemplated hereby to which MMA is a
party;
44
(ii) a copy of the Certificate of Limited Partnership and Partnership
Agreement, as amended, of MMA and a certificate issued by the
Recorder of Deeds of the District of Columbia certifying that MMA is
in good standing in the District of Columbia as of the most recent
practicable date;
(iii) true, correct and complete copies of each of the agreements,
documents and instruments contemplated hereby to which MMA, RTS and
Sellers are a party, duly executed by MMA, RTS and Sellers and all
agreements, documents, instruments and certificates delivered or to
be delivered in connection therewith by MMA;
(iv) a certificate of the General Partner on behalf of MMA certifying that
the resolutions, consents and agreement in paragraphs (i) and (ii)
above pertaining to MMA are in full force and effect and have not
been amended or modified, and that the officers of MMA are those
persons named in the certificate;
(v) a certificate issued by the United States of America and the
Secretary of State of the State of organization, as applicable, for
RTS, RIB and any Limited Partner which is an entity (together with a
copy of such entity's organizational documents) certifying that each
entity is duly organized and validly existing and (except for RTS) in
good standing in its jurisdiction of organization as of the most
recent practicable date, and an affidavit from an officer of such
entity confirming that such organizational documents are true and
complete;
(vi) the Escrow Agreement and UCC-1 Financing Statement executed by the
Sellers and the escrow agent, and
(vii) written resignations of the directors and officers of RTS, RIB and
RSI (to the extent RSI has not been previously liquidated and
dissolved in accordance with Section 1.3) and of the trustees, plan
-----------
administrators and fiduciaries of the Employee Programs and evidence
satisfactory to Buyers of the revocation of any powers of attorney or
any authorization of any person to draw on the bank accounts set
forth on Schedule 3.16.
-------------
(i) Regulated Investment Company Status.
-----------------------------------
MMA Buyer shall not have determined, applying reasonable methods and
assumptions, that any Fund would fail to qualify, for its taxable year that
includes the Closing Date, for treatment as a regulated investment company that
is eligible to compute its taxable income under Section 852 of the Code.
(j) Material Adverse Effect.
-----------------------
Since the date of this Agreement, there shall have been no event or
condition or events or conditions which, either individually or in the
aggregate, has had or could reasonably be expected to have an MMA Material
Adverse Effect, and Buyers shall be provided with a certificate from the General
Partner of MMA to that effect at the Closing.
45
(k) Title Policy.
------------
MMA Buyer shall have received the Title Policy (as hereinafter
defined).
(l) Completion of MMA and Fund Due Diligence.
----------------------------------------
Buyers and their counsel shall have been afforded an opportunity to
conduct and complete a due diligence review of the operations, books and records
of MMA and the Funds to the reasonable satisfaction of Buyer, which Buyers shall
complete within forty-five days from the date Buyers have been afforded access
to the operations, books and records of MMA and the Funds; provided, however,
that such period shall not begin to run and/or shall be tolled and this
condition shall not be satisfied unless and until Buyers are provided full and
complete access to such operations, books and records.
(m) Completion of RTS Due Diligence.
-------------------------------
Buyers and their counsel, agents or other representatives shall have
been afforded an opportunity to conduct and complete a due diligence review of
RTS to ensure, and RTS shall provide information reasonably necessary for MMA
Buyer to verify, that RTS is a qualified thrift lender in accordance with
Section 10(m) of the Home Owners Loan Act including, without limitation,
providing copies to MMA Buyer of all calculations made to ensure RTS's
compliance with requirements relating to qualified thrift lenders.
(n) Further Assurances.
------------------
Buyers shall have received such other certificates and instruments
signed by MMA as Buyers may reasonably request to consummate the transactions
contemplated hereby.
8.3. Conditions to Obligation of MMA to Consummate.
---------------------------------------------
The obligation of MMA to consummate the transactions contemplated
hereby shall be subject to the fulfillment or waiver at or prior to the Closing
Date of the following additional conditions:
(a) Representations and Warranties.
------------------------------
The representations and warranties of Buyers set forth in Article II,
----------
shall be true and correct in all material respects as of the Closing Date as
though made at and as of the Closing Date (it being understood that
representations and warranties that speak as of a specified date shall continue
to speak only as of the date so specified), and MMA shall have received a signed
certificate of each Buyer to that effect.
46
(b) Performance of Obligations.
--------------------------
Buyers shall have performed in all material respects all obligations
required to be performed by them under this Agreement at or prior to the Closing
Date, and Sellers shall have received a signed certificate of an executive
officer of each Buyer to that effect.
(c) Delivery.
--------
Buyers and FBR (as the case may be) shall have caused to be executed
and/or delivered to Seller Representative the following:
(i) certified copies of resolutions of the boards of directors of Buyers
authorizing the execution of this Agreement and each of the
agreements, documents and instruments contemplated hereby to which
each Buyer is a party;
(ii) a copy of the Certificate of Incorporation and by-laws of each Buyer,
each of which is certified as of a recent date by the Secretary of
State of the State of Delaware;
(iii) a certificate issued by the Secretary of State of Delaware certifying
that each Buyer is validly existing and in good standing in Delaware
as of the most recent practicable date;
(iv) true, correct and complete copies of each of the agreements,
documents and instruments contemplated hereby to which each Buyer is
a party, and all agreements, documents, instruments and certificates
delivered or to be delivered in connection therewith by each Buyer;
(v) a certificate of the Secretary of each Buyer certifying as to MMA
Buyer and LP Buyer (as the case may be) that the resolutions,
Certificate of Incorporation and by-laws in paragraphs (i) and (ii)
above are in full force and effect and have not been amended or
modified, and that the officers of each entity are those persons
named in the certificate;
(vi) the Initial Payment, the Minority Stock Purchase Price, the Note, the
Escrow Agreement, the UCC-1 Financing Statement and the Deed of Trust
to be delivered as consideration and collateral at the Closing
pursuant to Section 1.4; and
-----------
(vii) such other certificates and documents as are required hereby or are
reasonably requested by MMA.
(d) Further Assurances.
------------------
Sellers shall have received such other certificates and instruments
signed by Buyers as Sellers shall reasonably request.
47
(e) Opinion of Counsel to Buyers.
----------------------------
MMA shall have received the opinion of Dechert Price & ▇▇▇▇▇▇, counsel
to Buyers, dated the Closing Date, addressed to MMA and each Seller,
substantially in the form set forth in Exhibit 8.3(e).
--------------
ARTICLE IX
INDEMNIFICATION AND REMEDIES
9.1. No Waivers.
----------
No waiver of any breach of any covenant in this Agreement shall be
implied from any forbearance or failure of a party to take action thereon.
9.2. Indemnification.
---------------
(a) Indemnification by Principal Sellers. From and after the Closing, the
------------------------------------
Principal Sellers shall jointly and severally indemnify and hold Buyers,
MMA, RTS and RIB their respective directors, trustees, officers, registered
representatives, members and controlling persons, and their respective
successors and assigns, harmless from and against any liabilities, demands,
claims, actions or causes of action, assessments, fines, penalties, costs
(including reasonable attorneys' fee, expert witness fees and court costs),
actual damages and expenses (any and all of the foregoing being referred to
as "Losses" or individually a "Loss"), sustained or incurred by the
indemnified parties to the extent any such Loss is the subject of a Claim
(as defined below) by a party other than an indemnified party or a party
providing funding or financing solely to the extent the indemnified party
has assigned to such party its, or the funding or financing source has
succeeded in bankruptcy to such party's, right, title and interest in, to
and under this Agreement (other than a Claim by an indemnified party or its
funding or financing source for a breach of representation or warranty with
respect to ownership/title as set forth in Sections 3.3, 3.9 or 4.1 which
------------ --- ---
shall be covered by this Section 9.2) and arises out of or by virtue of (i)
-----------
any breach of a representation or warranty made by MMA, RTS and Principal
Sellers herein; (ii) any failure to perform any covenant or agreement of
MMA, RTS and Principal Sellers herein; (iii) any matters described in
Schedules 3.18 and 3.28(h), (iv) any Tax liability of MMA, any Subsidiary
-------------- --------
or any Fund (only to the extent, with respect to the Funds, that such a Tax
liability would be legally or customarily payable by the investment adviser
of, or provider of compliance or administrative services to, a Fund by
virtue of their status as investment adviser or provider of compliance or
administrative services, respectively) in each case relating to the period
prior to the Closing Date, any Tax Liability of Sellers, by reason of
transferee liability or otherwise or any Tax Liability referred to in
Section 7.7(d) hereof; and (v) (A) any wrongful or negligent act or
--------------
omission of RTS (except as specifically provided in subsection (v)(B)) or
the Funds which act or omission relates to, or arises out of the conduct of
the business prior to the Closing Date, or (B) any act or omission of MMA,
RTS (only to the extent any such act or omission results in liability that
would be legally or customarily payable by RTS in its capacity as a
provider of services to the Funds) or any Subsidiary which act or omission
relates to, or
48
arises out of the conduct of the business prior to the Closing Date. In the
event any Principal Seller or any of its successors or assigns (A)
reorganizes or consolidates with or merges into or enters into another
business combination transaction with any other person or entity and it is
not the resulting, continuing or surviving corporation or entity of such
consolidation, merger or transaction, or (B) liquidates, dissolves or
transfers all or substantially all of its properties and assets to any
person or entity, then, and in each such case, proper provisions shall be
made so that the successor or assign of such Principal Seller, as the case
may be, assumes the obligations set forth in this Section 9.2(a).
--------------
(b) Limitation on Indemnification by Principal Sellers. The indemnification
--------------------------------------------------
provided in Section 9.2(a) shall not apply to any Claim for breaches of
--------------
representations and warranties pursuant to clause (i) of Section 9.2(a)
--------------
(other than those contained in Sections 3.2(a) and 3.3 and Article IV and,
--------------- --- ----------
with respect to RTS, those contained in Section 3.12 for which notice
------------
pursuant to Section 9.3 has not been received by the Seller Representative
-----------
on or before the date that is six months after the expiration of the
applicable statute of limitations) for which notice pursuant to Section 9.3
-----------
has not been received by the Seller Representative on or before the date
that is two years after the Closing Date. The Principal Sellers shall not
be required to indemnify Buyers, MMA, RTS and RIB, their respective
directors, trustees, officers, registered representatives members and
controlling persons, and their respective successors and assigns, with
respect to any Claim resulting from or arising out of matters described in
clause (i) of Section 9.2(a) (other than those contained in Sections 3.2(a)
-------------- ---------------
and 3.3 and Article IV and, with respect to RTS, those contained in Section
--- ---------- -------
3.12) unless and until the aggregate amount of all Claims against Principal
----
Sellers collectively exceed $248,600 and then only to the extent such
aggregate amount exceeds $248,600. The amount of the indemnification
liability of the Principal Sellers (other than those contained in Section
-------
9.2(a)(iv) or by virtue of a breach of Sections 3.2(a) and 3.3 and Article
---------- --------------- --- -------
IV) shall not exceed $24,860,000.
--
(c) Indemnification by Buyers. From and after the Closing, Buyers, MMA and RTS
-------------------------
shall jointly and severally indemnify and hold Sellers, their respective
affiliates and subsidiaries, their directors, trustees, officers and
controlling persons, and their successors and assigns, harmless from and
against all Losses sustained or incurred by the indemnified parties to the
extent any such Loss arises out of or by virtue of (i) any breach of a
representation or warranty made by Buyers herein; (ii) any failure to
perform any covenant or agreement of Buyers herein; or (iii) the conduct of
the business by Buyers, MMA, RTS, RIB or any Fund after the Closing. In
the event any Buyer, MMA or RTS or any of their respective successors or
assigns (A) reorganizes or consolidates with or merges into or enters into
another business combination transaction with any other person or entity
and is not the resulting, continuing or surviving corporation or entity of
such consolidation, merger or transaction, or (B) liquidates, dissolves or
transfers all or substantially all of its properties and assets to any
person or entity, then, and in each such case, proper provisions shall be
made so that the successor and assign of such Buyer, MMA, or RTS (as the
case may be) assumes the obligations set forth in this Section 9.2(c).
--------------
49
(d) Limitation on Indemnification by Buyers. The indemnification pursuant to
---------------------------------------
Section 9.2(c) shall not apply to any Claim (as defined below) for breach
--------------
of representations and warranties pursuant to clause (i) of Section 9.2(c)
--------------
(other than those contained in Section 2.2(a)) for which notice pursuant to
--------------
Section 9.3 has not been received by MMA Buyer on or before the date that
-----------
is two years after the Closing Date. Buyers and MMA shall not be required
to indemnify Sellers with respect to any Claim resulting from or arising
out of matters described in clause (i) of Section 9.2(c) (other than those
--------------
contained Section 2.2(a)) unless and until the aggregate amount of all
--------------
Claims against Buyers exceed $248,600 and then only to the extent such
aggregate amount exceeds $248,600. The amount of the indemnification
liability of Buyers, MMA and RTS (other than those contained in Section
-------
2.2(a)) shall not exceed $24,860,000.
------
(e) Indemnification Changes to Representations and Warranties. For purposes of
---------------------------------------------------------
determining under Section 9.2 if any representation or warranty contained
-----------
in this Agreement has been breached, and for purposes of determining the
amount of a Claim for breach of a representation or warranty under this
Agreement (as applicable), all references to and limitations or
qualifications resulting from the terms "materiality," "MMA Material
Adverse Effect," "knowledge of MMA, RTS and/or Sellers," and "knowledge of
Buyers" shall be disregarded except as such references are used generally
in Sections 2.5, 3.12(b), 3.17(b), 3.18, 3.28(e) and 3.28(h) and as such
------------ ------- ------- ---- ------- -------
references are used with respect to third parties in Sections 3.8,
------------
3.9(a)(ii), 3.9(a)(iii) and 3.9(a)(v).
---------- ----------- ---------
(f) Recoveries. The amount of any Loss suffered by an indemnified party under
----------
this Agreement shall be net of (i) any amounts recovered or recoverable by
the indemnified party pursuant to any indemnification by or indemnification
agreement with any third party, other than any insurance policy, and (ii)
any insurance proceeds (net of associated incremental premiums) available
as an offset against such Losses.
9.3. Claims Procedures.
-----------------
(a) Notice. An indemnified party shall give written notice to an indemnifying
------
party promptly upon receipt of written notice or sixty (60) days from
discovery by the indemnified party of any claim, demand or cause of action
which may give rise to a claim for indemnification under this Agreement (a
"Claim") setting forth in detail all information that forms the basis of
such Claim. Except as otherwise set forth in Section 9.2(a) or (c), the
-------------- ---
failure to give such notice shall not affect the right of the indemnified
party to indemnity hereunder except to the extent such failure has
adversely affected the rights of the indemnifying party.
(b) Third Party Procedures. In the case of any Claim (other than a Claim by an
----------------------
indemnified party for a breach of representation or warranty with respect
to ownership/title as set forth in Sections 3.3, 3.9 or 4.1), the
------------ --- ---
indemnified party may defend, settle or otherwise compromise, or pay a
Claim unless it shall have received notice (within thirty (30) days of the
indemnifying party's receipt of the notice of such Claim from the
indemnified party) from the indemnifying party that the indemnifying party
either disputes that it has indemnification responsibility relating to such
Claim or it intends, at its sole cost and expense, to assume the defense of
any such matter, in which latter case the indemnified party shall have the
right, at no
50
cost or expense to the indemnifying party, to participate in such defense;
provided, that, any legal counsel selected by the indemnifying party
pursuant to this Section 9.3(b) shall be reasonably satisfactory to the
--------------
indemnified party; and provided, further, that the indemnifying party shall
not, in the defense of such Claim, consent to the entry of any judgment or
enter into any settlement, except with the written consent of the
indemnified party (which consent shall not be unreasonably withheld or
delayed), which provides for anything other than money damages or other
money payments or which does not include as an unconditional term thereof
the giving by the claimant or the plaintiff to the indemnified party a
release from all liability in respect of such Claim. If the indemnifying
party does not assume the defense of a Claim or dispute that it has
indemnification responsibility with respect to such Claim within the time
period specified above, the indemnifying party shall pay all costs of each
indemnified party arising out of the defense until the defense is assumed.
The indemnified party shall take all appropriate action to permit and
authorize the indemnifying party fully to participate, to the extent
provided above, in the defense of any such Claim. The indemnifying party
shall keep the indemnified party fully apprised at all times as to the
status of the defense. If the indemnifying party does not assume the
defense, the indemnified party shall keep the indemnifying party reasonably
apprised as to the status of the defense. If the Claim is one that by its
nature cannot be defended solely by the indemnifying party, then the
indemnified party shall make available such information and assistance as
the indemnifying party may reasonably request and shall cooperate with the
indemnifying party in such defense, at the expense of the indemnifying
party.
(c) Indemnified Party Procedures. A party which has a Claim for
----------------------------
indemnification under this Article IX, other than as described in Section
---------- -------
9.3(b), shall promptly notify the other parties hereto of such Claim. If
------
within thirty (30) days of the receipt of such notice of Claim, the parties
cannot agree on the amount of or responsibility for such Claim, the parties
agree to submit such dispute to binding arbitration to be held in Bethesda,
Maryland under the rules of the American Arbitration Association. Any such
arbitration shall be conducted by three arbitrators, one of whom shall be
selected by the Seller Representative, one of whom shall be selected by
Buyers and one of whom shall be selected by the arbitrators selected by the
Seller Representative and Buyers. The expenses of any such arbitration
shall be paid by the non-prevailing party as determined by the final order
of the arbitrators.
(d) Remedies. Absent fraud or criminal activity and except for equitable
--------
remedies, the remedies provided for in this Article IX shall constitute the
----------
sole and exclusive remedy of the parties hereto for any post-Closing claims
made for breach of this Agreement or the representations and warranties
contained herein or in connection with the transactions contemplated hereby
or any of the other matters covered by this Article IX. Nothing in this
----------
subsection is intended to affect any rights under the Note, Escrow
Agreement, Deed of Trust or UCC-1 Financing Statement.
51
(e) Satisfaction of Losses. Subject to the procedures set forth above, Losses
----------------------
shall be satisfied as follows:
(i) Principal Sellers shall satisfy their liability for Losses by paying
the amount of such liability to the indemnified party or, at the
written election of either Buyers or Seller Representative, by
offsetting such amount against the outstanding balance of the Note;
provided, however, that in the event any such offset is elected by
Seller Representative prior to the due date of the next installment
otherwise payable under the Note, the amount of Loss to be offset
shall be increased by the applicable "short-term rate" per annum,
compounded annually, from the date paid by the indemnified party to a
third party or payable to the indemnified party by virtue of a breach
of Sections 3.3, 3.9 or 4.1 up to the date of the next installment
------------ --- ---
otherwise payable under the Note; and
(ii) Buyers and MMA shall satisfy their liability for Losses by paying the
amount of such liability to the Seller Representative on behalf of the
Sellers.
ARTICLE X
TERMINATION
10.1. Termination.
-----------
This Agreement may, by written notice, be terminated at any time prior
to the Closing Date:
(a) by mutual written consent of the Seller Representative and Buyers;
(b) by either MMA or Buyers at any time after March 31, 2001 by written notice
given to the other, if the Closing shall not theretofore have occurred
(provided the terminating party is not otherwise in default or in breach of
this Agreement);
(c) by either MMA or Buyers by written notice given to the other, in the event
of the breach by (i) MMA, RTS and Principal Sellers, in the case of notice
from Buyers, of any representation or warranty contained herein or in any
schedule or document delivered herewith which has resulted or is reasonably
likely to result in an MMA Material Adverse Effect, or any agreement,
covenant or obligation contained herein, which breach cannot be or has not
been cured within 30 days after written notice to MMA, or (ii) Buyers and
FBR, in the case of notice from MMA, of any representation or warranty
contained herein or in any schedule or document delivered herewith which
has resulted or is reasonably likely to result in a Buyer Material Adverse
Effect, or any agreement, covenant or obligation contained herein, which
breach cannot be or has not been cured within 30 days after written notice
to Buyers;
(d) by either MMA or Buyers if the Board/Trustees of Directors of each Fund or
the shareholders of each Fund shall have met and rejected any of the
actions or transactions contemplated hereby;
(e) by MMA Buyer pursuant to Section 7.10;
------------
52
(f) by MMA Buyer by written notice given to Seller Representative (i) within
sixty days of the date hereof, in the event Buyers and their counsel have
not been afforded an opportunity to conduct and complete a due diligence
review of the operations, books and records of MMA and the Funds within
forty-five days of the date hereof or (ii) within sixty days of the date
Buyers have been afforded full and complete access to the operations, books
and records of MMA and the Funds, in the event Buyers are not reasonably
satisfied with the results of such due diligence review; or
(g) by MMA Buyer by written notice given to Seller Representative, in the event
Buyers are not reasonably satisfied with the results of the due diligence
review of RTS provided in Section 8.2(m).
--------------
10.2. Effect of Termination and Abandonment.
-------------------------------------
In the event of termination of this Agreement and abandonment of the
transactions contemplated hereby pursuant to this Article X, no party hereto (or
---------
any of its directors of officers) shall have any liability or further obligation
to any other party to this Agreement, except as provided in Section 11.5 and the
------------
provisions of this Section 10.2. In the event that the Buyers, FBR or any of
------------
them commits a willful and material breach of any of their representations,
warranties, covenants, agreements or obligations contained in this Agreement
(and for purposes hereof, failure by the Buyers to have sufficient cash to fund
the Initial Payment and the Minority Stock Purchase Price shall be deemed to be
a willful and material breach resulting in a Buyer Material Adverse Effect) and
this Agreement is thereafter terminated on account thereof pursuant to Section
-------
10.1(c), then in that event MMA Buyer shall be liable for $1,000,000 in cash
-------
damages to MMA as agreed upon liquidated damages ("MMA Liquidated Damages")
which shall be paid by MMA Buyer to MMA within thirty days after written demand.
FBR does hereby unconditionally guarantee timely payment of MMA Liquidated
Damages. In the event that MMA, RTS or any of the Sellers commits a willful and
material breach of any of their representations, warranties, covenants,
agreements or obligations contained in this Agreement and this Agreement is
thereafter terminated on account thereof pursuant to Section 10.1(c), then in
---------------
that event MMA shall be liable for $1,000,000 plus the amount of MMA Transaction
Expenses paid by MMA Buyer or FBR or reimbursed by either of them to MMA in cash
damages to MMA Buyer as agreed upon liquidated damages which shall be paid by
MMA to MMA Buyer within thirty (30) days after written demand.
ARTICLE XI
GENERAL PROVISIONS
11.1. Survival of Representations, Warranties and Agreements.
------------------------------------------------------
All agreements of Buyers or MMA contained in this Agreement or in any
instrument delivered by Buyers or MMA pursuant to this Agreement shall survive
consummation of the transactions contemplated hereby in accordance with their
terms. The representations and warranties contained herein (other than Sections
--------
3.2(a), 3.3, and 2.2(a) and Article IV) shall terminate after a period of two
------ --- ------ ----------
years from such consummation or termination of this Agreement. If this
Agreement is terminated prior to the Closing Date, the respective agreements of
the parties in Sections 7.3, 10.2 and Article XI shall survive such termination.
------------------ ----------
53
11.2. Notices.
-------
All notices and other communications hereunder shall be in writing and
shall be given and deemed to have been duly received (i) on the date given if
delivered personally or by telex or telecopy or (ii) on the date received if
mailed by registered or certified mail (return receipt requested), to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to MMA Buyer or FBR, to:
Friedman, Billings, ▇▇▇▇▇▇ Group, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.,
General Counsel
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Dechert Price & ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to Sellers or MMA, to:
c/o Rushmore Trust & Savings, FSB
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇
Telecopy:
With a copy to:
Breyer & Associates PC
▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
Suite 700 East
Washington, D.C. 20005
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
54
11.3. Counterparts.
------------
This Agreement may be executed in any number of counterparts (including
executed counterparts delivered and exchanged by facsimile transmission) each of
which shall be deemed to constitute an original, but all of which together shall
constitute one and the same instrument.
11.4. Governing Law.
-------------
This Agreement shall be governed by, and interpreted in accordance
with, the laws of the State of Maryland without regard to its conflict of law
principles, except to the extent federal law may apply.
11.5. Expenses.
--------
All reasonable third party fees, costs and expenses incurred by
Sellers, MMA, RTS, the Subsidiaries (excluding the cost and expense of the
liquidation and dissolution of RSI) and the Funds prior to Closing shall be
borne by MMA Buyer (including, but not limited to, reasonable fees and
reasonable expenses of attorneys and accountants, filing and other fees payable
to Governmental Authorities, proxy costs and expenses, and mailing and printing
costs) incurred by them, or any of them, in connection with this Agreement, the
transactions contemplated hereby, or the performance of obligations contained
herein. All such reasonable third party fees, costs and expenses incurred by
Sellers, MMA, RTS, the Subsidiaries (excluding the cost and expense of the
liquidation and dissolution of RSI) and the Funds prior to Closing (the "MMA
Transaction Expenses") shall be paid directly by MMA Buyer, or reimbursed by MMA
Buyer to the party who has made payment thereof, within 10 days after written
demand, which written demand shall include invoices or statements of third party
providers relating to such MMA Transaction Expenses; provided however, any MMA
Transaction Expenses that are unpaid at Closing shall be paid by MMA Buyer at
Closing without any requirement for prior written notice. Notwithstanding the
foregoing, MMA Buyer shall not be liable for MMA Transaction Expenses for legal
services to Breyer & Associates PC (inclusive of fees to Silver, ▇▇▇▇▇▇▇▇ & ▇▇▇▇
LLP but excluding reimbursable expenses) in excess of $160,000 and no MMA
Transaction Expenses, other than the foregoing MMA Transaction Expenses for
legal services to Breyer & Associates PC, shall be incurred without the prior
consent of MMA Buyer, which shall not be unreasonably withheld. FBR does hereby
unconditionally guarantee timely payment or reimbursement of all MMA Transaction
Expenses subject to the thresholds set forth above.
11.6. Waiver, Amendment.
-----------------
Any provision of this Agreement may be (i) waived by the party benefited
by the provision, or (ii) amended or modified at any time (including the
structure of the transactions contemplated hereby, or any part thereof), by an
agreement in writing among the parties hereto and executed in the same manner as
this Agreement. Any waiver of any terms or conditions or of the breach of any
covenant, representation or warranty of this Agreement in one instance shall
55
not operate as or be deemed to be construed as a further or continuing waiver of
any other breach of such term, condition, covenant, representation or warranty,
nor shall any failure or delay at any time or times to enforce or require
performance of any provision hereof operate as a waiver of or affect in any
manner such party's right at a later time to enforce or require performance of
such provision or of any provision hereof; provided, however, that no such
waiver, unless it, by its own terms, explicitly provides to the contrary, shall
be construed to effect a continuing waiver of the provision being waived and no
such waiver in any instance shall constitute a waiver in any other instance or
for any other purpose or impair the right of the party against whom such waiver
is claimed in all other instances or for all other purposes to require full
compliance.
11.7. Entire Agreement; No Third-Party Beneficiaries; Etc.
---------------------------------------------------
This Agreement represents the entire understanding of the parties hereto
with reference to the transactions contemplated hereby and supersedes any and
all other oral or written agreements heretofore made. All terms and provisions
of this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective personal representatives, heirs, successors
and permitted assigns. Nothing in this Agreement, other than Section 9.2 hereof,
-----------
is intended to confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
11.8. Assignment.
----------
This Agreement may not be assigned by any party hereto without the
written consent of the other parties.
11.9. Further Assurances.
------------------
At and after the Closing, each of the parties hereto agrees to execute,
acknowledge and deliver such additional instruments as any other party may
reasonably request in connection with the transactions contemplated by this
Agreement.
11.10. Consent to Jurisdiction.
-----------------------
Each of the parties hereby consents to personal jurisdiction, service
of process and venue in the federal or state courts of the State of Maryland for
any claim, suit or proceeding arising under this Agreement, or in the case of a
third party claim subject to indemnification hereunder, in the court where such
claim is brought and hereby irrevocably agrees that all claims in respect of
such action or proceeding may be heard and determined in such state court or, to
the extent permitted by law, in such federal court. Each of the parties hereby
irrevocably consents to the service of process in any such action or proceeding
by the mailing by certified mail of copies of any service or copies of the
summons and complaint and any other process to such party at the address
specified in Section 11.2. The parties agree that a final judgment in any such
------------
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit or in any other manner permitted by law and shall affect
the right of a party to serve legal process or to bring any action or proceeding
in the courts of other jurisdictions. Except as provided in Article IX, the
----------
expenses of any such action or proceeding shall be paid by the non-prevailing
party as determined by the final order of the applicable federal or state court.
56
11.11. Seller Representative.
---------------------
Each Seller hereby irrevocably appoints ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇ ("Seller
Representative"), as such Seller's representative, attorney-in-fact and agent,
with full power of substitution to act in the name, place and stead of such
Seller with respect to the transfer of such Seller's Interests to Buyers in
accordance with the terms and provisions of this Agreement and to act on behalf
of such Seller in any litigation or arbitration involving this Agreement and to
do or refrain from doing all such further acts and things, and to execute all
such documents, as such Seller Representative shall deem necessary or
appropriate in connection with any of the transactions contemplated under this
Agreement, including, without limitation, the power:
(a) to act for such Seller with regard to matters pertaining to indemnification
referred to in this Agreement, including the power to compromise any claim
on behalf of such Seller, to bring and transact matters of litigation and
to refer matters to arbitration;
(b) to receive, hold, and deliver to Buyers the Interests accompanied by
executed stock powers, signature guarantees, and any other documents
relating thereto on behalf of such Seller;
(c) to execute and deliver all ancillary agreements, certificates, statements,
notices, approvals, extensions, waivers, undertakings, amendments and other
documents required or permitted to be given in connection with the
consummation of the transactions contemplated by this Agreement;
(d) to receive funds and give receipt for funds including in respect of the
Purchase Price for the Interests for such Seller's Interests, to distribute
to the Seller their respective share of the Purchase Price for the
Interests and to withhold from such funds a contingency reserve for the
matters referred to below;
(e) to give and receive all notices and communications to be given or received
under this Agreement and to receive service of process in connection with
any claims under this Agreement, including service of process in connection
with arbitration; and
(f) to take all actions which under this Agreement may be taken by the Seller
Representative and to do or refrain from doing any further act or deed on
behalf of such Seller which Seller Representative deems necessary or
appropriate in his sole discretion relating to the subject matter of this
Agreement as fully and completely as such Seller could do if personally
present.
If ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇ dies or otherwise becomes incapacitated and
unable to serve as Seller Representative, ▇▇▇▇▇▇ ▇'▇▇▇▇▇▇ shall become Seller
Representative. The death or incapacity of any Seller shall not terminate the
agency and power of attorney granted hereby
57
to the Seller Representative. The appointment of Seller Representative shall be
deemed coupled with an Interest and shall be irrevocable and MMA Buyer and any
other person may conclusively and absolutely rely, without inquiry, upon any
action of Seller Representative, as the action of such Seller in all matters
referred to herein. All actions, decisions and instructions of Seller
Representative shall be conclusive and binding upon all of the Sellers and no
Seller shall have any cause of action against Seller Representative for any
action taken or not taken by Seller Representative in his role as such, except
for any action or omission taken or made fraudulently or in bad faith with
respect to such Seller. All reasonable out-of-pocket fees and expenses
(including fees payable to counsel and other professional and brokerage fees)
incurred by Seller Representative in connection with performing such function
and in connection with the transactions contemplated hereby and all payments,
damages, costs, fees and expenses in connection with any indemnification claim
by or other dispute with MMA Buyer under the Agreement shall be paid by each
Seller in proportion to his respective Interests and may be deducted by Seller
Representative from any amounts otherwise payable to any Seller hereunder.
Seller Representative may withhold from funds received on behalf of each Seller
prior to distribution of such funds to each Seller any amount which Seller
Representative deems necessary as a reserve for any such fees, expenses and
indemnification claims.
11.12. Title Insurance.
---------------
The Sellers shall and shall cause MMA, RTS and the Subsidiaries to
cooperate with MMA Buyer in obtaining, a good and valid, irrevocable ALTA title
insurance commitment (the "Title Commitment") from a title insurance company
reasonably acceptable to MMA Buyer (the "Title Company"), irrevocably committing
the Title Company (subject only to the satisfaction of any industry standard
requirements contained in the Title Commitment and reasonably acceptable to MMA
Buyer) to issuing (i) an ALTA form of title insurance policy insuring good,
valid and marketable fee simple title to the Owned Real Estate in RTS, in the
amount that MMA Buyer reasonably requests prior to Closing, or (ii) a date down
and, if required by MMA Buyer, an increased amount endorsement to the existing
title insurance policy number 95080085 issued by Chicago Title Insurance
Company, subject, in either case, to no Liens or other exceptions to title other
than Permitted Exceptions (the "Title Policy") and insuring pedestrian and
vehicular access to and from one or more legally and physically open public
rights of way satisfactory to MMA Buyer, in its sole but reasonable discretion.
The Title Commitment shall be effective as of a date occurring not earlier than
the date of this Agreement and its effective date shall be brought down to the
time of the Closing. The Title Policy shall include such endorsements thereto
as may reasonably be requested by MMA Buyer including, without limitation, a
zoning endorsement. On or prior to the Closing Date, RTS and/or the Sellers
shall execute and deliver, or cause to be executed and delivered, to the Title
Company any affidavits, standard gap indemnities and similar documents
reasonably requested by the Title Company in connection with the issuance of the
Title Commitment or the Title Policy.
58
11.13. Survey.
------
At MMA Buyer's request, RTS and/or Sellers shall cooperate with Buyers
to obtain, no later than fifteen (15) days prior to Closing, an as-built survey
of the Owned Real Estate (the "Survey") in accordance with (i) the 1997 minimum
standard detail requirements for ALTA/ACSM Land Title Surveys, including,
without limitation, Table A items 2,3,4,6,7,8,9,10,11 and 13 and such additional
or different Table A Items as MMA Buyer may, in its discretion, require, (ii)
with the Accuracy Standards (as adopted by ALTA and ACSM) of an Urban Survey,
and (iii) local standards required by MMA Buyer, in its discretion, dated after
the date hereof, and showing, without limiting the foregoing, all easements and
other appurtenances benefiting and all easements and other encumbrances
burdening the Owned Real Estate. The Survey shall be certified to the Buyers,
the Title Company and any other person reasonably requested by MMA Buyer.
11.14. Tenant Estoppel Certificates.
----------------------------
At MMA Buyer's request, prior to Closing RTS and/or Sellers shall
cooperate with Buyers to obtain estoppel certificates from each of the tenants
under the Lessor Leases in form and substances reasonably satisfactory to MMA
Buyer. No such estoppel certificate shall be conditioned upon a reduction in
rent or other concession to the tenant.
11.15. Non-Disturbance Agreement.
-------------------------
At MMA Buyer's or, after the Closing, RTS' request, the beneficiary
under the Deed of Trust shall (and shall cause the trustee to) execute a
commercially reasonable non-disturbance agreement in favor of any tenant under
the Lessor Leases.
59
The parties have duly executed this Agreement, all as of the date
first written above.
MONEY MANAGEMENT ASSOCIATES, INC.
By:
------------------------------------
Chairman and Chief Executive Officer
MONEY MANAGEMENT ASSOCIATES (LP), INC.
By:
------------------------------------
Chairman and Chief Executive Officer
MONEY MANAGEMENT ASSOCIATES, L.P.
By:
------------------------------------
▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇, General Partner
RUSHMORE TRUST AND SAVINGS, FSB
By:
------------------------------------
President
------------------------------------
▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇'▇▇▇▇▇▇
60
------------------------------------
▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
61
For Purposes of Article II and Sections 1.4, 10.2
---------- ------------------
and 11.5 only:
----
FRIEDMAN, BILLINGS, ▇▇▇▇▇▇ GROUP, INC.
By:
------------------------------------
President
62