1
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
AMRESCO, INC.
MIC ACQUISITION, INC.
MORTGAGE INVESTORS CORPORATION
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
AND
THE OTHER STOCKHOLDERS LISTED ON
THE SIGNATURE PAGE HEREOF
July 14, 1998
An Index of Defined Terms begins on Page vii
2
TABLE OF CONTENTS
PAGE
ARTICLE 1
Merger............................................................................................................2
1.1 The Merger....................................................................................2
(a) The Merger.............................................................................2
(b) Effective Time of the Mergers..........................................................2
(c) Effect of the Merger...................................................................2
(d) The Surviving Corporation's Articles of Incorporation; Bylaws;
Directors and Officers.................................................................2
(e) Tax Consequences.......................................................................2
1.2 Terms of the Merger...........................................................................3
(a) Merger Consideration...................................................................3
(b) Closing Stock Merger Consideration.....................................................3
(c) Post-Closing Earnout Payments..........................................................4
(d) Delivery of Estimated Earnout Computation Statement....................................5
(e) Earnout True-up Statement..............................................................5
(f) Earnout True-up Payment................................................................6
(g) Exchange Procedure for the Stock.......................................................6
(h) Merger Sub Capital Stock...............................................................7
(i) Marketing Solution Publications, Inc...................................................7
(j) Listed Shares..........................................................................7
ARTICLE 2
Closing The Transaction...........................................................................................7
2.1 Closing.......................................................................................7
2.2 Sellers Deliveries at Closing.................................................................8
(a) Stock Certificates.....................................................................8
(b) Closing Certificate....................................................................8
(c) Consents and Approvals.................................................................8
(d) Resolutions............................................................................8
(e) Proceedings and Documents..............................................................8
(f) Good Standing Certificates.............................................................8
(g) Opinions of Sellers' Counsel...........................................................8
(h) Stockholder Releases...................................................................8
(i) Other Instruments......................................................................9
2.3 Buyer's and Merger Sub's Deliveries at Closing................................................9
(a) The Merger Consideration...............................................................9
(b) Closing Certificate....................................................................9
(c) Resolutions............................................................................9
3
(d) Consents and Approvals.................................................................9
(e) Opinion of Buyer's and Merger Sub's Counsel............................................9
2.4 Related Agreements............................................................................9
(a) Employment Agreement...................................................................9
(b) Registration Rights Agreement..........................................................9
ARTICLE 3
Conditions To Consummating The Transaction.......................................................................10
3.1 Joint Conditions.............................................................................10
(a) HSR Act...............................................................................10
(b) No Litigation.........................................................................10
(c) Related Agreements....................................................................10
(d) Stockholder Releases..................................................................10
3.2 Buyer's and Merger Sub's Conditions..........................................................10
(a) Sellers' Representations True.........................................................10
(b) Sellers' Compliance with Agreement....................................................10
(c) Sellers Consents......................................................................10
(d) Permits...............................................................................11
(e) Merger................................................................................11
(f) Approvals.............................................................................11
(g) Termination Agreements................................................................11
(h) Cash Balances.........................................................................11
(i) Stockholder Obligations...............................................................11
(j) Software Issue Resolution.............................................................11
3.3 Sellers' Conditions to Closing...............................................................11
(a) Buyer's and Merger Sub's Representations True.........................................11
(b) Buyer's and Merger Sub's Compliance with Agreement....................................11
ARTICLE 4
Covenants to Satisfy Conditions and Consummate the Transaction...................................................12
4.1 Joint Responsibilities.......................................................................12
(a) Defending the Agreement...............................................................12
(b) Lifting Injunctions...................................................................12
(c) Other Actions.........................................................................12
4.2 Sellers' Responsibilities....................................................................12
(a) Sellers' Delegated Conditions.........................................................12
(i) Section 3.2(a)...............................................................12
(ii) Section 3.2(b)...............................................................13
(b) HSR Act Filings.......................................................................13
(c) Stockholder Approval..................................................................13
4.3 Buyer's and Merger Sub's Responsibilities....................................................13
(a) Buyer's and Merger Sub's Delegated Conditions.........................................13
(i) Section 3.3(a)...............................................................13
(ii) Section 3.3(b)...............................................................13
(b) HSR Act Filings.......................................................................13
ii
4
ARTICLE 5
Termination......................................................................................................14
5.1 Reasons for Termination......................................................................14
(a) By Mutual Consent.....................................................................14
(b) By the Buyer or Merger Sub............................................................14
(c) By Sellers............................................................................14
(d) Drop-Dead Date........................................................................14
5.2 Notice of Problems...........................................................................14
5.3 Buyer and Merger Sub Termination Procedure...................................................15
5.4 Sellers' Termination Procedure...............................................................15
5.5 Effect of Termination........................................................................15
ARTICLE 6
Representations and Warranties of Sellers........................................................................15
6.1 Sellers; Entry Into Agreements...............................................................16
(a) Organization and Good Standing........................................................16
(b) Validity and Authorization; Corporate Power and Authority.............................16
(c) Subsidiaries..........................................................................16
(d) No Conflict...........................................................................17
(e) Sellers Consents Required.............................................................17
(f) HSR Act...............................................................................17
(g) MSPI..................................................................................17
6.2 Financial Information........................................................................18
(a) Financial Statements; Books and Records...............................................18
(b) Conduct of Business...................................................................19
(c) No Material Adverse Change............................................................20
6.3 Stock........................................................................................20
(a) Capitalization........................................................................20
(b) Ownership and Transfer by Stockholder.................................................20
6.4 Assets.......................................................................................20
(a) Personal Property.....................................................................20
(i) Title........................................................................20
(ii) Notes and Accounts Receivable................................................21
(iii) Bank Accounts................................................................21
(b) Real Property.........................................................................21
(i) Fee Simple...................................................................21
(ii) Leases; Easements and Other Interests........................................21
(iii) Eminent Domain...............................................................22
(iv) Leased Premises Taxes........................................................22
(c) Intellectual Property.................................................................22
(i) Intellectual Property........................................................22
(ii) Ownership....................................................................23
iii
5
(iii) Technology Contracts.........................................................23
(iv) Trademarks...................................................................23
(v) Copyrights...................................................................23
(vi) Trade Secrets................................................................23
(d) Contracts.............................................................................23
6.5 Liabilities..................................................................................25
(a) No Liabilities........................................................................25
(b) Tax Matters...........................................................................25
(c) Litigation............................................................................26
(d) Employee Liabilities..................................................................27
6.6 Business.....................................................................................27
(a) Mortgage Banking Licenses and Qualifications..........................................27
(b) Mortgage Loans........................................................................28
(c) Enforceability........................................................................28
(d) Title to Certain Mortgage Loans; Mortgage Loan Conveyance
Agreements............................................................................29
(e) No Recourse...........................................................................29
(f) Compliance with Mortgage Banking Regulations..........................................29
(g) Physical Damage.......................................................................30
(h) Tax Identification....................................................................30
(i) ARMs and Conversion Loans.............................................................30
(j) Custodial Accounts....................................................................30
(k) Insurance.............................................................................31
(l) Employees.............................................................................31
(m) Worker's Compensation.................................................................31
(n) ERISA.................................................................................32
(o) Affiliated Transactions...............................................................32
(p) Legal Requirements....................................................................32
(i) Compliance with Laws.........................................................32
(ii) Certain Acts.................................................................32
(q) Environmental Matters.................................................................33
(i) Compliance...................................................................33
(ii) Environmental Claims.........................................................33
6.7 Buyer Stock..................................................................................34
(a) Purchase Entirely for Own Account.....................................................34
(b) Buyer's and Merger Sub's Reliance.....................................................34
(c) Receipt of Information................................................................34
(d) Investment Experience.................................................................34
(e) Accredited Investor...................................................................34
(f) Restricted Securities.................................................................35
(g) Legends...............................................................................35
6.8 Other........................................................................................35
(a) Documents Delivered...................................................................35
(b) No Brokers Fees; No Commissions.......................................................35
(c) Disclaimer............................................................................35
iv
6
ARTICLE 7
Representations and Warranties of Buyer and Merger Sub...........................................................36
7.1 Entry Into Agreements........................................................................36
(a) Organization and Good Standing........................................................36
(b) Corporate Power and Authority; Validity and Authorization.............................36
7.2 Conflicts and Consents.......................................................................36
(a) No Conflict...........................................................................36
(b) Buyer Consents Obtained...............................................................37
7.3 No Brokers Fees; No commissions..............................................................37
7.4 HSR Act......................................................................................37
7.5 Acquisition of Stock.........................................................................37
7.6 Buyer Stock..................................................................................37
7.7 SEC Documents................................................................................37
7.8 No Material Adverse Change...................................................................37
ARTICLE 8
Covenants of Sellers.............................................................................................38
8.1 Conduct of Business of the Company Pending Closing...........................................38
8.2 Access to Information and Employees..........................................................38
8.3 No Solicitation..............................................................................39
8.4 Financial Statements.........................................................................39
8.5 Payment of Indebtedness of Related Persons...................................................39
8.6 Maintain Organization........................................................................39
8.7 Assist in Obtaining Licenses, Etc............................................................39
8.8 Sellers' Consents............................................................................39
8.9 Records of the Company.......................................................................40
8.10 Employee Benefit Plans.......................................................................40
8.11 Other Stockholders...........................................................................40
ARTICLE 9
Post-Closing Agreements..........................................................................................40
9.1 Further Actions..............................................................................40
9.2 Cooperation..................................................................................40
9.3 Tax Returns..................................................................................41
9.4 Employee Benefit Plans.......................................................................41
ARTICLE 10
Indemnification..................................................................................................41
10.1 Survival; Etc................................................................................41
(a) Contents of this Agreement............................................................41
(b) No Effect on Liability................................................................41
(c) Survival..............................................................................42
(d) Commencing Actions....................................................................42
v
7
10.2 Indemnities..................................................................................42
(a) Indemnification of Buyer..............................................................42
(b) Indemnification of the Stockholder....................................................43
(c) Setoff................................................................................44
10.3 Limitations on Indemnities...................................................................44
(a) Basket................................................................................44
(b) Cap...................................................................................44
(c) Exclusions............................................................................45
(d) Exclusivity...........................................................................45
10.4 Notice and Opportunity to Defend.............................................................45
(a) Notice, Etc...........................................................................45
(b) Defense Costs.........................................................................46
(c) Third Party Claims....................................................................46
10.5 Delays or Omissions, Etc.....................................................................46
10.6 Governing Law; Attorneys' Fees...............................................................47
10.7 Dispute Resolution...........................................................................47
(a) Arbitration...........................................................................47
(b) Emergency Relief......................................................................48
ARTICLE 11
Miscellaneous....................................................................................................48
11.1 Successors and Assigns.......................................................................48
11.2 Entire Agreement; Amendment..................................................................49
11.3 Press Release................................................................................49
11.4 Notices, Etc.................................................................................49
11.5 No Third Party Beneficiary, Etc..............................................................51
11.6 Reformation; Severability....................................................................51
11.7 Counterparts.................................................................................51
11.8 Titles and Subtitles.........................................................................51
11.9 Confidentiality..............................................................................51
11.10 Expenses.....................................................................................52
11.11 Responsibility for Merger Sub................................................................53
11.12 Knowledge....................................................................................53
11.13 Waivers......................................................................................53
11.14 Cooperation with the Stockholder's Accountants...............................................53
List of Exhibits
Exhibit 2.2(c) - Closing Certificate
Exhibit 2.2(g) - Opinion of Counsel to Sellers
Exhibit 2.3(b) - Closing Certificate
Exhibit 2.3(e) - Opinion of General Counsel of Buyer
Exhibit 2.4(a) - Employment Agreement between Mortgage Investors Corporation and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Exhibit 2.4(b) - Registration Rights Agreement
[The Registrant hereby agrees to provide supplementally a copy of any exhibit
omitted from this Agreement and Plan of Merger to the Commission upon request.]
vi
8
INDEX OF DEFINED TERMS
Page
AAA ...................................................................... 47
Closing Deductions ................................................. 3-3
Accounts ................................................................. 21
Accounts Receivable ...................................................... 21
Agreement ................................................................ 1
Analysis ................................................................. 51
Approvals ................................................................ 11
Asserted Liability ....................................................... 45
Breach ................................................................... 41
Buyer .................................................................... 1
Buyer and Merger Sub Closing Certificate ................................. 9
Buyer Indemnitees ........................................................ 42
Buyer Indemnitors ........................................................ 43
Buyer Stock .............................................................. 3
Buyer's Delegated Conditions ............................................. 13
CLCFC .................................................................... 16
Closing .................................................................. 7
Closing Cash Merger Consideration ........................................ 3
Closing Certificate ...................................................... 8
Closing Date ............................................................. 8
Code ..................................................................... 26
Company .................................................................. 1
Company Financial Statements ............................................. 18
Confidential Information ................................................. 51
Contracts ................................................................ 24
Copyrights ............................................................... 22
Corporate Records ........................................................ 35
Custodial Accounts ....................................................... 30
Defense Costs ............................................................ 46
Disclosing Party ......................................................... 52
Earnout Amount ........................................................... 4
Earnout Base Amount ...................................................... 5
Earnout Computation Statement ............................................ 5
Earnout GAAP ............................................................. 5
Earnout Payment .......................................................... 4
Earnout Payment Date ..................................................... 4
Earnout True-up Payment .................................................. 5
Effective Time ........................................................... 2
Employee Benefit Plans ................................................... 32
Employee Pension Benefit Plan ............................................ 32
vii
9
Employment Agreement ..................................................... 9
Environmental Claim ...................................................... 33
Environmental Laws ....................................................... 33
Equipment Leases ......................................................... 20
ERISA .................................................................... 32
Escrow Funds ............................................................. 30
Established Loss ......................................................... 43
Established Stockholder Loss ............................................. 43
Exchange Act ............................................................. 37
GAAP ..................................................................... 19
Good Standing Certificate ................................................ 8
HSR Act .................................................................. 10
Indemnified Party ........................................................ 45
Indemnifying Party ....................................................... 45
Intellectual Property .................................................... 22
Leased Premises .......................................................... 21
Legal Requirements ....................................................... 32
Letter of Intent ......................................................... 49
Licenses ................................................................. 27
Liens .................................................................... 20
Loan Documents ........................................................... 29
Losses ................................................................... 42
Marks .................................................................... 22
Material Adverse Effect .................................................. 16
Maximum Earnout Payment .................................................. 5
Merger ................................................................... 2
Merger Consideration ..................................................... 3
Merger Sub ............................................................... 1
Minimum Earnout Payment .................................................. 4
Mortgage ................................................................. 28
Mortgage Business ........................................................ 27
Mortgage Loan ............................................................ 28
MSPI ..................................................................... 4
MSPI Merger Sub .......................................................... 7
Note ..................................................................... 28
OBCA ..................................................................... 2
Obligated Party .......................................................... 51
Orders ................................................................... 27
Other Stockholder ........................................................ 1
Other Stockholders ....................................................... 1
Outside Confidentiality Agreement ........................................ 31
Patents .................................................................. 22
Permits .................................................................. 11
Permitted Liens .......................................................... 20
viii
10
Personal Property ........................................................ 20
Plan of reorganization ................................................... 2
Policies ................................................................. 31
Post-Closing Earnout Payments ............................................ 4
Prior Policies ........................................................... 31
Proceedings .............................................................. 26
Real Estate Contracts .................................................... 22
Real Property ............................................................ 21
Recourse Mortgage Loans .................................................. 28
Registration Rights Agreement ............................................ 9
Regulations .............................................................. 29
Related Agreements ....................................................... 9
Representatives .......................................................... 39
SEC Documents ............................................................ 37
Seller Consents .......................................................... 17
Seller Indemnitors ....................................................... 42
Sellers' Delegated Conditions ............................................ 12
Sellers .................................................................. 1
Short Period ............................................................. 3
Stock .................................................................... 1
Stockholder .............................................................. 1
Stockholders ............................................................. 1
Stockholders Release ..................................................... 8
Surviving Corporation .................................................... 2
Tax ...................................................................... 26
Tax Returns .............................................................. 26
Taxes .................................................................... 26
Technology Contracts ..................................................... 22
Trade Secrets ............................................................ 22
ix
11
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into as
of July 14, 1998, by and among AMRESCO, INC., a Delaware corporation ("Buyer"),
MIC Acquisition, Inc., an Ohio corporation and a direct wholly owned subsidiary
of Buyer ("Merger Sub"), Mortgage Investors Corporation, an Ohio corporation
(the "Company"), the controlling stockholder of the Company, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
(the "Stockholder"), and the other stockholders of the Company as of the date
hereof, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ and
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ (collectively, the "Other Stockholders" and each an "Other
Stockholder").
R E C I T A L S
A. The Stockholder and the Other Stockholders own, in the aggregate, all
of the issued and outstanding shares of capital stock of the Company
(collectively, the "Stock"), consisting in the aggregate of 180.744
shares, (which number is subject to increase as described herein) of
common stock, no par value, of the Company. At or immediately prior to
the Closing, the Stockholder will have the right, but not the
obligation, to cause the Company to issue up to 3.843 shares of stock
in the Company to ▇▇▇▇▇ ▇▇▇▇ (upon completion of such issuance on the
terms set forth herein, such individual shall be deemed to be an "Other
Stockholder" hereunder). The Stockholder and the Other Stockholders are
sometimes referred to herein as the "Stockholders." The Company (prior
to Closing (defined below) only) and the Stockholders are sometimes
collectively referred to herein as the "Sellers."
B. The respective Boards of Directors of Buyer, Merger Sub and the Company
deem it advisable and in the best interests of their respective
stockholders that the Company be acquired by, and become a wholly-owned
subsidiary of, Buyer, and in furtherance thereof, the respective Boards
of Directors and stockholders of Merger Sub and the Company and the
Board of Directors of Buyer have approved, as applicable, the merger of
Merger Sub with and into the Company, upon the terms and subject to the
conditions set forth herein.
C. It is intended that the merger described herein shall qualify, for
federal income tax purposes, as a reorganization within the meaning of
Section 368(a)(2)(E) of the Code (defined below).
D. The Buyer, the Merger Sub and the Sellers acknowledge that they have
received adequate consideration for entering into, and have relied upon
the promises, covenants, representations and warranties contained in,
this Agreement, and that they will be benefitted by the transactions
contemplated herein.
▇. ▇▇▇▇▇▇▇ have delivered to Buyer certain Disclosure Schedules (herein so
called) of even date herewith referred to herein. The Disclosure
Schedules and the Exhibits (herein so called) referred to herein are a
part hereof.
12
A G R E E M E N T
Based on the recitals set forth above and the representation,
warranties, covenants and agreements contained herein, the parties hereto,
intending to be legally bound, agree as follows:
ARTICLE 1
Merger
1.1 The Merger.
(a) The Merger. Upon the terms and subject to the conditions
set forth in this Agreement and in accordance with the Ohio General Corporation
Law (the "OGCL"), at the Effective Time, Merger Sub shall be merged with and
into the Company (the "Merger"), in accordance with the terms set forth herein.
From and after the Effective Time, the separate corporate existence of Merger
Sub shall cease. The Company shall continue as the surviving corporation in the
Merger (the "Surviving Corporation") and shall continue to be governed by the
laws of the State of Ohio. The Merger shall be consummated by filing a
Certificate of Merger with the Secretary of State of the State of Ohio, together
with all other documents, notices and filings required by the OGCL.
(b) Effective Time of the Mergers. The Certificate of Merger
shall provide that the Merger shall be effective as of the date and time of
filing of the Certificate of Merger with the Secretary of State of the State of
Ohio (the "Effective Time").
(c) Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in Section 1701.82 of the OGCL.
(d) The Surviving Corporation's Articles of Incorporation;
Bylaws; Directors and Officers. The Articles of Incorporation and Bylaws of the
Company, in each case as in effect at the Effective Time, shall be the Articles
of Incorporation and Bylaws of the Surviving Corporation. At the Effective Time,
(i) the Board of Directors of the Surviving Corporation shall be composed of the
directors of the Merger Sub (and the Stockholder, if the Stockholder determines
that he wants to be a member of the Board of Directors of the Surviving
Corporation) and (ii) the officers of the Surviving Corporation shall be the
officers of the Company serving immediately before the Effective Time; in each
case, to hold office until their respective successors are duly elected or
appointed and qualified.
(e) Tax Consequences. It is intended that the Merger shall
constitute a reorganization described in Section 368(a)(2)(E) of the Code
(defined below) and that this Agreement shall constitute a "plan of
reorganization" for the purposes of Section 368 of the Code. It shall not be a
condition to the consummation of the Merger that any party hereto shall have
received a ruling of the Internal Revenue Service as to the federal income tax
consequences of the Merger.
2
13
1.2 Terms of the Merger.
(a) Merger Consideration.
(i) At the Effective Time, by virtue of the Merger
and without any action by the holder of the Stock, all Stock issued and
outstanding immediately prior to the Effective Time shall be canceled and
retired, shall cease to exist and shall be converted into and become rights to
receive, upon surrender of certificates evidencing the Stock, the Merger
Consideration in the manner described in this Section 1.2.
(ii) Each share of the Stock shall be converted into
(i) the right to receive, in cash, a pro rata portion attributable to each
outstanding share of Stock of the aggregate of the excess (if any) of (A) $12.6
million over (B) the sum of (x) an amount equal to 60.4% of the funds withdrawn
from the Company by, or paid or distributed by the Company to, the Stockholders
(to the extent such withdrawn, paid or distributed funds reduce the Company's
cash to an amount less than $17.0 million at the Effective Time) during the
period beginning April 1, 1998 and ending on the Closing Date (the "Short
Period") which amount shall be certified to Buyer in writing by the Stockholder
prior to the Closing and (y) an amount equal to the fees and expenses payable by
the Company to ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Associates, Inc. ("▇▇▇▇▇▇▇ ▇▇▇▇▇") at the Closing
in connection with the transactions contemplated herein and in the Related
Agreements, which amount shall be certified to Buyer in writing by the
Stockholder prior to the Closing and which amount shall be paid by the Surviving
Corporation (or one of its affiliates) at the Effective Time (the sum of (x) and
(y) being referred to herein as the "Closing Deductions") (such excess of (A)
over (B) being referred to herein as the "Closing Cash Merger Consideration"),
by wire transfer of the immediately-available funds to an account designated in
writing not later than the fifth day prior to the Effective Time by the
respective Stockholders to the Buyer (provided, however, that if the Closing
Deductions exceed $12.6 million, then the Closing Stock Merger Consideration
(defined below) shall be reduced by a number of shares of Buyer Stock having a
value equal to $31.8104 (which is the average closing sale price per share of
the Buyer Stock for the 30 trading-day period ending on the fifth trading day
prior to the date hereof) equal to the amount by which the Closing Deductions
exceed $12.6 million), (ii) the right to receive a pro rata portion attributable
to each outstanding share of Stock of the aggregate Closing Stock Merger
Consideration (as determined and defined below) and (iii) the right to receive,
from time to time, Post-Closing Earnout Payments (as determined and defined
below), if any, distributed pursuant to Section 1.2(c) (Post-Closing Earnout
Payments). The Closing Cash Merger Consideration, the Closing Stock Merger
Consideration and the Post-Closing Earnout Payments are collectively referred to
as the "Merger Consideration."
(b) Closing Stock Merger Consideration. At the Closing, upon
receipt of certificates evidencing the Stock, Merger Sub shall deliver to the
Stockholders (pro rata in accordance with their respective percentage ownership
of the Stock at the Effective Time) shares of common stock, par value $0.05 per
share, of Buyer (each share being referred to herein as a share of "Buyer
Stock") as set forth below. The aggregate number of Buyer Stock delivered at the
Closing (the "Closing Stock Merger Consideration") shall be 1,631,149 shares
(the "Base Shares"). The Base
3
14
Shares shall be reduced by (i) a number of shares equal to the amount of Closing
Deductions in excess of $12.6 million divided by $31.8104 and (ii) the number of
shares of Buyer Stock payable at the Closing by Buyer on behalf of the Surviving
Corporation in payment of fees payable at the Closing to ▇▇▇▇▇▇▇ ▇▇▇▇▇ (as
certified by the Stockholder pursuant to Section 1.2(a)(ii) above). No
fractional shares will be delivered. Buyer and the Stockholders acknowledge that
the value of the Closing Stock Merger Consideration received by the Stockholders
for the Stock is equal to $31.8104 per share.
(c) Post-Closing Earnout Payments. Subject to Section 10.2(c)
(Setoff), on or before each of April 30, 1999, April 30, 2000 and April 30, 2001
(each an "Earnout Payment Date"), as additional consideration for the Merger,
Buyer will deliver to the Stockholders cash and Buyer Stock having an aggregate
value (the Buyer Stock being valued based on the average of the closing sale
price of the Buyer Stock for the 30 trading-day period ending on the fifth
trading day prior to the applicable Earnout Payment Date) equal to the greater
of (i) the Minimum Earnout Amount (if applicable) or (ii) the lesser of (A) 90%
of the Earnout Amount (defined below) if the Earnout Base Amount is greater than
zero or (B) the applicable Maximum Earnout Payment (defined below).
Each payment made to the Stockholders on each Earnout Payment Date
shall consist of 18% (by value) cash and 82% (by value as determined in the
immediately preceding paragraph) of Buyer Stock. The cash and shares of Buyer
Stock delivered on any Earnout Payment Date are collectively referred to herein
as an "Earnout Payment." The Earnout Payments are collectively referred to
herein as "Post-Closing Earnout Payments."
"Minimum Earnout Payment" shall mean: (i) for the April 30, 1999
Earnout Payment Date, an amount equal to $36.0 million, (ii) for the April 30,
2000 Earnout Payment Date, an amount equal to $17.0 million and (iii) for the
April 30, 2001 Earnout Payment Date, an amount equal to $17.0 million; provided,
however, the Minimum Earnout Payment shall be zero for each Earnout Payment if
the sum of (A) the Earnout Base Amount, (B) compensation expenses paid to the
Stockholder, (c) payments made by the Company to Marketing Solution
Publications, Inc. ("MSPI") during the Short Period and (D) non-cash
compensation expense paid to the Other Stockholders in connection with the
Company's issuance to them of shares of Stock during the Short Period is less
than $25.0 million.
"Earnout Amount" shall mean: (i) for the April 30, 1999 Earnout Payment
Date, an amount equal to 50% of the Earnout Base Amount if the sum of (A) the
Earnout Base Amount, (B) compensation expenses paid to the Stockholder during
the Short Period, (c) payments made by the Company to MSPI, and (D) non-cash
compensation expenses paid to the Other Stockholders in connection with the
Company's issuance to them of shares of Stock during the Short Period is equal
to or greater than $61,698,375; provided, however, that in all other cases,
"Earnout Amount" for the April 30, 1999 Earnout Payment shall mean 25% of the
Earnout Base Amount and (ii) for the Earnout Payments for April 30, 2000 and
2001, "Earnout Amount" shall mean an amount equal to 25% of the Earnout Base
Amount.
4
15
"Earnout Base Amount" for each twelve-month period of the Surviving
Corporation ending on March 31, shall mean the income before taxes, amortization
of goodwill associated with the transactions contemplated herein and any portion
of the fees paid to ▇▇▇▇▇▇▇ ▇▇▇▇▇ hereunder that are recorded as an expense of
the Surviving Corporation for that fiscal year, as determined in accordance with
GAAP (defined below), without the application to the Surviving Corporation of
any corporate overhead, but after reduction for the cost of services actually
provided by Buyer and approved by the Stockholder (which approval shall not be
unreasonably withheld (and it being deemed reasonable for the Stockholder to
withhold his approval if, inter alia, the services provided by the Buyer are (a)
materially more costly or (b) materially less efficient than those otherwise
available to the Surviving Corporation), including without limitation legal,
accounting, accounts payable, payroll and information technology services, which
costs shall be charged at rates not in excess of those charged to Buyer's other
subsidiaries for comparable services ("Earnout GAAP"). Notwithstanding anything
herein to the contrary, for purposes of calculating the Earnout Base Amount for
any period, the Surviving Corporation shall recognize the sale of its mortgage
loans on the date on which funding of such mortgage loan occurs.
"Maximum Earnout Payment" shall mean: (i) for the April 30, 1999
Earnout Payment Date, an amount equal to $54.0 million and (ii) for the Earnout
Payments for April 30, 2000 and 2001, an amount equal to $25.5 million.
(d) Delivery of Estimated Earnout Computation Statement. On or
before each Earnout Payment Date, the Surviving Corporation shall prepare and
deliver to the Stockholder a statement (the "Earnout Computation Statement")
approved by Buyer setting forth in reasonable detail an estimated calculation of
the Earnout Amount, the Earnout Base Amount, the amount of the applicable
Minimum Earnout Payment (if any) and the amount of the Earnout Payment to be
paid for such Earnout Period. If at any time prior to the preparation of the
final Earnout Computation Statement the Surviving Corporation ceases to have an
in-house accounting staff that participates in the preparation of the Earnout
Computation Statement (for approval by Buyer), then the Surviving Corporation
shall permit an accountant or accountants selected by the Stockholder reasonably
to participate in the preparation of the Earnout Computation Statement.
(e) Earnout True-up Statement. As soon as is practicable after
the delivery of each Earnout Computation Statement (but in any event not later
than May 31 of 1999, 2000 and 2001), the Surviving Corporation shall prepare and
deliver to the Stockholder a statement (the "Earnout True-up Statement" setting
forth in reasonable detail the calculation of the final Earnout Amount and
Earnout Base Amount for such earnout period and the amount necessary to be paid
by Buyer to the Stockholders (in cash and stock as set forth above (with the
value of any additional Buyer Stock delivered by Buyer being valued based on the
average of the closing sale price of the Buyer Stock for the 30 trading-day
period ending on the fifth trading day prior to the date on which Buyer delivers
such shares)) in order for the Earnout Payment for such period (after taking
into account the amount paid on the applicable Earnout Payment Date) to equal
(i) the lesser of the Maximum Earnout Payment (defined below) or (ii) 100% of
the Earnout Amount for such period (any such payment an "Earnout True-up
Payment"). If at any time prior to the calculation of the final Earnout True-up
Statement the Surviving Corporation ceases to have an in-house accounting staff
5
16
that participates in the preparation of the Earnout True-up Statement (for
approval by Buyer), then the Surviving Corporation shall permit an accountant or
accountants selected by the Stockholder reasonably to participate in the
preparation of the Earnout True-Up Statement. If, within 30 days after delivery
of the Earnout True-up Statement, Buyer has not received a written notice signed
by the Stockholder disputing the Earnout True-up Statement and indicating in
reasonable detail the basis of such dispute, then such Earnout True-up Statement
shall be conclusive and binding on the Stockholder, subject to later discovery
of fraud. If the Stockholder gives the Buyer such notice of dispute within such
30-day period, the Stockholder and Buyer will use commercially reasonable
efforts to settle such dispute within 20 days after the giving of such notice.
Any dispute unresolved after such 20-day period shall be submitted to a national
public accounting firm satisfactory to Buyer and the Stockholder, or, in the
absence of agreement on such firm, to a panel of three public accounting firms,
one designated by the Stockholder, one designated by Buyer and one jointly
designated by the other two firms. The decision of such accounting firm or such
panel of accounting firms, as the case may be, with respect to such dispute
shall be final and binding on the parties hereto. Such decision shall include a
decision as to which party or parties shall bear the costs of the accounting
firm or panel of accounting firms and the decision-maker shall determine that
the prevailing party's costs and expenses shall be borne by the party who did
not prevail in such matter in accordance with the terms and conditions of
Section 10.6 (Governing Laws, Attorneys' Fees).
Buyer shall not take any action and shall not cause the
Surviving Corporation to take any action, in each case prior to the delivery of
the final Earnout True-up Statement, that would prevent the Surviving
Corporation (or its successor in interest (if any) or Buyer) from preparing the
Earnout Computation Statements and Earnout True-up Statements contemplated
herein. If Buyer takes any such action or causes the Surviving Corporation to
take any such action prior to April 30, 1999, then the Minimum Earnout Payment
for such Earnout Payment Date shall be $36.0 million and the Minimum Earnout
Payment for the April 30, 2000 and 2001 Earnout Payment Dates shall be $17.0
million and $17.0 million, respectively, in each case notwithstanding the
proviso set forth in the definition of "Minimum Earnout Payment" herein.
(f) Earnout True-up Payment. Any Earnout True-up Payment
required to be made shall be made on or before the later to occur of (i) the
31st day after the date on which the Earnout True-up Statement is delivered and
(ii) with respect only to that portion of an Earnout True-up Payment that is
disputed pursuant to Section 1.2(e) (Earnout True-up Statement), the tenth day
after any dispute regarding the Earnout True-up Statement is resolved in
accordance with Section 1.2(e) (Earnout True-up Statement).
Notwithstanding anything in this Agreement to the contrary,
each Earnout Payment made on an Earnout Payment Date and each Earnout True-up
Payment paid hereunder shall be reduced by 1% of the total amount thereof, to
reflect the Surviving Corporation's payment of fees to ▇▇▇▇▇▇▇ ▇▇▇▇▇ in
connection therewith.
(g) Exchange Procedure for the Stock. After the Effective
Time, each holder of a certificate or certificates that immediately prior to the
Effective Time represented outstanding Stock shall surrender such certificate or
certificates to the Surviving Corporation, duly endorsed and
6
17
executed as the Surviving Corporation may reasonably require, to the Surviving
Corporation for cancellation, at which time the Merger Consideration applicable
to such Stock shall be delivered to the holder of such Stock. At the Effective
Time, the holders of certificates evidencing the Stock outstanding immediately
prior to the Effective Time shall cease to have any rights with respect to such
stock, and their sole right shall be to receive their respective portions of the
Merger Consideration, as set forth above. All rights to receive the Merger
Consideration shall be deemed, when paid or issued hereunder, to have been paid
or issued, as the case may be, in full satisfaction of all rights pertaining to
the Stock.
(h) Merger Sub Capital Stock. Each share of common stock of
Merger Sub issued and outstanding immediately prior to the Merger shall be
converted into and become the right to receive one share of common stock of the
Surviving Corporation.
(i) Marketing Solution Publications, Inc. Prior to the
Effective Time, the Stockholder shall (i) transfer out of MSPI all assets held
by MSPI that are not related to the business conducted by the Company and (ii)
assume all liabilities of MSPI in existence at the Effective Time or that arise
out of events occurring up to and including the Effective Time. The Stockholder
may change the name of MSPI and may retain ownership of the name "Marketing
Solution Publications, Inc." Also prior to the Effective Time, Buyer shall
organize a direct, wholly-owned subsidiary ("MSPI Merger Sub"). At the Effective
Time, MSPI Merger Sub shall be merged with and into MSPI and MSPI shall be the
surviving corporation in such merger, the issued and outstanding shares of
capital stock of MSPI outstanding immediately prior to the Effective Time shall
be converted into the right to receive an aggregate amount of Buyer Stock having
a value (based on $31.8104, which is the average closing sale price per share of
the Buyer Stock for the 30 trading-day period ending on the fifth trading day
prior to the date hereof) equal to $5,512,500 and each share of MSPI Merger Sub
capital stock outstanding immediately prior to the Effective Time shall be
converted into one share of common stock of MSPI as the surviving corporation in
such merger. Such transactions shall be consummated on terms reasonably
satisfactory to Buyer.
(j) Listed Shares. Within 90 days after the Closing Date,
Buyer shall cause the Closing Stock Merger Consideration deliverable pursuant to
the Merger and an additional number of shares of Buyer Stock as estimated by
Buyer to be sufficient hereunder to be duly listed for trading on the Nasdaq
National Market and/or approved for listing upon official notice of issuance.
ARTICLE 2
Closing The Transaction
2.1 Closing. On the third business day after the satisfaction or
written waiver of the conditions (other than execution or delivery of
agreements, certificates, legal opinions or other instruments to be delivered at
Closing) contained herein, and unless this Agreement has been terminated
pursuant to the provisions of Article 5 (Termination), the consummation of the
transactions provided for herein (the "Closing") shall take place at the offices
of
7
18
Holland & Knight LLP, located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇,
▇▇▇▇▇▇▇, at 10:00 A.M., local time. The time and date of the Closing are
referred to herein as the "Closing Date."
2.2 Sellers Deliveries at Closing. At the Closing, the Sellers shall
deliver, or cause to be delivered, to Buyer and Merger Sub the following items:
(a) Stock Certificates. The Stockholder shall deliver a
certificate or certificates representing all of the Stock for tender in
connection with the Merger.
(b) Closing Certificate. If the conditions of Sections 3.2(a)
(Sellers' Representations True) and 3.2(b) (Sellers' Compliance with Agreement)
are satisfied, then the Sellers shall jointly deliver to Buyer and Merger Sub a
closing certificate executed by each of the Sellers (the "Closing Certificate")
in the form attached as Exhibit 2.2(b).
(c) Consents and Approvals. The Sellers jointly shall deliver
copies of all Sellers' Consents (defined below) and Approvals (defined below)
obtained by Sellers.
(d) Resolutions. Sellers shall deliver certified copies of
resolutions of the Stockholder (and, if necessary, the Other Stockholders) and
the Board of Directors of the Company approving the merger.
(e) Proceedings and Documents. Sellers shall deliver copies,
certified or otherwise identified to Buyer's satisfaction, of all corporate
documents that Buyer and Merger Sub shall reasonably request, including
resolutions of the board of directors of the Company and resolutions of the
Stockholder, dated on or before the date hereof to authorize this Agreement, the
Related Agreements (defined below) and the transactions and other acts
contemplated either by this Agreement or the Related Agreements.
(f) Good Standing Certificates. The Company shall deliver
certificates, issued within 30 days of the date of the Closing, (i) from the
Secretary of State of Ohio, evidencing that the Company is existing and in good
standing under the laws of its jurisdiction of organization and (ii) from each
state listed on the Disclosure Schedule to Section 6.1(a) (Organization and Good
Standing) evidencing that the Company is qualified to do business and is in good
standing as a foreign entity (each, a "Good Standing Certificate") in each such
state.
(g) Opinions of Sellers' Counsel. Sellers shall deliver an
opinion of Holland & Knight LLP, counsel to Sellers, dated as of the Closing
Date, in form and substance reasonably satisfactory to Buyer and Merger Sub
regarding the matters set forth in Exhibit 2.2(g).
(h) Stockholder Releases. The Stockholder and the Other
Stockholders shall execute and deliver releases (the "Stockholder Releases")
which release any and all claims held or to be held by the Stockholders against
the Company and its successors, assigns, officers, directors,
8
19
employees and agents, but excluding any claims the Stockholder or any Other
Stockholder may have to unpaid compensation and benefits.
(i) Other Instruments. Such other instruments, documents or
information that Buyer or Merger Sub reasonably requests in connection herewith
and the transactions contemplated hereby, in form and substance reasonably
satisfactory to Buyer and Merger Sub.
2.3 Buyer's and Merger Sub's Deliveries at Closing. At the Closing,
Buyer and Merger Sub shall deliver and Buyer shall cause the Merger Sub to
deliver the following items to the Stockholder:
(a) The Merger Consideration. Merger Sub shall deliver the
Closing Cash Merger Consideration and Buyer shall deliver the Closing Stock
Merger Consideration to the Stockholder.
(b) Closing Certificate. If the conditions of Sections 3.3(a)
(Buyer's and Merger Sub's Representations True) and 3.3(b) (Buyer's and Merger
Sub's Compliance with Agreement) are satisfied, then Buyer and Merger Sub shall
deliver to the Stockholder a closing certificate executed by Buyer and Merger
Sub (the "Buyer and Merger Sub Closing Certificate") in the form attached as
Exhibit 2.3(b).
(c) Resolutions. Merger Sub shall deliver certified copies of
resolutions of the sole stockholder and the Board of Directors of the Merger
Sub, and Buyer shall deliver certified copies of resolutions of the Board of
Directors of Buyer, approving the Merger, this Agreement and the transactions
set forth herein.
(d) Consents and Approvals. Buyer shall deliver copies of all
Approvals obtained by Buyer.
(e) Opinion of Buyer's and Merger Sub's Counsel. Buyer and
Merger Sub shall deliver an opinion of L. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq., General Counsel
of Buyer and Merger Sub, dated as of the Closing Date, in form and substance
reasonably satisfactory to the Stockholder regarding the matters set forth in
Exhibit 2.3(e) hereto.
2.4 Related Agreements. The parties, as appropriate, shall execute and
deliver at Closing the following documents (collectively, the "Related
Agreements"):
(a) Employment Agreement. Respective employment agreements,
effective as of the Closing Date, between the Company and (i) the Stockholder
(in substantially the form attached as Exhibit 2.4(a)(1)), and (ii) the Other
Stockholders (other than ▇▇▇▇▇ ▇▇▇▇) (in form and substance satisfactory to
Buyer and the Stockholder (collectively, the "Employment Agreements")).
(b) Registration Rights Agreement. A Registration Rights
Agreement, effective as of the Closing Date, between Buyer and the Stockholder
in substantially the form attached as Exhibit 2.4(b) (the "Registration Rights
Agreement").
9
20
ARTICLE 3
Conditions To Consummating The Transaction
3.1 Joint Conditions. The obligations of the parties to consummate the
transactions provided for in this Agreement and the Related Agreements are
subject to the satisfaction, at or prior to the Closing Date, of the following
conditions:
(a) HSR Act. The waiting period prescribed by the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976 and the rules and
regulations promulgated thereunder (the "HSR Act") shall have expired or early
termination of the waiting period under the HSR Act shall have been granted.
(b) No Litigation. No action, suit or proceeding (other than
such an action, suit or proceeding directly or indirectly instituted by a party
hereto seeking to terminate this Agreement) shall be threatened or pending, and
no injunction, order, decree or ruling shall be in effect, seeking to restrain
or prohibit, or to obtain damages or other relief in connection with, the
execution and delivery hereof or any Related Agreement or the consummation of
the transactions contemplated hereby or by any Related Agreement.
(c) Related Agreements. The parties shall have entered into
the Related Agreements.
(d) Stockholder Releases. The Stockholder Releases shall have
been executed and delivered by the Stockholders and shall be binding and in full
force and effect.
3.2 Buyer's and Merger Sub's Conditions. The obligations of Buyer and
Merger Sub to consummate the transactions contemplated by this Agreement and the
Related Agreements are subject to the satisfaction or waiver by Buyer and Merger
Sub, at or prior to the Closing Date, of the following conditions:
(a) Sellers' Representations True. Sellers' representations
and warranties made in this Agreement or any Related Agreement shall be true and
correct in all material respects at the Closing Date, except as affected by the
transactions contemplated hereby, and the Sellers shall have delivered the
Closing Certificate to that effect.
(b) Sellers' Compliance with Agreement. Sellers, in all
material respects, shall have performed each agreement, and shall have complied
with each covenant, to be performed or complied with by them, or any of them, on
or prior to the Closing Date under this Agreement or any Related Agreement, and
the Sellers shall have delivered the Closing Certificate to that effect.
(c) Sellers Consents. Sellers shall have obtained the Sellers
Consents.
10
21
(d) Permits. Sellers shall have obtained all governmental
licenses and permits, or binding commitments, if any, from governmental
authorities to issue, transfer or consent to a change of control with respect
to, all governmental licenses and permits necessary to consummate the Merger,
and to operate the Company in the manner that it has been conducted (the
"Permits").
(e) Merger. The Secretary of State of the State of Ohio must
have accepted for filing the Certificate of Merger.
(f) Approvals. All material authorizations, consents and
approvals, if any, of, and filings, if any, with, any governmental authority
that are required to validly execute, deliver and perform this Agreement or the
Related Agreements or to consummate the transactions provided for in this
Agreement or the Related Agreements (collectively, "Approvals"), shall have been
obtained or made.
(g) Termination Agreements. The Company shall have completed
termination of all agreements referenced in Exhibit 2.2(I).
(h) Cash Balances. The Company shall have aggregate cash
balances on deposit with commercial banks on the Closing Date, free and clear of
all liens, encumbrances and claims by third parties, of not less than the amount
of $17.0 million minus the amount of funds withdrawn from the Company by, or
paid or distributed by the Company to, the Stockholder during the Short Period.
(i) Stockholder Obligations. The Stockholder shall have repaid
to the Company all amounts, if any, owed by the Stockholder to the Company.
(j) Software Issue Resolution. The Company shall have finally
resolved to Buyer's reasonable satisfaction the existing dispute with the
Company's computer software vendor.
3.3 Sellers' Conditions to Closing. The obligations of Sellers to
consummate the transactions contemplated by this Agreement and the Related
Agreements are subject to the satisfaction or waiver in writing by Sellers, at
or prior to the Closing Date, of the following conditions:
(a) Buyer's and Merger Sub's Representations True. The
representations and warranties made by Buyer and Merger Sub herein shall be true
and correct in all material respects at the Closing Date, except as affected by
the transactions contemplated hereby, and each of Buyer and Merger Sub shall
have delivered the Buyer and Merger Sub Closing Certificate to that effect.
(b) Buyer's and Merger Sub's Compliance with Agreement. Each
of Buyer and Merger Sub, in all material respects, shall have performed each
agreement, and complied with each covenant to be performed or complied with by
it on or prior to the Closing Date under this Agreement or any Related
Agreement, and Buyer and Merger Sub shall have delivered the Buyer and Merger
Sub Closing Certificate to that effect.
11
22
(c) Merger. The Secretary of State of the State of Ohio must
have accepted for filing the Certificate of Merger.
(d) Approvals. All Approvals shall have been obtained or made.
ARTICLE 4
Covenants to Satisfy Conditions and Consummate the Transaction
4.1 Joint Responsibilities. Each party shall use his or its
commercially reasonable efforts to satisfy the conditions to the obligations of
the parties hereunder, and to consummate and make effective as promptly as
practicable the transactions provided for herein including:
(a) Defending the Agreement. Defending lawsuits or other legal
proceedings challenging this Agreement or any Related Agreement or the
consummation of the transactions provided for in this Agreement or any Related
Agreement;
(b) Lifting Injunctions. Using commercially reasonable efforts
to lift or rescind any injunction, restraining order or other order adversely
affecting the ability of the parties to consummate the transactions provided for
in this Agreement or any Related Agreement; and
(c) Other Actions. Taking such other commercially reasonable
actions that are necessary, appropriate or advisable, unless responsibility for
taking such actions has been delegated to certain parties pursuant to Sections
4.2 (Sellers' Responsibilities) or 4.3 (Buyer's and Merger Sub's
Responsibilities).
The parties shall reasonably cooperate with one another in connection
with the foregoing.
4.2 Sellers' Responsibilities.
(a) Sellers' Delegated Conditions. Sellers shall have the
responsibility for satisfying the following conditions ("Sellers' Delegated
Conditions"), for which Sellers shall have the obligations set forth in this
Section. Buyer and Merger Sub shall reasonably cooperate with Sellers in
connection with the following:
(i) Section 3.2(a) (Sellers' Representations True),
for which Sellers' obligation shall be as follows: (x) Sellers shall perform the
covenants contained in Article 8 (Covenants of Sellers), (y) Sellers shall take
no action that will cause any of their representations or warranties to be
untrue or incorrect in any material respect and (z) Sellers shall not omit any
action that any of them would take in the ordinary course of business, which
omission will cause their representations or warranties to be untrue or
incorrect in any material respect; and
12
23
(ii) Section 3.2(b) (Sellers' Compliance with
Agreement), for which Sellers shall have the obligations set forth elsewhere
herein.
(b) HSR Act Filings. Sellers shall make their HSR Act filings
(including causing any filings by any ultimate parent entities as required under
the HSR Act) and provide any additional information that the Federal Trade
Commission or the Justice Department requests as promptly as practicable, and
perform all other acts required of them under the HSR Act in order to satisfy
the condition contained in Section 3.1(a) (HSR Act).
(c) Stockholder Approval. The Stockholder (and if necessary
the Other Stockholders) shall approve the Merger and the consummation of
transactions contemplated herein.
4.3 Buyer's and Merger Sub's Responsibilities.
(a) Buyer's and Merger Sub's Delegated Conditions. Buyer and
Merger Sub shall have the responsibility for satisfying the following conditions
("Buyer's and Merger Sub's Delegated Conditions"), for which Buyer and Merger
Sub shall have the obligations set forth in this Section. Sellers shall
reasonably cooperate with Buyer and Merger Sub in connection with the following:
(i) Section 3.3(a) (Buyer's and Merger Sub's
Representations True), for which Buyer's and Merger Sub's obligation shall be as
follows: (x) Buyer and Merger Sub shall take no action that will cause any of
its representations and warranties to be untrue or incorrect in any material
respect and (y) Buyer and Merger Sub shall not omit any action that they would
take in the ordinary course of business, which omission will cause any of their
representations and warranties to be untrue or incorrect in any material
respect; and
(ii) Section 3.3(b) (Buyer's and Merger Sub's
Compliance with Agreement), for which Buyer and Merger Sub shall have the
obligations set forth elsewhere herein.
(b) HSR Act Filings. Buyer and Merger Sub shall make its HSR
Act filings and provide any additional information that the Federal Trade
Commission or the Justice Department requests as promptly as practicable, and
perform all other acts required of them under the HSR Act in order to satisfy
the condition contained in Section 3.1(a) (HSR Act). Buyer shall pay the HSR Act
filing fee relating to any filing requirement arising out of Buyer's acquisition
of voting securities of the Company and the Stockholder's acquisition of voting
securities of Buyer.
(c) Approvals. Buyer and Merger Sub shall approve the Merger
and the consummation of the transactions contemplated herein.
13
24
ARTICLE 5
Termination
5.1 Reasons for Termination. This Agreement may be terminated before
the Closing only by following the termination procedures set forth in this
Article for the following reasons:
(a) By Mutual Consent. By the mutual written consent of the
parties.
(b) By the Buyer or Merger Sub. By Buyer or Merger Sub after
compliance with the procedure set forth in this Article, if (i) any of the
Sellers' representations or warranties contained herein is or becomes or, when
executed any Related Agreement would be, untrue or incorrect in any material
respect, (ii) any Seller fails to perform any of his or its covenants or
agreements contained herein, or would be in breach of his or its covenants upon
execution of any Related Agreement in any material respect or (iii) any of
Buyer's or Merger Sub's conditions to the consummation of the transactions
provided for herein shall have become impossible to satisfy.
(c) By Sellers. By the Stockholder, after compliance with the
procedure set forth in this Article, if (i) any of Buyer's or Merger Sub's
representations or warranties contained herein is or becomes or, when executed
any Related Agreement would be, untrue or incorrect in any material respect,
(ii) Buyer or Merger Sub fails to perform its covenants or agreements contained
herein, or would be in breach of its respective covenants upon execution of any
Related Agreement in any material respect or (iii) any of Sellers' conditions to
the consummation of the transactions provided for herein shall become impossible
to satisfy.
(d) Drop-Dead Date. By either Buyer or Merger Sub, or by the
Stockholder, if the Closing shall not have occurred by August 31, 1998,
provided, however, such date shall be extended by the number of days, if any, to
cure any curable matter that is the subject of a notice under Section 5.3 (Buyer
and Merger Sub Termination Procedure) or Section 5.4 (Sellers' Termination
Procedure).
5.2 Notice of Problems. Each party will promptly give written notice to
the other parties when any of them becomes aware of the occurrence or failure to
occur, or the impending or threatened occurrence or failure to occur, of any
fact or event that would cause or constitute, or would be likely to cause or
constitute (i) any of its representations or warranties contained herein being
or becoming untrue or incorrect, (ii) its failure to perform any of its
covenants or agreements contained herein or (iii) any of its Delegated
Conditions, or any condition to the obligation of the parties contained in
Section 3.1 (Joint Conditions), being or becoming impossible to satisfy.
No such notice shall affect the representations, warranties, covenants,
agreements or conditions of the parties hereunder, or prevent any party from
relying on the representations and warranties contained herein.
14
25
5.3 Buyer and Merger Sub Termination Procedure. If either Buyer or
Merger Sub discovers, by reason of a notice given pursuant hereto or otherwise,
that (i) any of Sellers' representations or warranties is or has become untrue
or incorrect in a material respect, (ii) any Seller has failed to perform any of
his or its respective covenants or agreements contained herein in any material
respect or (iii) any of the conditions to either Buyer's or Merger Sub's
obligations to consummate the transactions provided for herein has become
impossible to satisfy, then either Buyer or Merger Sub may deliver a notice to
Sellers of such event, specifying the factual basis therefor in reasonable
detail. Sellers shall have the right to cure any matter referred to in clause
(I), (ii) or (iii) of this Section within 15 business days following the date of
delivery of such notice. Upon such notice and, in the case of clause (I), (ii)
or (iii) upon Sellers' failure to cure, either Buyer or Merger Sub may terminate
this Agreement by giving a notice of termination to Sellers.
5.4 Sellers' Termination Procedure. If the Stockholder discovers by
reason of a notice given pursuant hereto or otherwise, that (i) any of Buyer's
or Merger Sub's representations or warranties is or has become untrue or
incorrect in a material respect, (ii) Buyer or Merger Sub has failed to perform
any of its respective covenants or agreements contained herein in any material
respect or (iii) any of the conditions to Sellers' obligations to consummate the
transactions provided for herein has become impossible to satisfy, then the
Stockholder may deliver a notice to Buyer and Merger Sub of such event,
specifying the factual basis therefor in reasonable detail. Buyer and Merger Sub
shall have the right to cure any matter referred to in clause (I), (ii) or (iii)
of this Section within 15 business days following the date of delivery of such
notice. Upon such notice and, in the case of clause (I), (ii) or (iii), upon
Buyer's or Merger Sub's failure to cure, the Stockholder may terminate this
Agreement by giving a notice of termination to Buyer and Merger Sub.
5.5 Effect of Termination. Upon termination hereof pursuant to this
Article, no party shall have any liability or continuing obligation to another
party arising out of this Agreement, or out of actions taken in connection
herewith, except that Sections 10.5 (Delays or Omissions, Etc.), 10.6 (Governing
Laws; Attorneys' Fees) and 10.7 (Dispute Resolution) and Article 11
(Miscellaneous) (other than Section 11.3 (Press Release)) shall survive
termination hereof. Notwithstanding the foregoing, termination hereof shall not
relieve any party from its liability for (i) the failure, prior to termination,
of such party to perform or comply with its covenants or agreements or (ii) the
representations or warranties made by such party being untrue or incorrect in
any material respect when made.
ARTICLE 6
Representations and Warranties of Sellers
The Company (solely prior to Closing) and the Stockholder, jointly and
severally, represent and warrant to Buyer and Merger Sub as follows:
15
26
6.1 Sellers; Entry Into Agreements.
(a) Organization and Good Standing. The Company is a
corporation duly organized and validly existing under the laws of the State of
Ohio and is in good standing under such laws. The Company has all requisite
corporate power and authority to own, lease and operate all properties and
assets owned or leased by it and to conduct its business as previously and
currently conducted by it. The Company is qualified to do business and is in
good standing as a foreign corporation in each jurisdiction in which it is
required to be so qualified, except where the lack of such qualification would
not have a material adverse effect on the assets, liabilities, condition
(financial or other), results of operations or cash flows of the Company
(hereinafter, such an effect shall be referred to as a "Material Adverse
Effect"). The Disclosure Schedule to this Section lists all jurisdictions in
which the Company is qualified to do business as a foreign corporation.
(b) Validity and Authorization; Corporate Power and Authority.
The Company has full corporate power and authority to consummate the Merger and
to execute, deliver and perform this Agreement, the Related Agreements and the
other instruments called for hereby to which it is a party. This Agreement has
been duly authorized, executed and delivered by the Company and constitutes the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency or other laws governing creditors' rights and by
equitable principles.
The Stockholder has full requisite power and capacity to execute,
deliver and perform this Agreement, the Related Agreements and the other
instruments called for hereby to which the Stockholder is a party. This
Agreement has been duly executed and delivered by the Stockholder and
constitutes the legal, valid and binding obligation of the Stockholder,
enforceable against the Stockholder in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency or other laws governing
creditors' rights and by equitable principles.
When the Related Agreements and the other instruments called for hereby
to which the Stockholder is a party are executed and delivered at the Closing,
such agreements and instruments will have been duly executed and delivered by
the Stockholder pursuant to full requisite power and capacity to execute,
deliver and perform such Related Agreements and the other instruments called for
hereby and will constitute the legal, valid and binding obligations of the
Stockholder, enforceable against the Stockholder in accordance with their terms,
except as enforceability may be limited by bankruptcy, insolvency or other laws
governing creditors' rights and by equitable principles.
(c) Subsidiaries. Except as set forth in the Disclosure
Schedule to this Section, the Company does not own, control, or have voting
rights with respect to, directly or indirectly, any interest in any other
corporation, partnership, association or other business entity and the Company
is not a party to any agreement relating to the acquisition or disposition of
such an interest.
16
27
(d) No Conflict. Except as set forth in the Disclosure
Schedule to this Section, neither the execution, delivery or performance of this
Agreement or the Related Agreements, nor the consummation of the Merger or the
transactions contemplated hereby or thereby will (i) result in any violation of
the terms of, (ii) contravene or conflict with, (iii) accelerate the performance
of the obligations required under, (iv) constitute a default under, (v) give any
right of termination or cancellation under or (vi) give any right to make any
change in any of the liabilities or obligations under, the articles of
incorporation or bylaws of the Company, any Order (defined below), or any
agreement, contract, note, bond, debenture, indenture, mortgage, deed of trust,
lease, license, judgment, decree, order, law, rule or regulation or other
restriction applicable to the Company or the Stockholder or to which the Company
or the Stockholder is a party or by which the Company or the Stockholder or
their property or assets are bound or affected. Neither the execution, delivery
and performance of this Agreement or the Related Agreements, nor the
consummation of the transactions contemplated hereby or thereby will result in
the creation of any Lien (defined below) upon any of the properties or assets of
the Company or the Stock.
(e) Sellers Consents Required. The Disclosure Schedule to this
Section lists all material consents, approvals or authorizations of third
parties required in connection with each party's (other than Buyer's and Merger
Sub's) valid execution, delivery or performance of this Agreement and the
Related Agreements or the consummation of the Merger or any of the transactions
contemplated hereby or thereby on the part of any of them (collectively, the
"Sellers Consents"), including but not limited to the consents required under
the Contracts (defined below) and consents required in connection with Licenses
(defined below). The Stockholder has taken, or on or prior to Closing the
Stockholder shall have taken, all other actions necessary for the consummation
by the Company of the transactions contemplated by this Agreement and the
Related Agreements.
(f) HSR Act. Sellers have made all filings required under the
HSR Act, have fully complied with the provisions of the HSR Act and the rules
and regulations promulgated thereunder and have fully complied with all requests
for information from the Federal Trade Commission and the Department of Justice.
The information contained in such filings under the HSR Act is accurate and
complete and such filings do not include any incorrect statements or omit to
include any information necessary to make the statements therein not misleading.
Sellers have provided Buyer and Merger Sub with a true and complete copy of such
filings.
(g) MSPI. MSPI is a corporation duly organized and validly
existing under the laws of State of Michigan and is in good standing under such
laws. MSPI has all requisite corporate power and authority to own, lease and
operate all properties and assets owned or leased by it and to conduct its
business as previously and currently conducted by it. MSPI is qualified to do
business and is in good standing as a foreign corporation in each jurisdiction
in which it is required to be so qualified, except where the lack of such
qualification would not have a material adverse effect on the assets,
liabilities, condition (financial or other), results of operations or cash flows
of MSPI.
MSPI has full corporate power and authority to consummate the merger
described in Section 1.2(i) (Marketing Solution Publications, Inc.). Such merger
has been duly authorized, and the documents relating thereto, when executed and
delivered at the Closing, will have been duly
17
28
executed and delivered by MSPI (and, if applicable, the Stockholder) and will
constitute the legal, valid and binding obligation of MSPI (and, if applicable,
the Stockholder), enforceable against MSPI (and, if applicable, the Stockholder)
in accordance with their terms, except as enforceability may be limited by
bankruptcy, insolvency or other laws governing creditors' rights and by
equitable principles.
The Stockholder has good, valid and marketable title to all the issued
and outstanding shares of capital stock of MSPI, free clear of any Liens.
Neither MSPI nor the Stockholder is a party to any contract, agreement or
understanding (other than the Agreement) relating to the issuance, sale,
redemption, repurchase or other transfer of any shares of the capital stock or
any other equity security of MSPI.
6.2 Financial Information.
(a) Financial Statements; Books and Records. Included in the
Disclosure Schedule to this Section are true and correct copies of (i) the
audited, balance sheets for the Company at March 31, 1998, 1997 and 1996 and the
related statements of profit and loss and cash flows for the one-year periods
then ended, (ii) the unaudited, balance sheet for the Company at May 31, 1998
and the related statement of profit and loss for the two-month period then ended
and (iii) when delivered pursuant hereto, similar financial statements for each
additional month ending more than 30 days before the Closing Date (collectively,
the "Company Financial Statements").
The Company Financial Statements fairly present the financial position
of the Company as of the dates thereof and the results of the Company's
operations and cash flows for the periods then ended, in accordance with GAAP,
except for the variances from GAAP set forth in the notes to the Company
Financial Statements, subject in the case of the Company Financial Statements
listed in items (ii) and (iii) of the immediately-preceding paragraph, to normal
recurring period-end adjustments and absence of notes and a statement of cash
flows in each case that, if presented, would not differ materially from those
included in the financial statements for the fiscal year ended March 31, 1998.
The Company maintains a standard system of accounting, including without
limitation internal controls, established and administered in accordance with
GAAP, except for the variances from GAAP set forth in the notes to the Company
Financial Statements.
The Company's books and records (including without limitation, all
financial records, business records, minute books, stock transfer records,
client lists, referral source lists and records pertaining to services or
products delivered to clients) (i) are complete and correct in all respects and
all transactions to which the Company is or has been a party are accurately
reflected therein, (ii) reflect all discounts, returns and allowances granted by
the Company with respect to the periods covered thereby, (iii) have been
maintained in accordance with customary and sound business practices in the
Company's industry, (iv) form the basis for the Company Financial Statements and
(v) accurately reflect the assets, liabilities, financial position, results of
operations and cash flows of the Company. The Company's management information
systems are adequate for the preservation of relevant information and the
preparation of accurate reports.
18
29
"GAAP" shall mean those generally accepted accounting principles and
practices which are used in the United States and recognized as such by the
American Institute of Certified Public Accountants acting through its Accounting
Principles Board or by the Financial Accounting Standards Board or through other
appropriate boards or committees thereof and which are consistently applied for
all periods, so as to properly reflect the financial position, results of
operations and operating cash flow on a consolidated basis of the party, except
that any accounting principle or practice required to be changed by the
Accounting Principles Board or Financial Accounting Standards Board (or other
appropriate board or committee) in order to continue as a generally accepted
accounting principle or practice may be so changed for periods for which such
change is applicable.
(b) Conduct of Business. Except as set forth on the Disclosure
Schedule to this Section and except as specifically contemplated herein, since
March 31, 1998, the Company has not (i) changed its authorized or issued capital
stock; granted any stock option or right to purchase shares of capital stock;
issued any security convertible into such capital stock; granted any
registration rights; purchased, redeemed, retired or otherwise acquired any
shares of any such capital stock; or declared or paid any dividend or other
distribution or payment in respect of shares of capital stock; (ii) amended its
organizational documents; (iii) sold or transferred (other than in the ordinary
course of business) any assets with a fair market value in excess of $25,000
individually, or $100,000 in the aggregate, including without limitation
Mortgage Loans (defined below); (iv) mortgaged, pledged or subjected to any Lien
or other encumbrance any assets; (v) incurred or become subject to any debt,
liability (including repurchase obligations) or lease obligation, other than
current liabilities incurred in the ordinary course of business that do not
exceed $25,000 individually, or $100,000 in the aggregate; (vi) incurred
obligations or entered into contracts outside of the ordinary course of
business; (vii) suffered any damage, destruction or loss of any assets in the
aggregate in excess of $100,000; (viii) waived or relinquished any rights or
canceled or compromised any debt or claim owing to it, in either case, without
adequate consideration or not in the ordinary course of business; (ix) made any
change in its accounting methods or practices or increased any reserves for
Taxes (defined below); (x) made any material change in its billing and
collection practices and procedures; (xi) paid any bonuses or made any increase
in the compensation, commissions or benefits payable or to become payable to any
of its officers, directors, employees or agents over the amounts paid or payable
as of such date, or entered into or terminated any employment, deferred
compensation, severance or bonus agreement with any of such parties, or made any
loan, or commitment to loan, monies to any such parties, other than customary
cash travel advances which do not exceed $1,000 individually or $10,000 in the
aggregate; (xii) declared or made any dividend, payment or distribution to the
Stockholder other than ordinary employment compensation; (xiii) entered into any
transaction with any Affiliate (defined below) of the Company (including without
limitation by paying, distributing or transferring any funds or assets to the
Stockholder, whether in his capacity as stockholder or in any other capacity);
(xiv) made any capital expenditures in excess of $10,000 on a single basis or
$50,000 in the aggregate (other than in the ordinary course of business and
consistent with past practices); or (xvi) agreed to do any of the foregoing.
19
30
(c) No Material Adverse Change. Since the date of the most
recent Company Financial Statements delivered prior to the date hereof, the
Company has conducted its business only in the ordinary course consistent with
past practice and there has been no event or occurrence that has caused a
Material Adverse Effect.
6.3 Stock.
(a) Capitalization. The authorized capital stock of the
Company consists (i) of 2,000 shares of common stock, no par value, of which
180.744 shares are currently issued and outstanding and which together with such
additional shares as may be issued to the Stockholders prior to Closing comprise
the Stock and (ii) no shares of preferred stock. All of the issued and
outstanding shares of the Stock have been duly authorized and validly issued,
are fully paid and nonassessable and are free and clear of any preemptive
rights. There are no outstanding preemptive, conversion or other rights, or
other options, warrants or agreements granted by, issued by, or binding upon,
the Company for the issuance, purchase, redemption or acquisition of its equity
securities.
(b) Ownership and Transfer by Stockholder. The Stockholder has
good, valid and marketable title to the Stock, free and clear of any Liens. At
the Effective Time, the Stockholder and (if applicable) each Other Stockholder,
will have good valid and marketable title to the Stock (in the aggregate), free
and clear of any Liens. No legend or other reference to any Lien or purported
Lien appears on any certificate representing any shares of the Stock. Neither
the Company nor the Stockholder is a party to any contract, agreement or
understanding (other than the Agreement) relating to the issuance, sale,
redemption, repurchase or other transfer of any shares of the Stock or any other
equity security of the Company.
6.4 Assets.
(a) Personal Property.
(i) Title. The Company is the sole owner of the
assets reflected in the Company Financial Statements and has good and marketable
title to all assets that are personalty (the "Personal Property") (other than
the leased Personal Property described below), in each case free and clear of
all Liens, except for (A) liens for non-delinquent taxes and assessments, (B)
liens of lessors arising under statute and (c) other liens, claims and
encumbrances or charges that do not materially detract from the value of, or
impair the use or transfer of, such Personal Property ("Permitted Liens"). For
purposes hereof, "Liens" shall mean security interests, liens (▇▇▇▇▇▇ or
inchoate), encumbrances, mortgages, pledges, equities, charges, assessments,
easements, covenants, restrictions, reservations, defects in title,
encroachments and other burdens, whether arising by contract or under law, other
than inchoate statutory liens for amounts not yet payable. With respect to any
Personal Property that is leased, the Company is in compliance with each such
lease and is the sole holder of a valid and subsisting leasehold interest, free
and clear of any Liens, other than Permitted Liens. The Disclosure Schedule to
this Section lists all lease agreements, service agreements or other agreements
related to leased Personal Property (the "Equipment Leases"). EXCEPT AS
SPECIFICALLY SET FORTH HEREIN, NO REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, OF
20
31
ANY NATURE IS BEING MADE WITH RESPECT TO ANY OF THE PERSONAL PROPERTY,
INCLUDING, BUT NOT LIMITED TO, ITS MERCHANTABILITY, DESIGN OR USE FOR A
PARTICULAR PURPOSE.
(ii) Notes and Accounts Receivable. Except as set
forth on the Disclosure Schedule to this Section, all notes (excluding the
Mortgage Loans) payable to, and accounts receivable of, the Company (the
"Accounts Receivable") were created in the ordinary course of business and have
been collected or are collectible in the amounts thereof reflected in the books
and records of the Company, net of reserves or contractual allowances reflected
in the Company Financial Statements. For purposes of this Agreement and the
Related Agreements, Accounts Receivable shall be deemed to be uncollectible if
payment is not collected by Buyer through Buyer's utilization of ordinary
collection efforts on the ninetieth day after the applicable payment date.
Payments to the Company in respect of Accounts Receivable are deposited, upon
receipt, directly into the Company's Accounts (defined below) and such amounts
can only be withdrawn therefrom by the Company or its duly authorized agents. To
the Company's Knowledge, none of the Accounts Receivable is or was subject to
any counterclaim or set off. All of such Accounts Receivable arose out of bona
fide, arms-length transactions.
(iii) Bank Accounts. The Disclosure Schedule to this
Section sets forth the names and locations of all banks, trust companies,
savings and loan associations and other financial institutions at which the
Company maintains accounts of any nature (collectively, the "Accounts"), the
numbers of such accounts and the names of all persons authorized to draw thereon
or to make withdrawals therefrom.
(b) Real Property.
(i) Fee Simple. The Disclosure Schedule to this
Section sets forth a description of each parcel of real property owned by the
Company (the "Real Property"), together with a summary description of the
buildings, structures and improvements thereon. Except as set forth in the
Disclosure Schedule to this Section, the Company has good, indefeasible and
marketable title in fee simple absolute to all Real Property, including but not
limited to those properties reflected on the Company Financial Statements, and
to the buildings, structures and improvements thereon, in each case free and
clear of all Liens other than Permitted Liens. Except as set forth in the
Disclosure Schedule to this Section, the Company has not granted any leases on,
and there are no tenancies on, the Real Property.
(ii) Leases; Easements and Other Interests. The
Disclosure Schedule to this Section sets forth (A) a description of the nature
of the Company's use of the land, premises, buildings, structures and
improvements covered by each lease of real property used in the business of the
Company and (B) a list of all other contracts and instruments, whether or not in
writing, relating to or affecting real property or any interest therein to which
the Company is a party or by which the assets of the Company or the Company's
business is bound or affected. The interests described in items (A) and (B)
above are collectively referred to herein as the "Leased Premises" and
21
32
the leases, easements, concessions, contracts and instruments described in items
(A) and (B) above are referred to herein as the "Real Estate Contracts."
The Company is the sole holder of valid and subsisting leasehold
interests in the Leased Premises leased thereby free and clear of any Liens,
other than Permitted Liens. All lease or rental payments and other amounts due
and payable in connection with the Real Estate Contracts are current, there are
no defaults by the Company with respect thereto and no event has occurred that
with the passing of time or the giving of notice or both would constitute a
default (x) by the Company thereunder and (y), to the Sellers' Knowledge, by any
other party thereunder. All options in favor of the Company to purchase any of
the Leased Premises, if any, are in full force and effect. The Company has the
right to quiet enjoyment of the Leased Premises for the full term of the related
Real Estate Contract and any renewal option related thereto, and no leasehold or
other interest of the Company in such real property is subject or subordinate to
any Lien, other than Permitted Liens.
(iii) Eminent Domain. Neither the whole nor any
portion of any Leased Premises has been condemned, taken by right of eminent
domain, requisitioned or otherwise taken by any public authority and the Company
has not received written notice from any governmental body with power of eminent
domain of pending or threatened taking by eminent domain, requisition or
condemnation.
(iv) Leased Premises Taxes. To the extent the Company
is liable for payment therefor, there is no Tax assessment pending or, to the
Sellers' Knowledge, threatened with respect to any portion of the Leased
Premises, except for ad valorem taxes for the calendar year 1998 or as otherwise
set forth in the Disclosure Schedules.
(c) Intellectual Property.
(i) Intellectual Property. The term "Intellectual
Property" shall include the names "Amerigroup Mortgage Corporation, a division
of Mortgage Investors Corporation," "Mortgage Investors Corporation of Ohio,"
and "Mortgage Investors of Utah Corporation," (but shall not include the name
"Marketing Solution Publications, Inc." if the Stockholder retains such name as
described in Section 2.2(i) (Sellers Deliveries at Closing)), all fictitious
business names, trade names, registered and unregistered trademarks, service
marks and applications owned, used or licensed by the Company (collectively
"Marks"), all patents and patent applications (if any) owned, used or licensed
by the Company (collectively "Patents"), all registered and unregistered
copyrights (if any) in both published works and unpublished works owned, used or
licensed by the Company (collectively "Copyrights"), and all know-how, trade
secrets, confidential information, software, technical information, process
technology, plans, drawings and blue prints owned, used or licensed by the
Company as licensee or licensor (collectively, "Trade Secrets"). The
Intellectual Property also includes all such rights and assets of the Company
under all contracts to which the Company is a party or by which it is bound
relating to the Intellectual Property including, without limitation, contracts
by which the Company licenses Intellectual Property to third parties and
contracts by which third parties license to, or otherwise permit the use of its
intellectual property by, the Company (collectively "Technology Contracts"). To
the Company's Knowledge, the Company is in compliance
22
33
with all Technology Contracts, is not currently in default thereunder, and no
event has occurred that with the passing of time or the giving of notice or both
would constitute a default thereunder.
(ii) Ownership. Except with respect to licensed
Intellectual Property or as listed in the Disclosure Schedule to this Section,
the Company is the owner of all right, title and interest in and to the
Intellectual Property free and clear of all Liens. The Intellectual Property
includes all such property necessary for the operation of the business of the
Company (A) as it currently is or has been conducted and (B) without violating
or infringing upon the rights of any third party. Without limiting the
foregoing, the Company is properly licensed to use all computer software (and
copies thereof) used by it. No current and former employee of the Company has
any rights to any inventions, improvements, discoveries or information which
relate to any software used by the Company. No right, license or consent of, or
payment to, any third party will be required after consummation of the
transactions contemplated hereby for the continued use of the Intellectual
Property by the Company.
(iii) Technology Contracts. The Disclosure Schedule
to this Section contains an accurate and complete list of all the Technology
Contracts.
(iv) Trademarks. The Disclosure Schedule to this
Section contains an accurate and complete list of all material Marks, including
application and registration dates and numbers, and jurisdiction thereof, if
any. The Sellers are not aware of any potentially interfering ▇▇▇▇ or
application therefor of any third party. No ▇▇▇▇ is infringed or has been
challenged or threatened in any way. None of the Marks used by the Company
infringe or are alleged to infringe any business name, trade name, trademark or
service ▇▇▇▇ of any third party.
(v) Copyrights. The Disclosure Schedule to this
Section contains an accurate and complete list of all registered Copyrights,
including application and registration dates and numbers, and jurisdictions
thereof. None of the Copyrights infringe or are alleged to infringe any
copyright of any third party.
(vi) Trade Secrets. The Company has taken all
reasonable precautions to protect the secrecy, confidentiality and value of the
Trade Secrets. To the Sellers' Knowledge, no Trade Secret is subject to any
adverse claim nor has any Trade Secret been challenged or, to the Sellers'
Knowledge, threatened in any way. None of the Trade Secrets infringe or are
alleged to infringe any proprietary right of any third party.
(d) Contracts.
(i) The Disclosure Schedule to this Section lists all
agreements, contracts, notes, bonds, debentures, indentures, mortgages, deeds of
trust, leases, licenses, obligations, promises, settlements, repurchase
obligations (including, but not limited to, repurchase obligations pertaining to
whole loan sales, securitizations, pooling and servicing agreements, servicing
agreements and other such agreements and understandings (whether written or oral
and whether express or implied) (together with the Equipment Leases, the Real
Estate Contracts and the
23
34
Technology Contracts, the "Contracts")) that are material to the business of the
Company, including without limitation all the foregoing (A) that provide for
future payments, claims or obligations to or from the Company of $100,000 or
more per year or $500,000 or more over the term thereof or (B) that are (1)
collective bargaining agreements or other agreements with any labor union, (2)
joint venture agreements, partnership agreements or other agreements involving a
sharing of profits, losses, costs or liabilities, (3) agreements containing
covenants that in any way purport to restrict the business activity of the
Company or limit the freedom of the Company to engage in any line of business or
to compete with any other person, (4) standard forms of agreements providing for
payments to or for any person based on sales, originations, closings, purchases
or profits (other than direct payments for goods), (5) powers of attorney, (6)
agreements providing for the payment of special or consequential damages by the
Company, (7) agreements relating to capital expenditures in excess of $50,000 by
the Company, (8) warranties, guarantees or other similar undertakings by the
Company, (9) agreements involving material indemnification, (10) employment,
secrecy or confidentiality agreements with key employees, (11) requirements or
output contracts, (12) business alliance or joint marketing agreements, (13)
pooling and servicing agreements under which the Company may have repurchase
obligations or special servicing duties, custodial agreements, loan agreements,
master loan purchase agreements, master loan repurchase agreements or
underwriting agreements or (14) amendments, modifications or supplements to any
of the foregoing; provided, however, that Mortgage Loans are disclosed
separately in the Disclosure Schedule to Section 6.6(b) (Mortgage Loans). As
used herein, the term "Contracts" also shall be deemed to refer to all
agreements between the Company, on the one hand, and the Stockholder, any
affiliate of the Stockholder, or any director or executive officer of the
Company, on the other hand.
(ii) Except as set forth on the Disclosure Schedule
to this Section, all of the Contracts are legal, valid and binding on the
parties thereto, are in full force and effect and represent legitimate
transactions; the Company is not in violation of or default under any of the
Contracts and to Sellers' Knowledge, no other party to any Contract is in
violation or default thereunder; no event, occurrence or condition exists which,
with the lapse of time, the giving of notice, or both, or the happening of any
further event or condition, would become a violation or default by the Company
or any other party thereto, under any Contract; there are no outstanding, and to
the Sellers' Knowledge, no threatened disputes or disagreements with respect to
any of the Contracts; the Company has not released any material rights under any
Contract; the Company is not subject to any legal obligations to renegotiate,
nor to Sellers' Knowledge is there any right to renegotiate, any Contract; and
the Company is not subject to any liability, or claim therefor, for or with
respect to price adjustment under any Contract with the United States Government
or any agency thereof, including any liability for defective pricing.
(iii) The Contracts constitute all of the material
contracts, leases and agreements necessary for the conduct of the businesses of
the Company in the manner and to the extent conducted by it. Except as listed on
the Disclosure Schedule to this Section, all rights of the Company under the
Contracts will be enforceable by it after the Closing without the consent or
agreement of any other party.
24
35
(iv) The Sellers have delivered or made available to
Buyer true and complete copies of each Contract, including all amendments
thereto. There are no unwritten amendments to, or waivers under, any Contract.
6.5 Liabilities.
(a) No Liabilities. The Company does not have any debt,
guaranty, liability or obligation of any nature, whether accrued, absolute,
contingent or otherwise, whether due or to become due, and whether known or
unknown, and there is no basis for the assertion against it of any such debt,
guaranty, liability or obligation except (i) to the extent set forth or reserved
against in full in the Company Financial Statements, (ii) current liabilities
incurred in the ordinary course of business since March 31, 1998 and (iii) to
the extent set forth in the Disclosure Schedule to this Section.
(b) Tax Matters. Except as set forth in the Disclosure
Schedule to this Section:
(i) The Company has filed or will timely file all Tax
Returns (defined below) that it was or is required to file on its behalf and on
behalf of any other party. All such Tax Returns were correct and complete in all
respects. All Taxes due and owing by the Company (whether or not shown on any
Tax Return, whether known or unknown, asserted or unasserted) have been paid.
The Company is not a party to any tax sharing or other agreement that will
require any payment with respect to Taxes. The Company currently is not the
beneficiary of any extension of time within which to file any Tax Return. The
Company has not waived any statute of limitations in respect of Taxes and has
not agreed to any extension of time with respect to a Tax assessment or
deficiency or the collection of Taxes.
(ii) The Company does not expect any taxing authority
or other governmental unit to assess any additional Taxes. No taxing authority
or other governmental unit has proposed or threatened in writing by notice or
correspondence received by the Company any assessment, deficiency, adjustment,
dispute or claim concerning any Tax Return or any Tax liability of any of the
Company. There is no unpaid assessment, deficiency or adjustment concerning any
Tax Return or Tax liability of the Company. None of the Tax Returns of the
Company has been selected for or are now under audit or examination by any
taxing authority or other governmental unit, and there are no suits, actions,
proceedings or investigations pending or, to the Sellers' Knowledge, threatened
against the Company with respect to any Taxes.
(iii) The Company has withheld and timely deposited
or paid all Taxes required to have been withheld and deposited or paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other third party.
(iv) The Company has not filed a consent under Sec.
341(f) of the Code concerning collapsible corporations. The Company has not made
any payments, is not obligated to make any payments, and is not a party to any
agreement that under certain circumstances could obligate it to make any
payments that would be characterized as "excess parachute payments" under Code
Sec. 280G of the Code. None of the assets of the Company (A) is property which
is required
25
36
to be treated as being owned by any other person pursuant to the so-called "safe
harbor lease" provisions of former Code Sec. 168(f)(8) of the Code; (B) directly
or indirectly secures any debt the interest on which is tax exempt under Code
Sec. 103(a) of the Code; or (C) is "tax-exempt use property" within the meaning
of Code Sec. 168(h) of the Code. The Company has disclosed on its federal income
Tax Returns all positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Code Sec. 6662. The
Company (X) is not a party to any Tax allocation or sharing agreement; (Y) has
not been a member of an affiliated group filing a consolidated federal income
Tax Return; and (Z) has no liability for the Taxes of any person under Treas.
Reg. Sec. 1.1502-6 or any similar provision of state, local, or foreign law, as
a member of a consolidated group, transferee or successor, by contract, or
otherwise. Neither the Stockholder nor the Company is a person other than a
United States person within the meaning of the Code and the transaction
contemplated herein is not subject to the withholding provisions of Code Sec.
3406 of the Code or subchapter A of Chapter 3 of the Code.
(v) Any unpaid Taxes of the Company, including all
Taxes not yet due for any and all periods through the Closing Date, whether
known or unknown, asserted or unasserted (A) do not exceed the reserve for Tax
liability (other than any reserve for deferred Taxes established to reflect
timing differences between book and Tax basis in assets and liabilities)
included in the Company Financial Statements and (B) do not exceed those
reserves as adjusted for the passage of time through the Closing Date.
As used herein, the term "Taxes" means all federal, state, local,
foreign and other governmental net income, gross income, gross receipts, sales,
use, ad valorem, transfer, franchise, profits, license, lease, service, service
use, withholding, payroll, employment, unemployment, excise, severance, stamp,
occupation, premium, property, windfall profits, customs, duties or other taxes,
fees, assessments or charges of any kind whatever, together with any interest
and any penalties, additions to tax or additional amounts with respect thereto,
and the term "Tax" means any one of the foregoing Taxes; the term "Tax Returns"
means all returns, declarations, reports, statements and other documents
required to be filed in respect of Taxes; the term "Code" means the Internal
Revenue Code of 1986, as amended (all citations to the Code, or to the Treasury
Regulations promulgated thereunder, shall include any amendments or any
substitute or successor provisions thereto).
(c) Litigation.
(i) Other than the items listed on the Disclosure
Schedule to this Section, there is no pending action, arbitration, audit,
hearing, investigation, litigation or suit (whether civil, criminal,
administrative (including Equal Employment Opportunity Commission and similar
state or federal agencies), investigative or informal) (A) that has been
commenced by or against the Company or that otherwise relates to or may affect
the Merger, the Company, the Stock, this Agreement, any Related Agreement or the
transactions contemplated herein or therein or (B) that has been commenced by or
against the Stockholder and that relates to the Company or that otherwise
relates to or may affect the Company, the Stock, this Agreement, any Related
Agreement or the transactions contemplated herein or therein (collectively, the
"Proceedings"). To the Sellers' Knowledge, no Proceeding has been overtly
threatened.
26
37
(ii) Except as set forth on the Disclosure Schedule
to this Section, there is no award, decision, injunction, judgment, order,
ruling, subpoena, writ or verdict of any court, arbitrator or government agency
or instrumentality (A) to which the Company, the Stock, this Agreement, any
Related Agreement or the transactions contemplated herein or therein is subject
or by which any of the foregoing may be affected or (B) to which the Stockholder
is subject and that relates to or affects the Company, the Stock, this
Agreement, any Related Agreement or the transactions contemplated herein and
therein (collectively, the "Orders").
(iii) The Disclosure Schedule to this Section sets
forth a brief description of each Proceeding pending or, to the Seller's
Knowledge, overtly threatened at the date hereof.
(d) Employee Liabilities. The Disclosure Schedule to this
Section accurately lists as of the date set forth therein, (i) the hire date of
and year-to-date compensation paid to each employee (specifying as to each
employee the respective amounts of base salary, bonus and commissions paid to
such employee), (ii) all written employee policies and (iii) all accrued and
unpaid commissions or bonus payments due to employees of the Company as of May
31, 1998.
6.6 Business.
(a) Mortgage Banking Licenses and Qualifications.
(i) The Company has all certifications,
authorizations, licenses, permits, approvals, governmental licenses, exemptions,
classifications and registrations, (collectively, the "Licenses"), necessary to
conduct its business, to the extent such business has been or is being conducted
by the Company in those jurisdictions where such Licenses are required (the
"Mortgage Business"). The Disclosure Schedule to this Section lists every
material License that is in effect, has been applied for or is pending. Sellers
have made available to Buyer the originals, or if the originals are not
available, then true and complete copies of, all of the Licenses.
(ii) All Licenses are in full force and effect. No
event has occurred that will constitute or result in a violation of a License,
or result in the revocation, suspension, modification or non-renewal of any
License. No Seller has received any notice of any actual, alleged or potential
violation, revocation, suspension, modification or non-renewal of any License.
The Company has complied with all Licenses, and the Sellers know of no
threatened suspension, cancellation or invalidation of, or penalties (including
fines or refunds) under, any License.
(iii) The Company has not originated mortgage loans
through brokers or correspondents since July 1, 1995.
27
38
(iv) Except as set forth in the Disclosure Schedule
to this Section, the Company is (and has been at all times when each mortgage
loan was originated) approved and qualified and in good standing in all states
where it has originated mortgage loans under all applicable federal, state and
local laws and regulations thereunder (as such laws and regulations existed when
each such loan was originated) as a mortgage lender, eligible to originate,
purchase, hold, sell and service mortgage loans (to the extent necessary to
carry on the Mortgage Business).
(b) Mortgage Loans. The Disclosure Schedule to this Section
lists the aggregate principal dollar amount of the mortgage loans that have been
endorsed by the Company but that have not yet been funded by ▇▇▇▇▇ ▇▇▇▇▇ or any
other party under a repurchase obligation (each a "Mortgage Loan"). All (i)
Mortgage Loans, (ii) other mortgage loans for which the Company may be subject
to recourse under any whole loan sale, securitization, pooling and servicing
agreement, servicing agreement or other agreement and (iii) mortgage loans sold
wherein the Company has made representations and warranties on which the Company
has any continuing contingent liability (the items described in (i), (ii) and
(iii) above are referred to collectively herein as the "Recourse Mortgage
Loans") are (A) evidenced by a promissory note or notes, or other evidence of
indebtedness (a "Note"), properly payable or endorsed to the Company or an
assignee of the Company (as applicable), secured by a mortgage, deed of trust or
other security instrument creating a lien on real property, a leasehold estate
or furniture, fixtures and equipment and other personal property, and any other
property described therein which secures such Note, together with any
assignment, reinstatement, extension, endorsement or modification thereof (a
"Mortgage") properly assigned to the Company or an assignee of the Company (as
applicable), with such terms as are customary in the appropriate segment of the
mortgage lending business, (B) duly secured by a Mortgage in full force and
effect, with customary terms in accordance with industry practice, which grants
the holder thereof a first or second priority lien on the subject property
(including any improvements thereon) or leasehold estate, as applicable, each
such Mortgage constituting a security interest that has been duly perfected and
maintained (or is in the process of perfection in due course) as a first lien or
second lien, where applicable, subject only to taxes and assessments not yet
delinquent and to such other matters as evidenced by a lender's title insurance
policy for mortgages or deeds of trust on fee or leasehold estates (for
Mortgages on certain ground leases), (c) accompanied by a hazard insurance
policy (and a flood insurance policy and certification where required under the
terms of the National Flood Insurance Act of 1968 and the Flood Disaster
Protection Act of 1973, each as amended) covering improvements on the premises
subject to such Mortgage, with a loss payee clause in favor of the Company or an
assignee of the Company, such insurance policy covering such risks as are
customarily insured against in accordance with industry practice, and (D) other
files and documents as are customary in industry practice.
(c) Enforceability. Except as set forth in the Disclosure
Schedule to this Section, all Recourse Mortgage Loans are (i) valid and legally
binding obligations of the borrowers thereunder, have been duly executed by a
borrower of legal capacity, are enforceable in accordance with their terms
(except as enforcement thereof may be limited by (A) bankruptcy, insolvency or
other similar laws affecting the enforcement of creditors' rights generally and
by general principles of equity (whether applied in a proceeding in equity or at
law), (B) state laws requiring creditors to proceed against the collateral
before pursuing the borrower and (c) state laws on deficiencies or election of
28
39
remedies and (iii) conform to all applicable federal, state and local laws,
rules and regulations with respect to the origination, insuring, purchase, sale,
pooling, servicing, subservicing, master servicing or filing of claims in
connection with a mortgage loan, as well the Company's underwriting, closing and
servicing guidelines (collectively, the "Regulations"). Neither the operation of
any of the terms of any Recourse Mortgage Loan, nor the exercise of any right
thereunder, has rendered or will render the related Mortgage or Note
unenforceable, in whole or in part, or subject it to any right of rescission,
setoff, counterclaim or defense, and no such right of rescission, setoff,
counterclaim or defense has been asserted with respect thereto. The file or
files containing the photostatic copy or copies on other media, and to the
extent required by the Regulations, original documents of the Mortgage, the Note
and other loan documents with respect to each Recourse Mortgage Loan, as well as
the related credit and closing packages, disclosures, custodial documents, and
all other files, books, records, and documents reasonably necessary or customary
in accordance with industry practice for the sale and servicing of such mortgage
loan (the "Loan Documents"), including without limitation Recourse Mortgage
Loans, are in compliance in all material respects with applicable Regulations
and are complete in all material respects.
(d) Title to Certain Mortgage Loans; Mortgage Loan Conveyance
Agreements. Except as set forth on the Disclosure Schedule to this Section, all
mortgage loans owned by the Company that are not subject to (or not qualified
for) any agreement pursuant to which the Company is bound to sell or convey such
loan to any party, are owned by the Company free and clear of all Liens. Such
mortgage loans have been duly recorded or submitted for recordation in due
course in the appropriate filing office in the name of the Company as mortgagee.
The Company has not, with respect to any such mortgage loan currently held by
the Company, released any security therefor, except upon receipt of commercially
reasonable consideration for such release, or accepted prepayment of any such
mortgage loan which has not been promptly applied to such mortgage loan. The
Disclosure Schedule to this Section lists all agreements, contracts and other
documents or instruments to which the Company is a party and by which the
Company is bound to sell or convey mortgage loans to any party or to reacquire
any Mortgage Loans under any repurchase agreement, reverse repurchase agreement
or similar agreement.
(e) No Recourse. The Company has no obligation to repurchase,
reimburse, indemnify or hold harmless any person based solely on the default
under or the foreclosure or sale of the collateral for, any mortgage loan at any
time originated, held, owned, sold, transferred or otherwise conveyed by the
Company, without regard to a breach or default of any contract containing any
representation, warranty, undertaking, misfeasance or malfeasance by the
Company, as the case may be. The Disclosure Schedule to this Section describes
each contract containing any representation, warranty and undertaking by the
Company that obligates the Company to repurchase, reimburse, indemnify or hold
harmless any person in respect of any such mortgage loan.
(f) Compliance with Mortgage Banking Regulations. With respect
to each Recourse Mortgage Loan, the Company and each prior and current
originator, if any, of any such mortgage loan has been and is in compliance in
all material respects with all Regulations, orders, writs, decrees, injunctions
and other requirements of any court or governmental authorities applicable
29
40
to any of them, including without limitation any applicable local, state or
federal law or ordinance, and any regulations or orders issued thereunder.
(g) Physical Damage. Except as set forth on the Disclosure
Schedule to this Section, to the Sellers' Knowledge, there exists no physical
damage to the collateral securing the Mortgage Loans, whether from fire, flood,
windstorm, earthquake, tornado, hurricane or any other similar casualty, which
physical damage has caused any such Mortgage Loan to become delinquent or
adversely affect the value or marketability of any such Mortgage Loan or the
collateral securing such Mortgage Loan.
(h) Tax Identification. All tax identifications for the
mortgagors under the Mortgage Loans (or evidence that reasonable attempts have
been made to obtain such in accordance with applicable regulations) are
contained in the Loan Documents relating to each Mortgage Loan. All of such tax
identifications are correct and complete in all material respects, and property
descriptions contained in any loan documents are legally sufficient in
accordance with applicable law and regulations.
(i) ARMs and Conversion Loans. None of the Mortgage Loans are
adjustable rate mortgages.
(j) Custodial Accounts. The Company has full authority to
maintain Custodial Accounts for all of the Mortgage Loans, as required by
applicable law, and, when required, has established Custodial Accounts for all
Escrow Funds relating to any servicing rights. Such Custodial Accounts comply in
all respects with all laws and regulations and any terms of the mortgage loans.
Except as set forth in the Disclosure Schedule to this Section, there
are no pooling, participation, servicing or other agreements to which the
Company is a party which obligate it to make servicing advances with respect to
defaulted or delinquent mortgage loans.
The Disclosure Schedule to this Section contains a true and correct
list of (i) all of the completed audits and investigations of the Company by any
agency, investor or insurer that were commenced since June 30, 1995, the results
of which audits and investigations claimed a failure to comply with applicable
laws, regulations, guidelines or other standards and (ii) to the Sellers'
Knowledge, all pending audits and investigations of the Company by any agency,
investor or insurer.
"Custodial Accounts" shall mean all escrow, impound, suspense (loan
level and other) and custodial accounts maintained with respect to the mortgage
loans for purposes of receiving and disbursing payments of principal, interest,
taxes, insurance, assessments and similar charges (and interest, if any, accrued
on such funds for the benefit of mortgagors) relating to mortgage loans.
"Escrow Funds" shall mean all amounts held in Custodial Accounts, with
respect to mortgage loans held for the purpose of paying property taxes, hazard
insurance premiums, assessments and other such items as provided in the Mortgage
and applicable laws and regulations.
30
41
(k) Insurance. The Company maintains insurance on its assets,
and upon its business and operations, against loss or damage, risks, hazards and
liabilities (the "Policies"), with insurers the Stockholder reasonably believes
to be financially sound and reputable. The premiums due and owing with respect
to the Policies have been paid, premiums not yet due have been adequately
accrued for, and no Seller has received any notice of cancellation or of
intention not to renew any such Policy. The Disclosure Schedule to this Section
contains a list of the Policies, copies of which have been provided to Buyer.
The Disclosure Schedule to this Section sets forth a list of each other
insurance policy or insurance contract relating to the Company and its business
pursuant to which the Company is or may hereafter be entitled to assert claims
for insurance coverage (the "Prior Policies"). The Company has timely pursued
all rights to recover (if any) under the Policies and the Prior Policies.
(l) Employees. No officer or employee of the Company is in
violation of any term of any contract, proprietary information agreement,
noncompetition agreement, or any other agreement or any restrictive covenant or
any other common law obligation to a former employer relating to the right of
any such person to be engaged by it or to the use of trade secrets or
proprietary information of others (an "Outside Confidentiality Agreement"), and
the engagement of such persons by the Company before or after the Closing does
not subject the Company or Buyer to any liability with respect thereto. There
are neither pending, nor to the Sellers' Knowledge threatened, any Proceedings
with respect to any Outside Confidentiality Agreement. The Disclosure Schedule
to this Section lists every Outside Confidentiality Agreement about which the
Company has Knowledge.
There is no labor strike, dispute, slowdown, picketing or stoppage
pending or, to the Sellers' Knowledge, threatened against or directly affecting
the Company, nor has the Company experienced any of the foregoing since January
1, 1995. The Company is not subject to any collective bargaining agreement. No
union representation question exists and, to Sellers' Knowledge, there has been
no union organization effort since January 1, 1995, respecting the employees of
the Company. The Company is not delinquent in payments to any of its employees
for any wages, salaries, commissions, bonuses or other direct compensation for
any services performed by them prior to the Closing Date or amounts required to
be reimbursed to such employees. The Disclosure Schedule to this Section lists
every retired employee entitled to receive compensation from the Company or to
participate in any benefit plan. The books and records of the Company accurately
reflect all changes in compensation since April 1, 1995.
The employment of each of the Company's employees is terminable at will
without cost to the Company for severance obligations, except for payment of
accrued salaries or wages and vacation pay. No employee or former employee has
any right to be rehired by the Company prior to the hiring of a person not
previously employed by the Company. To Sellers' Knowledge, no officer, director
or key employee intends to terminate employment with the Company.
(m) Worker's Compensation. Except as set forth on the
Disclosure Schedule to this Section, the Company subscribes to, or is otherwise
insured under, the worker's compensation or similar statute in every state in
which it owns or leases real estate or has employees. The
31
42
Disclosure Schedule to this Section lists all material claims filed by employees
of the Company in respect of employment-related injury or illness since June 30,
1995. The Company has not received any report or notice from the Occupational
Safety and Health Administration.
(n) ERISA. The Disclosure Schedule to this Section lists each
"employee benefit plan" as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), that the Company maintains or
ever has maintained after June 30, 1995, or to which the Company contributes,
ever has contributed or ever has been required to contribute after June 30, 1998
(the "Employee Benefit Plans"). Each Employee Benefit Plan (and each related
trust, insurance contract or fund) complies in form and in operation in all
respects with the applicable requirements of all laws, rules and regulations
governing or applying to such Employee Benefit Plan, including without
limitation ERISA and the Code. All contributions (including all employer and
employee salary reduction contributions) which are due have been paid to each
such Employee Benefit Plan which is an "employee pension benefit plan" (as
defined in Section 3(2) of ERISA (hereinafter, an "Employee Pension Benefit
Plan")). Sellers have delivered or made available to Buyer correct and complete
copies of the plan documents and summary plan descriptions, the most recent
determination letter received from the Internal Revenue Service, the most recent
Form 5500 Annual Report, and all related trust agreements, insurance contracts
and other funding agreements which implement each Employee Benefit Plan.
No action, suit, proceeding, hearing or investigation with respect to
the administration or the investment of the assets of any Employee Benefit Plan
is pending or, to the Sellers' Knowledge, threatened, except for routine claims
for benefits under such plans.
The Disclosure Schedule to this Section lists all contracts with
third-party administrators, insurers, actuaries, investment managers,
consultants and other independent contractors that relate to any Employee
Benefit Plan.
(o) Affiliated Transactions. At the time of the Closing, there
will be no executory transactions between the Company and the Stockholder, or an
Associate or Affiliate (as such terms are defined in Rule 405 promulgated
pursuant to the Securities Act) of the Company, except as described herein.
(p) Legal Requirements. Except as set forth in the Disclosure
Schedule to this Section:
(i) Compliance with Laws. The Company has not
violated any term of any judgment, writ, decree, order, law, statute, rule or
regulation to which it is subject or a party, or by which the business or assets
of the Company is bound or affected (collectively, "Legal Requirements"). The
Company has not received written notice of any actual, alleged or potential
violation of a Legal Requirement.
(ii) Certain Acts. Neither any Seller nor any of
their former or current officers, directors, employees, agents or
representatives has made or agreed to make, directly or
32
43
indirectly, with respect to the businesses or assets of the Company, any (A)
bribes or kickbacks, illegal political contributions, payments from corporate
funds not recorded on the books and records of the Company, or funds to
governmental officials (or any such official's family members or affiliates) for
the purpose of affecting their action or the action of the government they
represent, to obtain favorable treatment in securing business or licenses or to
obtain special concessions, or illegal payments from corporate funds to obtain
or retain business or (B) payments from corporate funds to governmental
officials for the purpose of affecting their action or the action of the
government they represent, to obtain favorable treatment in securing business or
licenses or to obtain special concessions. Without limiting the generality of
the foregoing, none of the foregoing persons or entities has made or agreed to
make, directly or indirectly, (whether or not said payment is lawful) any
payment to obtain, or with respect to, sales other than usual and regular
compensation to its employees and sales representatives with respect to such
sales.
(q) Environmental Matters.
(i) Compliance. To the Seller's Knowledge, the
Company is in compliance with all applicable Environmental Laws (defined below)
and the Company has not received any written communication, from any person that
alleges that the Company is not in compliance with applicable Environmental
Laws. As used herein, "Environmental Laws" mean all laws or orders relating to
the regulation or protection of human health, safety or the environment
(including, without limitation, ambient air, soil, surface water, ground water,
wetlands, land or subsurface strata), including, without limitation, laws and
regulations relating to releases or threatened releases of hazardous materials,
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, recycling or handling of hazardous
materials.
(ii) Environmental Claims. There is no Environmental
Claim (defined below) pending or to the Seller's Knowledge, threatened (A)
against the Company, (B) against any person or entity whose liability for any
Environmental Claim the Company has or may have retained or assumed either
contractually or by operation of law or (c) against any real or personal
property or operations which are now or have been previously owned, leased,
operated or managed, in whole or in part, by the Company.
As used herein, "Environmental Claim" means any and
all administrative, regulatory or judicial actions, suits, demands, demand
letters, directives, claims, Liens, investigations, proceedings or notices of
compliance or violation (written or oral) by any person or entity (including any
governmental authority) alleging potential liability (including, without
limitation, potential liability for enforcement, investigatory costs, cleanup
costs, governmental response costs, removal costs, remedial costs, natural
resources damages, property damages, personal injuries, or penalties) arising
out of, based on or resulting from (A) the presence, or release or threatened
release into the environment, of any hazardous material at any location, whether
owned, operated, leased or managed by the Seller with respect to the business of
the Company; or (B) any violation, or alleged violation, of any Environmental
Law; or (c) any and all claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting from
the presence or release of any hazardous materials.
33
44
6.7 Buyer Stock.
(a) Purchase Entirely for Own Account. Each of the
Stockholders is acquiring the shares of Buyer Stock for investment for such
Stockholder's own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof in violation of the Securities Act.
Each of the Stockholders does not have any present intention of selling,
granting any participation in, or otherwise distributing the shares of Buyer
Stock otherwise than pursuant to an effective registration statement under the
Securities Act as contemplated by the Registration Rights Agreement or in a
transaction exempt from the registration requirements under the Securities Act
and applicable state securities laws. Except as set forth in the Registration
Rights Agreement, each of the Stockholders does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
shares of Buyer Stock.
(b) Buyer's and Merger Sub's Reliance. Each of the
Stockholders acknowledges that the issuance of the shares of Buyer Stock will
not be registered under the Securities Act or any state securities laws on the
basis that the issuance of the shares of Buyer Stock as provided for herein is
exempt from registration under the Securities Act and such state laws. Each of
the Stockholders acknowledges that the availability of such exemptions is
predicated in part on such Stockholder's representations set forth in this
Section and that Buyer, Merger Sub and Buyer are relying on such
representations.
(c) Receipt of Information. Each of the Stockholders has
received all the information he considers necessary or appropriate for deciding
whether to consummate the transactions described herein and to accept the shares
of Buyer Stock. Each of the Stockholders has had an opportunity to ask questions
and to receive answers from Buyer and Merger Sub regarding the terms and
conditions of the issuance of the shares of Buyer Stock and the business
properties, prospects and financial condition of Buyer and Merger Sub and to
obtain additional information (to the extent Buyer or Merger Sub possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify the accuracy of any information furnished to such
Stockholder or to which such Stockholder had access.
(d) Investment Experience. Each of the Stockholders, alone or
with his representative, acknowledges that he is able to fend for himself and
bear the economic risk of the investment in the shares of Buyer Stock, and has
such knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of the investment in the shares of
Buyer Stock.
(e) Accredited Investor. Each of the Stockholders is an
Accredited Investor as defined in Rule 501(a) of Regulation D promulgated under
the Securities Act.
34
45
(f) Restricted Securities. Each of the Stockholders
acknowledges that the shares of Buyer Stock may not be sold, transferred or
otherwise disposed of without registration under the Securities Act or an
applicable exemption therefrom and that in the absence of an effective
registration statement covering the shares of Buyer Stock or an available
exemption from registration under the Securities Act, the shares of Buyer Stock
must be held indefinitely. Each of the Stockholders further acknowledges that
the shares of Buyer Stock may not be sold pursuant to Rule 144 promulgated under
the Securities Act unless all of the conditions of that rule are met.
(g) Legends. Each of the Stockholders acknowledges that each
certificate representing any shares of the Buyer Stock will be endorsed with a
legend substantially similar to the following:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND
MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION THAT IS EXEMPT
UNDER SUCH ACT OR LAWS OR PURSUANT TO AN EFFECTIVE REGISTRATION UNDER
SUCH ACT OR LAWS AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT OR LAWS OR
UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR OTHER
EVIDENCE, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH
REGISTRATION IS NOT REQUIRED.
6.8 Other.
(a) Documents Delivered. The minute books and stock transfer
records of the Company (the "Corporate Records") that have been made available
to Buyer, Merger Sub and their agents are complete in all material respects. The
Corporate Records contain accurate records of all meetings held of, and
corporate action taken by the respective boards of directors and stockholders of
the Company, and any committee or representative thereof. No meeting has been
held and no action has been taken, by any such board of directors or equity
security holders for which accurate records have not been prepared and included
in the Corporate Records. At the Closing, all of the Corporate Records will be
in the possession of the Company.
(b) No Brokers Fees; No Commissions. All negotiations relative
hereto and the transactions contemplated hereby have been carried on by Sellers
directly with Buyer and Merger Sub without any act by Sellers that would give
rise to any claim against the Company, Buyer, Merger Sub or their respective
Affiliates for a brokerage commission, finder's fee or other similar payment,
except for a fee to be paid by the Surviving Corporation to ▇▇▇▇▇▇▇ ▇▇▇▇▇ at the
Closing and fees to be paid to ▇▇▇▇▇▇▇ ▇▇▇▇▇ by the Surviving Corporation after
the Closing in connection with the Earnout Payments and any Earnout True-up
Payments, as described in Section 1.2(a)(ii).
(c) Disclaimer. Neither Seller shall be deemed to have made to
Buyer or Merger Sub any representation or warranty other than as expressly made
by Sellers herein. Without limiting
35
46
the generality of the foregoing, and notwithstanding any otherwise express
representations and warranties made by Sellers herein, Sellers make no
representation or warranty with respect to any projections, estimates or budgets
heretofore, delivered to or made available to Buyer or Merger Sub of future
revenues, expenses or expenditures or future results of operations.
ARTICLE 7
Representations and Warranties of Buyer and Merger Sub
Buyer and Merger Sub, jointly and severally, represent and warrant to
Sellers as follows:
7.1 Entry Into Agreements.
(a) Organization and Good Standing. Buyer is a corporation
duly organized and validly existing under the laws of the State of Delaware and
is in good standing under such laws. Merger Sub is a corporation duly organized,
validly existing and in good standing under the laws of Ohio. Buyer owns,
beneficially and of record, all of the issued and outstanding shares of capital
stock of Merger Sub.
(b) Corporate Power and Authority; Validity and Authorization.
Buyer and Merger Sub have full corporate power and authority to execute, deliver
and perform this Agreement and the Related Agreements. This Agreement has been
duly authorized, executed and delivered by Buyer and Merger Sub, and is
enforceable against Buyer and Merger Sub in accordance with its terms.
When the Related Agreements to which each of Buyer and Merger
Sub is a party are delivered at the Closing, such agreements will have been duly
authorized, executed and delivered by Buyer and Merger Sub, and will constitute
the legal, valid and binding obligations of Buyer and Merger Sub, enforceable
against Buyer and Merger Sub in accordance with their terms.
7.2 Conflicts and Consents.
(a) No Conflict. The execution, delivery and performance of
this Agreement and the Related Agreements, and the consummation of the
transactions contemplated hereby and thereby will not result in any violation of
the terms of and will not contravene, conflict with, accelerate the performance
of the obligations required under, or constitute a default under, the
Certificate of Incorporation or Bylaws of Buyer or Articles of Incorporation or
Bylaws of Merger Sub, or any agreement, judgment, decree, order, law, rule or
regulation or other restriction applicable to it, or to which it is a party or
by which Buyer or Merger Sub or their property or assets is bound, or result in
the creation of any mortgage, pledge, lien, encumbrance or charge upon any of
the properties or assets of Buyer or Merger Sub.
36
47
(b) Buyer Consents Obtained. Other than the approval referred
to in Section 3.1(a) (HSR Act) and the Permits, no consents, approvals or
authorizations of third parties are required in connection with Buyer's and
Merger Sub's valid execution, delivery, or performance of this Agreement and the
Related Agreements or the consummation of the Merger or any of the transactions
contemplated hereby or thereby on the part of such party.
7.3 No Brokers Fees; No commissions. All negotiations relative hereto
and the transactions contemplated hereby have been carried on by Buyer and
Merger Sub directly with the Sellers without any act by Buyer or Merger Sub that
would give rise to any claim against the Sellers or their Affiliates for a
brokerage commission, finder's fee or other similar payment.
7.4 HSR Act. Buyer and Merger Sub have made all filings required under
the HSR Act, have fully complied with the provisions of the HSR Act and the
rules and regulations promulgated thereunder, and have fully complied with all
requests for information from the Federal Trade Commission and the Department of
Justice. The information contained in Buyer's and Merger Sub's filings under the
HSR Act is accurate and complete and such filings do not include any incorrect
statements or omit to include any information necessary to make the statements
therein not misleading. The copies of Buyer's and Merger Sub's filings under the
HSR Act that have been provided to Sellers are true and complete copies of such
filings.
7.5 Acquisition of Stock. Buyer is acquiring the Stock for investment
for its own account, not as a nominee or agent, and not with a view to the
resale or present distribution of any part thereof in violation of the
Securities Act. Buyer has no present intention of selling, granting any
participation in or otherwise distributing the shares of Stock and Buyer has no
contract, undertaking, agreement or arrangement with any person to sell,
transfer, grant participations to such person or to any third person, with
respect to any of the shares of Stock.
7.6 Buyer Stock. The shares of Buyer Stock, when issued, sold and
delivered in accordance with the terms hereof in exchange for the Stock will be
duly and validly issued, fully paid and nonassessable and free and clear of any
Liens.
7.7 SEC Documents. Buyer has heretofore delivered or made available to
the Sellers all reports filed by Buyer under Sections 13(a), 14(a), 14(c) and
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
with the Securities and Exchange Commission on or after March 31, 1997 (the "SEC
Documents"). As of their respective dates, each of the SEC Documents complied in
all material respects with all applicable requirements of the Securities Act and
the Exchange Act. The audited consolidated financial statements and unaudited
consolidated financial statements of Buyer included in the SEC Documents fairly
present the financial position of Buyer as of the dates of such financial
statements and the results of Buyer's operations and cash flows for the periods
then ended, in accordance with GAAP, except for the variances from GAAP set
forth in the notes thereto.
7.8 No Material Adverse Change. Since the date of the most recent
filing by the Buyer under the Exchange Act prior to the date hereof, Buyer has
suffered no material adverse change in
37
48
its condition (financial or other), results of operations or cash flows or any
developments that have had a material adverse effect on its condition (financial
or other), results of operations, or cash flows (other than general economic or
industry conditions).
ARTICLE 8
Covenants of Sellers
From the execution hereof until the Closing, the Stockholder, and until
the Closing occurs the Company jointly and severally with the Stockholder,
covenants and agrees as follows:
8.1 Conduct of Business of the Company Pending Closing. Unless
otherwise expressly contemplated hereby or approved in writing by Buyer and
Merger Sub, the business and operations of the Company shall be conducted only
in, and the Company shall not take any action except in, the ordinary course of
business and consistent with past practices. Without limitation, the Company
shall not take any of the following actions without Buyer's and Merger Sub's
prior written approval: (a) dispose of any assets, including without limitation
disposing of any Mortgage Loans, other than a sale of assets in the ordinary
course of business, (b) incur any indebtedness, other than in the ordinary
course of business, (c) pay any discretionary bonuses (other than bonuses
already accrued on the date hereof) to, alter the commission rates received by,
or alter the salaries of, any director, officer or key employee, (d) enter into
any transaction or agreement with any Affiliate or associate of the Company or
the Stockholder (including, without limitation by paying, distributing or
transferring any funds or assets to the Stockholder, whether in his capacity as
a stockholder or in any other capacity), (e) institute any planned reduction in
force, (f) close any branch office of the Company, (g) take any action that will
cause any of the Sellers' representations or warranties to be untrue or
incorrect, (h) omit any action that the Company would take in the ordinary
course of business, which omission will cause the Sellers' representations or
warranties to be untrue or incorrect or (i) increase any reserves for Taxes
(other than through any adjustments necessitated by the Company's filing of its
change in accounting method under Code Section 3115). The Sellers shall use
commercially reasonable efforts to maintain and preserve the Company, and its
organization, franchises, authorizations, prospects, goodwill, employees and
advantageous business relationships. Nothing in this provision shall prevent the
Company from distributing an amount equal to the Company's taxable income for
the Short Period to the Stockholder.
8.2 Access to Information and Employees. Sellers shall permit, upon
reasonable notice during normal business hours, Buyer and its Representatives to
visit and inspect any of the properties of the Company, including books and
records, and to discuss the affairs, finances and accounts of the Company, and
Buyers' prospects, plans and intentions with the Company's officers, employees,
brokers and independent public accountants, as often as any such person may deem
necessary or desirable and reasonably request. Sellers shall furnish to Buyer
copies of any existing Phase 1 or other existing environmental reports relating
to the Real Property. Sellers shall permit Buyer to conduct, at Buyer's sole
discretion, environmental investigations and analyses of the Real Property.
38
49
In this Agreement, "Representatives" means, collectively, a party's
directors, officers, employees, stockholders, partners, financial parties in
interest, agents, advisors, attorneys, accountants, consultants, Affiliates,
financing sources and representatives of any such source, representatives, and
any person or entity being considered for any such role.
8.3 No Solicitation. Sellers shall not directly or indirectly, through
any Representatives or otherwise, solicit, accept, or entertain offers from,
negotiate with or in any manner encourage, accept or consider any proposal of,
or enter into any agreement with any person other than Buyer or Merger Sub
relating to the acquisition of the Company or any stock, business or substantial
asset of the Company, whether through purchase, merger, consolidation or other
business combination. If any Seller receives any contact, inquiry or proposal
regarding the foregoing, then such Seller shall notify the party making such
proposal that the Sellers are contractually prohibited from engaging in such
discussions. Sellers then shall promptly notify Buyer and Merger Sub of any
contact received by Sellers relating to any such transaction and shall furnish
to Buyer and Merger Sub, in writing, the nature of the contact and the terms of
the proposal or offer, if any, the name of the person who received the contact
on behalf of Sellers, and the response given by such person to the person who
initiated the contact.
8.4 Financial Statements. Sellers shall deliver to Buyer and Merger Sub
not later than the 30th business day of each succeeding month, financial
statements of the kind described in Section 6.2 (Financial Information) for the
month ended May 31, 1998 and each subsequent month before the Closing.
8.5 Payment of Indebtedness of Related Persons. The Stockholder will
cause all indebtedness that the Stockholder or any of his Affiliates owes to the
Company to be paid in full prior to Closing.
8.6 Maintain Organization. Sellers shall cause the Company to take such
action as may be necessary to maintain, preserve, renew and keep in favor and
effect the existence, rights and franchises of the Mortgage Business and shall
use their commercially reasonable efforts to maintain, preserve and renew the
Mortgage Business intact, and to preserve, protect and maintain for Buyer and
Merger Sub the good will of the employees of the Mortgage Business, to keep
available to Buyer and Merger Sub the present officers, employees and brokers of
the Mortgage Business, and to preserve for Buyer and Merger Sub the present
relationships with payors, suppliers, referral sources, customers and clients of
the Mortgage Business and others having business relationships with the Mortgage
Business. Sellers shall consult with Buyer and Merger Sub on strategies for
maintaining and preserving the Mortgage Business and effecting an orderly
transition to Buyer and Merger Sub's ownership of the Mortgage Business.
8.7 Assist in Obtaining Licenses, Etc. Sellers shall reasonably assist
Buyer in obtaining all Permits necessary for Buyer to operate the Mortgage
Business.
8.8 Sellers' Consents. Sellers shall use their commercially reasonable
efforts to obtain the Sellers' Consents.
39
50
8.9 Records of the Company. On or prior to the Closing Date, the
Sellers shall transfer or cause to be transferred to the Company any files,
books, records or other documents relating to the business of the Company that
are the property of the Company and that are possessed by any Seller and that
are not otherwise possessed by the Company. Sellers may make and retain copies
(at their expense) of any such files, books, records and documents transferred
to the Company.
8.10 Employee Benefit Plans. The Company shall maintain in accordance
with all legal requirements the Employee Benefit Plans and shall not take any
action to terminate or discontinue any such plan without Buyer's and Merger
Sub's prior written consent.
8.11 Other Stockholders. The Stockholder shall not sell any shares of
the Stock to any person other than an Other Stockholder who agrees in a writing
(in substantially the form of Exhibit 8.11) executed by all parties hereto (a)
to be a party hereto, and subject to the terms hereof, and (b) to appoint, and
does thereby appoint, the Stockholder as the attorney-in-fact (the
"Stockholders' Representative") for such person hereunder. The Company shall not
issue, and the Stockholder shall cause the Company to not issue, any shares of
capital stock of the Company to any person other than an Other Stockholder who
agrees in a writing (in substantially the form of Exhibit 8.11) executed by all
parties hereto (i) to be a party, and subject to the terms hereof, and (ii) to
appoint, and does thereby appoint, the Stockholders' Representative as
attorney-in-fact for such person hereunder.
ARTICLE 9
Post-Closing Agreements
After the Closing, the Stockholders, on the one hand, and Buyer and the
Surviving Corporation collectively, on the other, covenant and agree as follows:
9.1 Further Actions. The Stockholders shall execute and deliver at
their own expense, such further instruments of transfer and conveyance,
documents and certificates as may be reasonably requested by Buyer in order to
more effectively convey and transfer to Buyer the Stock, to aid and assist in
reducing to possession or exercising rights with respect to the Stock, or to
consummate any of the transactions contemplated hereby.
The Stockholders shall as promptly as practical after receipt deliver
to Buyer any cash, checks, mail, packages, notices and other similar
communications he receives (in his respective former roles as Stockholders,
directors, officers, employees or agents of the Company). The Stockholders shall
endorse in favor of Buyer any checks or other instruments of payment that by
their terms are payable to the Stockholders but that are property of the
Company.
9.2 Cooperation. The Stockholders shall use commercially reasonable
efforts to aid Buyer in establishing itself as the new owner and operator of the
Company and, in connection therewith, shall use commercially reasonable efforts
to maintain the Company's goodwill and reputation with
40
51
all suppliers, customers, distributors, creditors and others having business
relations with the Company and in the business community generally. The
Stockholders shall cooperate, and shall cause their Representatives to
cooperate, with Buyer at Buyer's expense, in connection with Buyer's preparation
and filing under the Securities Act of any Registration Statement for which the
assistance of Sellers or their respective Representatives is reasonably
required.
9.3 Tax Returns. The Stockholders shall cooperate with Buyer in
connection with, and shall use commercially reasonable efforts to cause the
Surviving Corporation to, file on behalf of the Company (and, if necessary, on
behalf of any Stockholder), all tax returns for the Company's fiscal year ended
March 31, 1998, by not later than July 31, 1998, and all tax returns for the
Short Period by not later than the 60th day after the Closing Date.
9.4 Employee Benefit Plans. For so long as the Stockholder serves as
the Chief Executive Officer of the Surviving Corporation, Buyer shall not cause
the Surviving Corporation to materially amend or modify any Employee Benefit
Plan of the Surviving Corporation in effect at the Closing, except (a) with the
Stockholder's prior written consent (which consent shall not be unreasonably
withheld) or (b) in accordance with any change in the laws, rules or regulations
governing such Employee Benefit Plans.
9.5 Working Capital. Buyer shall make available to the Surviving
Corporation, at all times prior to April 30, 2001, funds in amounts not less
than $10.0 million, which may be utilized by the Surviving Corporation for its
working capital requirements in the ordinary course of business.
ARTICLE 10
Indemnification
10.1 Survival; Etc.
(a) Contents of this Agreement. The representations,
warranties, covenants and agreements made in any Related Agreement, Exhibit or
Disclosure Schedule shall be deemed representations, warranties, covenants and
agreements made herein.
(b) No Effect on Liability. None of (i) the consummation of
the transactions contemplated by this Agreement or the Related Agreements, (ii)
the delay or omission of any party to exercise any of its rights under this
Agreement or any Related Agreement or (iii) any investigation or disclosure that
any party makes, any notice that any party gives, or any knowledge that any
party obtains as a result thereof, or otherwise, shall (A) affect the liability
of the parties to one another for Breaches (defined below) of this Agreement or
any Related Agreement or (B) prevent any party from relying on the
representations or warranties contained in this Agreement or any Related
Agreement.
As used herein, a party's "Breach" shall mean any
representation or warranty being untrue when made by such party, any breach of
any of such party's covenants or agreements or any
41
52
other claim that may be asserted against such party arising from the document in
question or the transactions contemplated thereby.
(c) Survival. The representations and warranties of Buyer, the
Merger Sub and the Stockholder made in this Agreement or any Related Agreement
shall survive the Closing. The representations and warranties of the Company
made herein shall be extinguished at the Closing and the Company shall have no
liability thereafter for Breach hereof. Effective at the Closing, the
Stockholder waives and releases any claim for Breach by the Company, including
without limitation any claim for indemnification or contribution.
(d) Commencing Actions. If the Closing occurs, then any action
against any party hereof for Breaches herein that is not commenced pursuant to
Section 10.7 (Dispute Resolution) within two years of the Closing Date shall be
deemed waived, and no person shall have any remedy against any party for any
such Breaches; provided, however, if the Buyer is subject to Losses (defined
below) for Breaches in Sections 6.5(b) (Tax Matters), 6.6(p) (Legal
Requirements) or 6.6(q) (Environmental Matters), the Buyer may commence an
action against the Stockholder to recover such Losses at any time that Buyer or
the Company is subject to Losses (defined below) with respect thereto and shall
not be barred by the first clause of this Section; provided, however, that Buyer
shall use commercially reasonable efforts to obtain (for itself and for the
Stockholder) the benefit of any statute of limitations applicable as against any
third party.
10.2 Indemnities.
(a) Indemnification of Buyer. Subject to the other provisions
of this Article, before the Closing the Sellers jointly and severally, and after
the Closing the Stockholder and the Other Stockholders, jointly and severally
(collectively, as applicable, the "Seller Indemnitors"), shall defend, indemnify
and hold Buyer, the Surviving Corporation (from and after the Closing), and
their respective directors, officers, employees, stockholders, subsidiaries,
agents, advisors, attorneys, accountants, consultants and affiliates
(collectively, the "Buyer Indemnitees"), harmless from and against, and promptly
reimburse the Buyer Indemnitees for, any loss, expense, damage, deficiency,
liability, claim or obligation, including investigative costs, costs of defense,
settlement costs (subject to approval as provided below) and attorneys' and
accountants' fees (collectively, "Losses") that any Buyer Indemnitee suffers or
incurs or to which any Buyer Indemnitee becomes subject, which Losses arise out
of or in connection with (i) any Breach by any Seller of this Agreement or any
Related Agreement, (ii) any claim asserted by any third party that, assuming the
truth thereof, would constitute a Breach by any Seller of this Agreement or any
Related Agreement, (iii) the Proceedings, whether or not listed on the
Disclosure Schedule to Section 6.5(c) (Litigation) (provided, however, that the
Seller Indemnitors' obligation to indemnify for any Loss arising out of any
Proceeding shall be reduced by any amount previously collected by the Surviving
Corporation in satisfaction of judgments in the Surviving Corporation's favor
arising out of any Proceeding, or, if any such collection by the Surviving
Corporation occurs after the reduction of any Earnout Payment by the amount of
any Loss arising out of any Proceeding, and prior to April 30, 2001, then the
Surviving Corporation shall pay to the Stockholders (without duplication in the
calculation or payment of future Earnout Payments) an amount equal to the lesser
of the amount offset or the amount of the collection,
42
53
provided further, that the Seller Indemnitors shall be entitled to utilize such
reduction only once with respect to the amount collected pursuant to each such
judgment), (iv) any Tax in excess of the applicable reserve (other than any
reserve for deferred Taxes established to reflect temporary differences between
book and Tax basis in assets and liabilities) for accrued but unpaid Taxes owed
by the Company for any period prior to the Closing or (v) any liability arising
out of Marketing Solution Publications, Inc.
The Seller Indemnitors shall promptly pay or reimburse to the Buyer
Indemnitees the amount of all Losses after the amount of any such Loss and such
Seller Indemnitor's liability therefor is established by (A) agreement in
writing between Buyer and the Stockholders' Representative or (B) arbitration
pursuant to Section 10.7 (Dispute Resolution) (any Loss so determined is
referred to herein as an "Established Loss"). If each Seller Indemnitor does not
pay to the Buyer Indemnitees the amount of the Established Loss on or before the
30th day after the determination described in item (A) or (B) above, then on the
31st day after such determination, the amount of the Established Loss payable by
such Seller Indemnitor shall bear interest at a rate of interest per annum that
shall, from day to day, equal the lesser of (X) the variable rate of interest
published in the Money Rates section of the Wall Street Journal (or the
comparable section of such newspaper) as the prime rate of interest on corporate
loans at large United States money center commercial banks plus five percent
(5%) and (Y) the maximum rate allowed under applicable law. Notwithstanding the
foregoing, no such interest shall accrue on the portion of any Established Loss
that is set off against an Earnout Payment pursuant to Section 10.2(c) (Setoff).
(b) Indemnification of the Stockholder. Subject to the other
provisions of this Article, Buyer and the Surviving Corporation (the "Buyer
Indemnitors") shall defend, indemnify and hold the Stockholder (and after the
Closing, the Other Stockholders) harmless from and against, and promptly
reimburse him (or them) for, any Losses that the Stockholder incurs (and the
Other Stockholders incur after the Closing) or to which the Stockholder becomes
subject (and the Other Stockholders or any of them become subject after the
Closing), which Losses arise out of or in connection with (i) any Breach by
Buyer or Merger Sub of this Agreement or any Related Agreement or (ii) any claim
asserted by any third party that, assuming the truth thereof, would constitute a
Breach by Buyer or Merger Sub of this Agreement or any Related Agreement.
The Buyer Indemnitors shall promptly pay to the Stockholders the
aggregate amount of all Losses after the amount of any such Loss and the Buyer
Indemnitors' liability therefor is established by (A) agreement in writing
between the Stockholder's Representative and the Buyer Indemnitors or (B)
arbitration pursuant to Section 10.7 (Dispute Resolution) (any Loss so
determined is referred to herein as an "Established Stockholder Loss"). If the
Buyer Indemnitors do not pay to the Stockholders the aggregate amount of any
Established Stockholder Loss on or before the 30th day after the determination
described in item (A) or (B) above, then on the 31st day after such
determination, the amount of the Established Stockholder Loss shall bear
interest at a rate of interest per annum that shall, from day to day, equal the
lesser of (X) the variable rate of interest published in the Money Rates section
of the Wall Street Journal (or the comparable section of such newspaper) as the
prime rate of interest on corporate loans at large United States money center
commercial banks plus five percent (5%) and (Y) the maximum rate allowed under
applicable law.
43
54
(c) Setoff. For any Established Loss determined prior to the
final Earnout Payment Date, the Buyer Indemnitees shall offset such Established
Loss against any Earnout Payment, pro-rata among the Stockholders and pro-rata
between cash and Buyer Stock, with the Common Stock Portion of any such setoff
Earnout Payments being valued at the value of such setoff Earnout Payment on the
applicable Earnout Payment Date. Any such set off will be an adjustment to the
Merger Consideration.
The exercise of such right of offset by the Buyer Indemnitees in good
faith, whether or not ultimately determined to be justified, will not constitute
an event of default under, or Breach of, the Buyer Indemnitees' obligations to
the Stockholders.
If the Buyer Indemnitees commence any action pursuant to Section
10.1(d) (Commencing Actions) prior to the third anniversary of the Closing Date,
then the parties shall use commercially reasonable efforts to resolve such
action or to convert the applicable Loss into an Established Loss prior to the
final Earnout Payment Date. If, however, any such action is pending on the final
Earnout Payment Date, then the payment of a portion of the Earnout Payments in
an amount equal to the value of the claimed Loss, pro-rata between cash and
Buyer's Stock and pro-rata among the Stockholders, shall be delayed until the
action is resolved or until the loss is converted to an Established Loss.
10.3 Limitations on Indemnities.
(a) Basket.
(i) Notwithstanding anything to the contrary in this
Article, after the Closing the Seller Indemnitors shall not have any obligation
to indemnify the Buyer Indemnitees for Losses incurred hereunder until the
indemnifiable Losses incurred by the Buyer Indemnitees or to which the Buyer
Indemnitees become subject, exceed $500,000, and then the Seller Indemnitors
shall indemnify the Buyer Indemnitees pursuant to this Article only for Losses
in excess of such amount.
(ii) Notwithstanding anything to the contrary in this
Article, the Buyer Indemnitors shall not have any obligation to indemnify the
Stockholders for Losses incurred hereunder until the indemnifiable Losses
incurred by the Stockholders or to which the Stockholders become subject, exceed
$500,000 and then the Buyer Indemnitors shall indemnify the Stockholders
pursuant to this Article only for Losses in excess of such amount.
(b) Cap.
(i) The Seller Indemnitors shall not have any
liability to the Buyer Indemnitees for indemnifiable Losses after the
Stockholders have suffered setoffs of Earnout Payments pursuant to Section
10.2(c) (Setoff) (and, if applicable, have paid to the Buyer Indemnitees cash)
having an aggregate value equal to the sum of $7.5 million; plus an additional
amount equal to any indemnifiable Losses relating to Taxes or Tax Returns of the
Company or MSPI (or of the Surviving Corporation or any successor to MSPI, in
each case relating to periods up to and including the Effective Time), in an
amount not to exceed an additional $2.5 million, for an aggregate maximum
indemnifiable amount of $10.0 million; provided, however, that any amounts paid
by the Stockholder
44
55
to the Surviving Corporation after the Effective Time in respect of claims by
Buyer on behalf of the Surviving Corporation for breaches of the Stockholder's
fiduciary duties to the Company or related claims shall reduce such aggregate
maximum indemnification obligation.
(ii) The Buyer Indemnitors shall not have any
liability to the Stockholders for indemnifiable Losses after the Buyer
Indemnitors have paid to the Stockholders, in the aggregate, the sum of $7.5
million.
(c) Exclusions.
(i) The limitations in clause (a)(I) and clause
(b)(I) of this Section shall not apply to claims for fraud by any Seller in
connection with the consummation of the transactions described herein or any
Stockholders' failure to pay any Earnout True-up Payment. Notwithstanding any
other provision hereof, the Seller Indemnitors shall defend, indemnify and hold
the Buyer Indemnitees harmless from and against, and promptly reimburse the
Buyer Indemnitees for, any Losses that any Buyer Indemnitee incurs or to which
any Buyer Indemnitee becomes subject, arising out of such fraud.
(ii) The limitations in clause (a)(ii) and clause
(b)(ii) of this Section shall not apply to claims for (A) the Buyer's failure to
deliver possession or title to the Closing Stock Merger Consideration or to pay
any Earnout Payment or Earnout True-up Payment, all as provided herein or (B)
fraud by the Buyer or Merger Sub in connection with the consummation of the
transactions described herein. Notwithstanding any other provision hereof, the
Buyer Indemnitors shall defend, indemnify and hold the Stockholders harmless
from and against, and promptly reimburse the Stockholders for, any Losses that
any Stockholder incurs or to which any Stockholder becomes subject, arising out
of the foregoing matters.
(d) Exclusivity. The indemnification provisions of this
Article 10 shall be the exclusive remedy for any loss, expense, damage,
deficiency, liability, claim or obligation, including investigative costs, costs
of defense, settlement costs (subject to consent as provided in Section 10.4(b)
(Defense Costs) below) and attorneys' and accountants' fees in connection with
this Agreement or any Breach hereof.
10.4 Notice and Opportunity to Defend.
(a) Notice, Etc. If any party (the "Indemnified Party")
receives notice of any third-party claim or commencement of any third-party
action or proceeding (an "Asserted Liability") with respect to which any other
party (an "Indemnifying Party") is obligated to provide indemnification pursuant
to Section 10.2(a) (Indemnification of Buyer) or Section 10.2(b)
(Indemnification of the Stockholders), the Indemnified Party shall promptly give
all Indemnifying Parties notice thereof. The Indemnified Party's failure so to
notify an Indemnifying Party shall not cause the Indemnified Party to lose its
right to indemnification under this Article, except to the extent that such
failure materially prejudices the Indemnifying Party's ability to defend against
an Asserted Liability that such Indemnifying Party has the right to defend
against hereunder (and except as otherwise set forth in this Article). Such
notice shall describe the Asserted Liability in reasonable detail, and if
practicable shall indicate the amount (which may be estimated) of the Losses
that have
45
56
been or may be asserted by the Indemnified Party. Each of the Indemnifying
Parties may defend against an Asserted Liability on behalf of the Indemnified
Party utilizing counsel reasonably acceptable to the Indemnified Party, unless
(i) the Indemnified Party reasonably objects to the assumption of such defense
on the grounds that counsel for such Indemnifying Parties cannot represent both
the Indemnified Party and the Indemnifying Parties because such representation
would be reasonably likely to result in a conflict of interest or because there
may be defenses available to the Indemnified Party that are not available to
such Indemnifying Parties, (ii) the Indemnifying Party is not capable (by reason
of insufficient financial capacity, bankruptcy, receivership, liquidation,
managerial deadlock, managerial neglect or similar events) of maintaining a
reasonable defense of such action or proceeding, or (iii) the action or
proceeding seeks injunctive or other equitable relief against the Indemnified
Party.
(b) Defense Costs. If any Indemnifying Party defends an
Asserted Liability, it shall do so at its own expense and shall not be
responsible for the costs of defense, investigative costs, attorney's fees or
other expenses incurred to defend the Asserted Liability (collectively, "Defense
Costs") of the Indemnified Party (which may continue to defend, at its own
expense). Notwithstanding the foregoing, if the person or entity asserting the
Asserted Liability against the Indemnified Party claims or seeks amounts in
excess of the amount set forth in Section 10.3(b) (Cap), then the Indemnifying
Party shall remain liable for the Costs of Defense incurred by the Indemnified
Party, subject to the limitation contained in Section 10.3(b) (Cap). If the
Indemnified Party assumes the defense of an Asserted Liability by reason of
clauses (i), (ii) or (iii) of Subsection (a) above, or because the Indemnifying
Party has not elected to assume the defense, then such Indemnifying Party shall
indemnify the Indemnified Party for its Defense Costs; provided, however, the
Indemnifying Parties shall not be liable for the costs of more than one counsel
for all Indemnified Parties in any one jurisdiction. An Indemnifying Party may
settle any Asserted Liability only with the consent of the Indemnified Party,
which consent shall not be unreasonably withheld.
(c) Third Party Claims. The parties shall cooperate with each
other with respect to the defense of any claims or litigation made or commenced
by third parties subsequent to the Closing Date with respect to which
indemnification is not available (for any reason) under this Article, provided
that the party requesting cooperation shall reimburse the other party for the
other party's reasonable out-of-pocket costs and expenses of furnishing such
cooperation.
10.5 Delays or Omissions, Etc.. Except as provided in Section 10.1
(Survival; Etc.) and Section 10.4(a) (Notice, Etc.), no delay or omission to
exercise any right, power or remedy inuring to any party upon any breach or
default of any party under this Agreement or any Related Agreement shall impair
any such right, power or remedy of such party nor shall it be construed to be a
waiver of any such breach or default, or an acquiescence therein, or of or in
any similar breach or default thereafter occurring; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Neither the exercise of nor the failure to
exercise any remedy under this Agreement or any Related Agreement will
constitute an election of remedies or limit in any manner enforcement of any
remedies. All remedies either under this Agreement or any Related Agreement or
by law or otherwise afforded to the parties shall be cumulative and not
alternative.
46
57
10.6 Governing Law; Attorneys' Fees. This Agreement and the Related
Agreements shall be governed by, construed, interpreted and applied in
accordance with the laws of the State of Florida, without giving effect to any
conflict of laws rules that would refer the matter to the laws of another
jurisdiction.
Subject to Section 10.7 (Dispute Resolution), each party hereto hereby
irrevocably submits to the exclusive jurisdiction of the United States District
Court for the Middle District of Florida and, if such court does not have
jurisdiction, of the courts of the State of Florida in Pinellas County, for the
purposes of any action arising out of this Agreement or any of the Related
Agreements, or the subject matter hereof or thereof, brought by any other party.
Subject to Section 10.7 (Dispute Resolution), to the extent permitted
by applicable law, each party hereby waives and agrees not to assert, by way of
motion, as a defense or otherwise in any such action, any claim (i) that it is
not subject to the jurisdiction of the above-named courts, (ii) that the action
is brought in an inconvenient forum, (iii) that it is immune from any legal
process with respect to itself or its property, (iv) that the venue of the suit,
action or proceeding is improper or (v) that this Agreement or any Related
Agreement, or the subject matter hereof or thereof, may not be enforced in or by
such courts.
The prevailing party in any action or proceeding relating to this
Agreement or any Related Agreement shall be entitled to recover reasonable
attorneys' fees and other costs from the non-prevailing parties, in addition to
any other relief to which such prevailing party may be entitled.
10.7 Dispute Resolution.
(a) Arbitration. All disputes and controversies of every kind
and nature between the parties hereto arising out of or in connection with this
Agreement (including without limitation this Article 10) or the Related
Agreements as to the construction, validity, interpretation or meaning,
performance, non-performance, enforcement, operation, or breach, shall be
submitted to arbitration pursuant to the following procedures:
(i) After a dispute or controversy arises, either
party may, in a written notice delivered to the other party, demand such
arbitration. Such notice shall designate the name of the arbitrator (who shall
be an impartial person) appointed by such party demanding arbitration, together
with a statement of the matter in controversy.
(ii) Within 30 days after receipt of such demand, the
other party shall, in a written notice delivered to the other party, name such
party's arbitrator (who shall be an impartial person). If such party fails to
name an arbitrator, then the second arbitrator shall be named by the American
Arbitration Association (the "AAA"). The two arbitrators so selected shall name
a third arbitrator (who shall be an impartial person) within 30 days, or in lieu
of such agreement on a third arbitrator by the two arbitrators so appointed, the
third arbitrator shall be appointed by the AAA. If any arbitrator appointed
hereunder shall die, resign, refuse, or become unable to act before an
arbitration decision is rendered, then the vacancy shall be filled by the
methods set forth in this Section for the original appointment of such
arbitrator.
47
58
(iii) Each party shall bear its own arbitration costs
and expenses. The arbitration hearing shall be held in Tampa, Florida at a
location designated by a majority of the arbitrators. The Commercial Arbitration
Rules of the American Arbitration Association shall be incorporated by reference
at such hearing, the substantive laws of the State of Florida (excluding
conflict of laws provisions) shall apply.
(iv) The arbitration hearing shall be concluded
within ten days unless otherwise ordered by the arbitrators and the written
award thereon shall be made within 15 days after the close of submission of
evidence. An award rendered by a majority of the arbitrators appointed pursuant
hereto shall be final and binding on all parties to the proceeding, shall
resolve the question of costs of the arbitrators and all related matters, and
judgment on such award may be entered and enforced by either party in any court
of competent jurisdiction.
(v) Except as set forth in Section 10.7(b) (Emergency
Relief), the parties stipulate that the provisions of this Section shall be a
complete defense to any suit, action or proceeding instituted in any federal,
state or local court or before any administrative tribunal with respect to any
controversy or dispute arising out of this Agreement or any of the Related
Agreements. The arbitration provisions hereof shall, with respect to such
controversy or dispute, survive the termination or expiration of this Agreement
or the Related Agreements.
Neither any party hereto nor the arbitrators may disclose the existence
or results of any arbitration hereunder without the prior written consent of the
other party; nor will any party hereto disclose to any third party any
confidential information disclosed by any other party hereto in the course of an
arbitration hereunder without the prior written consent of such other party.
Notwithstanding the foregoing, the parties acknowledge that Buyer may disclose
the existence or results of an arbitration hereunder, as well as information
otherwise required to be disclosed by deposition, subpoena or other court or
governmental action in connection with Buyer's obligations under the Exchange
Act and the rules and regulations promulgated thereunder and in connection with
Buyer's registration of offerings of securities under the Securities Act and the
rules and regulations promulgated thereunder.
(b) Emergency Relief. Notwithstanding anything in Section 10.7
(Dispute Resolution) to the contrary and subject to the provisions of Section
10.6 (Governing Law; Attorneys' Fees), either party may seek from a court any
provisional remedy that may be necessary to protect any rights or property of
such party pending the establishment of the arbitral tribunal or its
determination of the merits of the controversy.
ARTICLE 11
Miscellaneous
11.1 Successors and Assigns. The provisions hereof shall inure to the
benefit of, and be binding upon, the permitted assigns, successors, heirs,
executors and administrators of the parties hereto. This Agreement may not be
assigned without the written consent of all other parties and any attempted
assignment without such consent shall be null and void; provided, however, Buyer
and/or
48
59
Merger Sub may assign all of its rights and obligations hereunder to one
of its affiliates; provided, further, that any assignment hereunder shall not
relieve any party of any obligations or liabilities hereunder.
11.2 Entire Agreement; Amendment. This Agreement (including the
Schedules and Exhibits hereto), the other documents delivered pursuant hereto
and referenced herein constitute the full and entire understanding and agreement
between the parties and supersede any other agreement, written or oral, with
regard to the subject matter hereof. This Agreement supersedes that certain
Letter of Intent dated June 2, 1998 among certain of the parties hereto (the
"Letter of Intent"). Except as expressly provided herein, neither this Agreement
nor any term hereof may be amended, waived, discharged or terminated, except by
a written instrument signed by the parties hereto.
11.3 Press Release. Prior to the Closing, none of the parties hereto,
nor any of their Representatives shall, without the prior written consent of the
others, which shall not be unreasonably withheld, make any statement, public
announcement or release to the press, or any other third party with respect to
their discussions or this Agreement or permit any of its employees or agents to
make any such statement, announcement or release, until such time as either
party may be permitted, under this Section, or required by law, regulation or
order to make disclosure.
The parties hereto also agree to notify each other promptly of any
disclosure with respect to such discussions or this Agreement which is required
by law, regulation or otherwise and to coordinate the disclosure of any
information so required. If any party hereto becomes legally compelled by
deposition, subpoena, or other court or governmental action to disclose any of
the information described in this Section, then such party will give the other
parties prompt notice to that effect, and will cooperate with the other parties
if the other parties seek to obtain a protective order concerning the
information described in this Section. The legally compelled party will disclose
only such information as its counsel shall advise is legally required.
Notwithstanding the foregoing, the parties acknowledge that Buyer may
disclose these discussions and this Agreement in connection with Buyer's
obligations under the Exchange Act and the rules and regulations promulgated
thereunder, in connection with Buyer's registration of offerings of securities
under the Securities Act and the rules and regulations promulgated thereunder,
and in connection with any presentation or delivery of information to any rating
agency.
11.4 Notices, Etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by certified or
registered mail, postage prepaid with return receipt requested, telecopy (with
hard copy delivered by overnight courier service), or delivered by hand,
messenger or overnight courier service, and shall be deemed given when received
at the addresses of the parties set forth below, or at such other address
furnished in writing to the other parties hereto:
If to the Company: Mortgage Investors Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
49
60
with copies to: Holland & Knight LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (fax)
Carlton, Fields, ▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇ & ▇▇▇▇▇▇, P.A.
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (fax)
If to the Stockholder: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
with copies to: Holland & Knight LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (fax)
Carlton, Fields, ▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇ & ▇▇▇▇▇▇, P.A.
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (fax)
If to Buyer or Merger Sub: AMRESCO
Suite 2400
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
(▇▇▇) ▇▇▇-▇▇▇▇ (fax)
50
61
with copies to: ▇▇▇▇▇▇ and ▇▇▇▇▇, LLP
Suite 3100
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (fax)
11.5 No Third Party Beneficiary, Etc. There shall be no third party
beneficiary hereof. Neither the availability of, nor any limit on, any remedy
hereunder limit the remedies of any party hereto against third parties.
11.6 Reformation; Severability. In case any provision hereof shall be
invalid, illegal or unenforceable, such provision shall be reformed to best
effectuate the intent of the parties and permit enforcement thereof, and the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby. If such provision is not capable of
reformation, it shall be severed from this agreement and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
11.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument. Any counterpart may be delivered
by facsimile; provided that attachment thereof shall constitute the
representation and warranty of the person delivering such signature that such
person has full power and authority to attach such signature and to deliver this
Agreement. Any facsimile signature shall be replaced with an original signature
as promptly as practicable.
11.8 Titles and Subtitles. The titles of the paragraphs and
subparagraphs hereof are for convenience of reference only and are not to be
considered in construing this Agreement. References to "Sections" herein are
references to sections of this Agreement. The words "herein," "hereof," "hereto"
and "hereunder" and other words of similar import refer to this Agreement as a
whole and not to any particular Article, Section or other subdivision.
11.9 Confidentiality.
(a) As used herein, "Confidential Information" means
confidential business information regarding any party hereto or its affiliates,
including, without limitation, marketing lists used by the Company or any
information identifying the source of, and the process used by the Company to
obtain, such marketing lists; customer lists and files; prices and costs;
business and financial records; information relating to personnel contracts;
stock ownership; liabilities; litigation and the terms of this Agreement or any
Related Agreement and any written analysis or other document reflecting such
information that a party hereto (the "Obligated Party") prepared (an
"Analysis"). However, "Confidential Information" shall not include:
(i) any information properly obtained and already in
the possession of a party hereto prior to the execution of the Letter of Intent,
or information available to the Obligated Party from public records or from
other sources in accordance with law,
51
62
(ii) any information that is in the public domain or
subsequently enters the public domain otherwise than through disclosure by the
Obligated Party or any of the Obligated Party's Representatives,
(iii) any information that is independently developed
by or on behalf of the Obligated Party without reference to the Confidential
Information,
(iv) any information that is acquired from a person
(other than the party disclosing Confidential Information (the "Disclosing
Party")) not known by the Obligated Party to be providing such information in
breach of a confidentiality obligation to the Disclosing Party, or
(v) information the release of which has been
approved in writing by the Disclosing Party.
(b) The Sellers on the one hand, and Buyer and Merger Sub
collectively on the other, will treat the Confidential Information disclosed by
the other as confidential, will use the Confidential Information only in
connection with their evaluation of the transactions hereunder, and will not
disclose it to others, except that each party shall have the right to
communicate the information to any of such party's Representatives, provided
that such Representative is informed that the Confidential Information is
confidential and such Representative agrees to be bound by the terms of this
Section. The Obligated Party shall be liable for any breach of this Section by
any of its Representatives.
The parties acknowledge that Buyer may disclose Confidential
Information in connection with Buyer's obligations under the Exchange Act and
the rules and regulations promulgated thereunder, and in connection with Buyer's
registration of offerings of securities under the Securities Act, and the rules
and regulations promulgated thereunder. Any such disclosures of Confidential
Information by Buyer shall not be a breach or violation of this Section.
If the Obligated Party becomes legally compelled by deposition,
subpoena or other court or governmental action to disclose any of the
Confidential Information, then the Obligated Party will give the Disclosing
Party prompt notice to that effect, and will cooperate with the Disclosing Party
if the Disclosing Party seeks to obtain a protective order concerning the
Confidential Information. The Obligated Party will disclose only such
Confidential Information as its counsel shall advise is legally required.
The parties acknowledge that remedies at law may be inadequate to
protect against breach of this Section, and the Obligated Party hereby in
advance agrees to the granting of injunctive relief in the Disclosing Party's
favor without proof of actual damages as a remedy for breach of this Section.
11.10 Expenses. Except as otherwise expressly provided herein, each
party hereto will bear its respective third-party expenses incurred in
connection with the preparation, execution and performance of this Agreement,
the Related Agreements and the transactions contemplated herein or therein,
including without limitation all fees and expenses of agents, representatives,
counsel and accountants. The Sellers shall not utilize assets of the Company to
pay such expenses.
52
63
11.11 Responsibility for Merger Sub. Buyer shall be directly
responsible for assuring that Merger Sub performs all of its obligations
hereunder.
11.12 Knowledge. The term "Knowledge" shall mean the actual awareness
of a party. Knowledge of the Company shall be the Knowledge of the Stockholder
and any Other Stockholder (other than ▇▇▇▇▇ ▇▇▇▇).
11.13 Waivers. Any and all waivers shall only be effective if set forth
in writing and signed by the party waiving the rights in question.
11.14 Cooperation with the Stockholder's Accountants. Prior to the
Closing, Buyer shall use commercially reasonable efforts to cooperate with the
reasonable requests of the Stockholder's accountants with a view toward
permitting such accountants to render to the Stockholder an opinion regarding
the tax effect of the transactions contemplated herein.
* * * * *
53
64
This Agreement has been executed and delivered as of the date first
written above.
The Company:
Mortgage Investors Corporation
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Chairman of the Board and
Chief Executive Officer
The Stockholders:
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------------------
▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇ ▇▇▇▇▇
--------------------------------------------------
▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
--------------------------------------------------
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
Buyer:
AMRESCO, INC.
By: /s/ ▇▇▇▇▇ ▇. READING
-----------------------------------------------
▇▇▇▇▇ ▇. Reading
President - Residential Mortgage Banking
Merger Sub:
MIC Acquisition, Inc.
By: /s/ ▇▇▇▇▇ ▇. READING
----------------------------------------------
▇▇▇▇▇ ▇. Reading, President