EXHIBIT 2.1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
POPULAR, INC.
NEW POPULAR ACQUISITIONS CORPORATION
AND
E-LOAN, INC.
DATED AS OF AUGUST 2, 2005
TABLE OF CONTENTS
ARTICLE I THE MERGER....................................................2
1.1 The Merger.......................................................2
1.2 Closing; Effective Time..........................................2
1.3 Effects of the Merger............................................2
1.4 Conversion of Company Capital Stock..............................2
1.5 Merger Sub Common Stock..........................................3
1.6 Parent Common Stock..............................................3
1.7 Company Dissenting Shares........................................3
1.8 Warrants and Options.............................................3
1.9 Certificate of Incorporation.....................................4
1.10 Bylaws...........................................................4
1.11 Directors of Surviving Corporation...............................4
1.12 Taking of Necessary Action; Further Action.......................4
1.13 Parent to Make Cash Available....................................4
1.14 Exchange of Shares...............................................4
1.15 Withholding......................................................5
1.16 Reservation of Right to Revise Structure.........................5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................6
2.1 Corporate Organization, Standing and Power.......................6
2.2 Capitalization...................................................6
2.3 Authority; No Violation..........................................7
2.4 Subsidiaries; Subsidiaries' Activities...........................8
2.5 Consents and Approvals...........................................8
2.6 SEC Documents; Financial Statements..............................9
2.7 Absence of Certain Changes or Events............................10
2.8 Undisclosed Liabilities.........................................11
2.9 Legal Proceedings...............................................11
2.10 Taxes and Tax Returns...........................................11
2.11 Employee Benefit Plans..........................................12
2.12 Compliance with Applicable Law and Regulatory Matters...........15
2.13 Material Contracts..............................................16
2.14 Non-Competition/Non-Solicitation................................19
2.15 Assets..........................................................19
2.16 Environmental Liability.........................................19
2.17 State Takeover Laws.............................................20
2.18 Insurance.......................................................20
2.19 Intellectual Property...........................................20
2.20 Information Technology..........................................23
2.21 Related-Party Transactions; Interests of Officers and
Directors.......................................................24
2.22 Opinion.........................................................25
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2.23 Broker's Fees...................................................25
2.24 Company Information.............................................25
2.25 Books and Records...............................................25
2.26 Accounting Controls.............................................25
2.27 Risk Management.................................................25
2.28 Employee Matters................................................26
2.29 Mortgage Banking and Home Equity Loan Businesses; Auto
Loan Business; Lending Business Generally.......................27
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT.....................30
3.1 Corporate Organization, Standing and Power......................30
3.2 Authority; No Violation.........................................30
3.3 Consents and Approvals..........................................31
3.4 Legal Proceedings...............................................31
3.5 Compliance with Applicable Law and Regulatory Matters...........31
3.5 Broker's Fees...................................................32
3.6 Parent Information..............................................32
3.7 Financing.......................................................32
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME..........................32
4.1 Conduct of Business Prior to the Effective Time.................32
4.2 Conduct of Business of the Company..............................32
4.3 No Solicitation.................................................36
4.4 Conduct of Parent and Merger Sub................................38
ARTICLE V ADDITIONAL AGREEMENTS........................................38
5.1 Regulatory Matters..............................................38
5.2 Access to Information...........................................40
5.3 Stockholder Approval............................................40
5.4 Public Disclosure...............................................41
5.5 Commercially Reasonable Best Efforts; Further Assurances........41
5.6 Employees; Employee Benefit Matters.............................41
5.7 Director and Officer Indemnification............................43
5.8 Advice of Changes...............................................44
5.9 Section 16b-3...................................................44
ARTICLE VI CONDITIONS PRECEDENT.........................................44
6.1 Conditions to Each Party's Obligation To Effect the
Merger..........................................................44
6.2 Conditions to Obligation of the Company.........................45
6.3 Conditions to Obligation of the Parent..........................45
ARTICLE VII TERMINATION AND AMENDMENT....................................46
7.1 Termination.....................................................46
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7.2 Effect of Termination...........................................47
7.3 Expenses and Termination Fee....................................47
7.4 Amendment.......................................................48
7.5 Extension; Waiver...............................................49
ARTICLE VIII DEFINITIONS..................................................49
8.1 Certain Defined Terms...........................................49
ARTICLE IX GENERAL PROVISIONS...........................................56
9.1 Nonsurvival of Representations, Warranties and Agreements.......56
9.2 Notices.........................................................56
9.3 Interpretation..................................................57
9.4 Counterparts....................................................57
9.5 Entire Agreement................................................58
9.6 Assignment......................................................58
9.7 Third Party Beneficiaries.......................................58
9.8 Governing Law...................................................58
9.9 Rules of Construction...........................................58
9.10 Attorneys' Fees.................................................58
9.11 Waiver of Jury Trial............................................58
9.12 Severability....................................................59
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER ("Agreement"), dated as of August
2, 2005, by and among Popular, Inc., a Puerto Rico corporation ("Parent"),
New Popular Acquisitions Corporation, a Delaware corporation and a
wholly-owned subsidiary of Parent ("Merger Sub"), and E-LOAN, Inc., a
Delaware corporation (the "Company"). Certain capitalized terms have the
meanings given to such terms in Article VIII.
RECITALS
A. The Board of Directors of the Company has determined
that it is advisable, and in the best interests of the Company and its
stockholders for Parent to acquire the Company upon the terms and subject
to the conditions set forth in this Agreement.
B. In furtherance of the acquisition of the Company by
Parent, it is proposed: that Merger Sub merge with and into the Company,
with the Company being the surviving corporation, on the terms and subject
to the conditions set forth in this Agreement (the merger of Merger Sub
with and into the Company being referred to in this Agreement as the
"Merger").
C. The Board of Directors of the Company has (i) determined
that this Agreement and the transactions contemplated hereby, including
the Merger, are advisable and in the best interests of the Company and its
stockholders, (ii) approved this Agreement, and the transactions
contemplated hereby, including the Merger, and (iii) resolved to recommend
that the stockholders of the Company adopt this Agreement.
D. The Board of Directors of Parent has (i) determined that
this Agreement and the transactions contemplated hereby, including the
Merger, are advisable, and in the best interests of, Parent and its
stockholders and (ii) approved this Agreement and the transactions
contemplated hereby, including the Merger.
E. The Board of Directors of Merger Sub has (i) determined
that this Agreement and the transactions contemplated hereby, including
the Merger, are advisable and in the best interests of, Merger Sub and its
stockholder, (ii) approved this Agreement and the transactions
contemplated hereby, including the Merger, and (iii) resolved to recommend
that the stockholder of Merger Sub adopt this Agreement.
F. Pursuant to the Merger, among other things, the
outstanding shares of Company Common Stock, other than the Company
Dissenting Shares, will be converted into the right to receive the Merger
Consideration as set forth herein.
G. As an inducement to Parent to enter into this Agreement,
Xxxx X. Xxxxxxxxxx, Chief Executive Officer of the Company, is entering
into an employment agreement dated as of the date hereof and effective at
the Effective Time.
NOW THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements set forth herein,
and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. At the Effective Time, and subject to and upon the terms
and conditions of this Agreement and the applicable provisions of the Delaware
Law, Merger Sub shall merge with and into the Company. The Company shall be the
Surviving Corporation in the Merger and shall continue its corporate existence
under the laws of the State of Delaware, and the separate corporate existence of
the Company with all its rights, privileges, immunities, powers and franchises
shall continue unaffected by the Merger. Upon consummation of the Merger, the
separate corporate existence of Merger Sub shall terminate.
1.2 CLOSING; EFFECTIVE TIME. The Closing shall take place as soon as
practicable, and in any event not later than two (2) business days after the
satisfaction of each of the conditions set forth in Article VI or at such other
time as the parties hereto may agree (the "Closing Date"). The Closing shall
take place at the offices of Wachtell, Lipton, Xxxxx & Xxxx, 00 Xxxx 00xx
Xxxxxx, Xxx Xxxx, XX 00000, or at such other location as the parties hereto may
agree in writing. The Merger shall become effective at the Effective Time as set
forth in the Certificate of Merger which shall be filed with the Secretary of
State of the State of Delaware on the Closing Date.
1.3 EFFECTS OF THE MERGER. At and after the Effective Time, the
Merger shall have the effects set forth in Sections 259 and 261 of the
Delaware Law. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of the Company and Merger Sub shall vest
in the Surviving Corporation, and all debts, liabilities and duties of the
Company and Merger Sub shall become the debts, liabilities and duties of
the Surviving Corporation.
1.4 CONVERSION OF COMPANY CAPITAL STOCK. At the Effective Time, by virtue
of the Merger and without any action on the part of Parent, the Company or the
holder of any of the following securities:
(a) Each share of Company Common Stock issued and outstanding immediately
prior to the Effective Time (other than shares of Company Common Stock held by
Merger Sub or the Company and Company Dissenting Shares) shall be converted into
the right to receive $4.25 per share, subject to adjustment as provided in
Section 1.4(c) (the "Merger Consideration"). All shares of Company Common Stock
issued and outstanding immediately prior to the Effective Time held by Merger
Sub or the Company shall be cancelled and shall cease to exist as of the
Effective Time.
(b) All shares of Company Common Stock converted into Merger Consideration
pursuant to this Section 1.4 shall no longer be outstanding and shall
automatically be cancelled and shall cease to exist as of the Effective Time,
and each certificate previously representing any such shares of Company Common
Stock shall thereafter represent the right to
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receive with respect to each underlying share of Company Common Stock the Merger
Consideration.
(c) If, subsequent to the date of this Agreement and prior to the Effective
Time, the outstanding shares of Company Common Stock shall have been increased,
decreased, changed into or exchanged for a different number or kind of shares or
securities as a result of a reorganization, recapitalization, reclassification,
stock dividend, stock split, reverse stock split, or other similar change in
capitalization consented to by Parent pursuant to this Agreement, then an
appropriate and proportionate adjustment shall be made to the Merger
Consideration.
1.5 MERGER SUB COMMON STOCK. At the Effective Time, by virtue of the Merger
and without any action on the part of Parent or the Company, each share of the
common stock, $.01 par value, of Merger Sub shall be converted into one (1)
share of Company Common Stock (which shares of Company Common Stock shall be
deemed not to be outstanding immediately prior to the Effective Time for
purposes of this Agreement).
1.6 PARENT COMMON STOCK. At and after the Effective Time, each share of
Parent Common Stock issued and outstanding immediately prior to the Effective
Time shall remain an issued and outstanding share of Parent Common Stock and
shall not be affected by the Merger.
1.7 COMPANY DISSENTING SHARES. Holders of Company Dissenting Shares shall
have those rights, but only those rights, of holders who perfect their appraisal
rights under Section 262 of the Delaware Law. The Company shall give Parent
prompt notice of any demand, purported demand, objection, notice, petition, or
other communication received from stockholders or provided to stockholders by
the Company with respect to any Company Dissenting Shares or shares claimed to
be Company Dissenting Shares, and Parent shall have the right to participate in
all negotiations and proceedings with respect to such shares. Payment of any
amount payable to the holders of Company Dissenting Shares shall be the
obligation of the Company. However, the Company agrees that, without the prior
written consent of Parent, it shall not voluntarily make any payment with
respect to, or settle or offer to settle, any demand or purported demand
respecting such shares.
1.8 WARRANTS AND OPTIONS.
(a) WARRANTS. At the Effective Time, each outstanding Warrant shall
be converted into the right to receive, at the Effective Time, a lump sum cash
payment equal to the product of (x) the number of shares such Warrant entitles
the holder thereof to purchase and (y) the excess, if any, of (i) the Merger
Consideration over (ii) the purchase price per share provided for under such
Warrant.
(b) COMPANY OPTIONS. At the Effective Time, each outstanding Company
Option under the 1997 Company Stock Option Plan shall fully vest, automatically
be cancelled and shall only entitle the holder thereof the right to receive, as
soon as reasonably practicable after the Effective Time, a lump sum cash payment
equal to the product of (x) the number of shares subject to such Company Option
and (y) the excess, if any, of (i) the Merger Consideration over (ii) the
exercise price per share of such Company Option.
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(c) ACTIONS. Prior to the Effective Time, Company shall deliver
appropriate notices (which notices shall have been both provided to Parent with
a reasonable opportunity to review and approved by the Parent) to each holder of
Company Options setting forth each holder's rights pursuant to the 1997 Company
Stock Option Plan, and stating that such Company Options shall be treated in the
manner set forth in this Section 1.8. In addition, Company shall cause the
administrator of the 1997 Company Stock Option Plan to take such actions under
the 1997 Company Stock Option Plan as are necessary to accomplish the provisions
of this Section 1.8.
1.9 CERTIFICATE OF INCORPORATION. At the Effective Time, the Certificate of
Incorporation of Merger Sub, as in effect immediately prior to the Effective
Time, shall be the Certificate of Incorporation of the Surviving Corporation.
1.10 BYLAWS. At the Effective Time, the Bylaws of Merger Sub, as
in effect immediately prior to the Effective Time, shall be the Bylaws of
the Surviving Corporation.
1.11 DIRECTORS OF SURVIVING CORPORATION. At the Effective Time, the
directors of the Surviving Corporation shall be the persons listed in Exhibit
1.11.
1.12 TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation with full right,
title and possession to all assets, property, rights, privileges, powers and
franchises of the Company and Merger Sub, the Company, Parent and Merger Sub
shall cause their respective officers to take all such lawful and necessary
action, so long as such action is not inconsistent with this Agreement.
1.13 PARENT TO MAKE CASH AVAILABLE. At or prior to the Effective Time,
Parent shall deposit or cause to be deposited in an Exchange Fund with the
Exchange Agent for the benefit of the holders of Company Common Stock the cash
to be exchanged for outstanding shares of Company Common Stock.
1.14 EXCHANGE OF SHARES.
(a) As soon as practicable after the Effective Time, the Exchange Agent
shall mail to each holder of record of one or more certificates of Company
Common Stock whose shares are being converted into the Merger Consideration
pursuant to Section 1.4 a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the certificates of
Company Common Stock shall pass, only upon delivery of the certificates of
Company Common Stock to the Exchange Agent) and instructions for use in
effecting the surrender of the certificates of Company Common Stock in exchange
for the Merger Consideration. Upon proper surrender of a certificate of Company
Common Stock for exchange and cancellation to the Exchange Agent, together with
such properly completed letter of transmittal, duly executed, the holder of such
certificate of Company Common Stock shall be entitled to receive in exchange
therefor the amount of Merger Consideration provided in Section 1.4, and the
certificate of Company Common Stock so surrendered shall forthwith be cancelled.
No interest shall be paid or accrued on any cash or on any unpaid dividends or
distributions payable to holders of certificates of Company Common Stock.
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(b) After the Effective Time, there shall be no transfers on the stock
transfer books of the Company of the shares of Company Common Stock which were
issued and outstanding immediately prior to the Effective Time. If, after the
Effective Time, any certificates of Company Common Stock representing such
shares are presented for transfer to the Exchange Agent, each such share shall
be cancelled and exchanged for the Merger Consideration provided in Section 1.4.
In the event of a transfer of ownership of any share of Company Common Stock
prior to the Effective Time that has not been registered in the transfer records
of the Company, the Merger Consideration payable in respect of such share of
Company Common Stock shall be paid to the transferee of such share if the
certificate that previously represented such share is presented to the Exchange
Agent accompanied by all documents required to evidence and effect such transfer
and to evidence that any applicable stock transfer taxes have been paid.
(c) Any portion of the Exchange Fund that remains unclaimed by the
stockholders of the Company for 18 months after the Effective Time shall be paid
to Parent. Any stockholders of the Company who have not theretofore complied
with this Article I shall thereafter look only to Parent for payment of the
Merger Consideration deliverable in respect of each share of Company Common
Stock such stockholder holds as determined pursuant to this Agreement without
any interest thereon. Notwithstanding the foregoing, none of the Company,
Parent, the Exchange Agent or any other Person shall be liable to any former
holder of shares of Company Common Stock for any amount delivered in good faith
to a public official pursuant to applicable abandoned property, escheat or
similar laws.
(d) In the event any certificate of Company Common Stock shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
Person claiming such certificate of Company Common Stock to be lost, stolen or
destroyed and, if reasonably required by Parent, the posting by such Person of a
bond in such amount as Parent may determine is reasonably necessary as indemnity
against any claim that may be made against it with respect to such certificate
of Company Common Stock, the Exchange Agent shall issue in exchange for such
lost, stolen or destroyed certificate of Company Common Stock the Merger
Consideration such holder has a right to receive pursuant to this Article I.
1.15 WITHHOLDING. Parent and the Surviving Corporation shall be entitled to
deduct and withhold from the Merger Consideration deliverable under this
Agreement, and from any other payments made pursuant to this Agreement, such
amounts as Parent and the Surviving Corporation are required to deduct and
withhold with respect to such delivery and payment under the Code or any
provision of state, local, provincial or foreign tax law. To the extent that
amounts are so withheld, such withheld amounts shall be treated for all purposes
of this Agreement as having been delivered and paid to the holder of shares of
Company Common Stock in respect of which such deduction and withholding was made
by Parent and the Surviving Corporation.
1.16 RESERVATION OF RIGHT TO REVISE STRUCTURE. Notwithstanding anything to
the contrary contained in this Agreement, before the Effective Time, Parent may
revise the structure of the Merger by providing for a directly or indirectly
wholly-owned Subsidiary of Parent other than Merger Sub to be merged with and
into the Company; PROVIDED that (a) such revision does not reduce the value or
alter the form of the Merger Consideration and (b) such revised structure or
method is reasonably capable of consummation without significant delay in
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relation to the structure contemplated herein. In the event Parent makes such an
election, the Company agrees to execute an appropriate amendment to this
Agreement in order to reflect such election.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as disclosed in the Company Disclosure Schedule (with
specific reference to the section of this Agreement to which the
information stated in such disclosure relates; PROVIDED that (i)
disclosure in any section of such Company Disclosure Schedule shall be
deemed to be disclosed with respect to any other Section of this Agreement
to the extent that it is readily apparent from the face of such disclosure
that such disclosure is applicable to such other Section and (ii) the mere
inclusion of an item in such Company Disclosure Schedule as an exception
to a representation or warranty shall not be deemed an admission that such
item represents a material exception or material fact, event or
circumstance or that such item has had or would have a Company Material
Adverse Effect) the Company represents and warrants to Parent and Merger
Sub as follows and as set forth in the Company Disclosure Schedule:
2.1 CORPORATE ORGANIZATION, STANDING AND POWER. Each of the Company and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization. Each of the Company
and its Subsidiaries has the corporate and other power and authority to own its
properties and to carry on its business as now being conducted and is duly
qualified to do business and is in good standing in each jurisdiction in which
the failure to be so qualified and in good standing would have a Company
Material Adverse Effect. The Company has furnished or made available to Parent a
complete and correct copy of the certificate or articles of incorporation, as
amended, and bylaws, as amended, and any other charter or organizational
documents, each as amended, of the Company and each of its Subsidiaries. Neither
the Company nor any of its Subsidiaries is in violation of any of the provisions
of its certificate or articles of incorporation or bylaws or other charter or
organizational documents, each as amended.
2.2 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of 150,000,000
shares of Company Common Stock; and 5,000,000 shares of Company Preferred Stock.
As of the date of this Agreement, (i) 65,788,780 shares of Company Common Stock
are issued and outstanding, all of which are duly authorized, validly issued,
fully paid and nonassessable, (ii) 10,865,257 shares of Company Common Stock are
reserved for issuance upon the exercise of outstanding Company Options, (iii)
400,000 shares of Company Common Stock are reserved for issuance upon exercise
of the outstanding Warrants, (iv) no shares of Company Common Stock are held in
the treasury of the Company and (v) 2,884,083 shares of Company Common Stock are
reserved for issuance pursuant to Company Options not yet granted. As of the
date of this Agreement, no shares of Company Preferred Stock are outstanding.
There are no bonds, debentures, notes or other indebtedness or securities of the
Company that have the right to vote (or that are convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
stockholders of the Company may vote. Except as set forth above, as of the date
of this Agreement, no shares of capital stock or other voting securities of, or
other equity interests in, the Company are issued, reserved for issuance or
outstanding and no shares of capital stock or other voting securities of, or
other equity
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interests in, the Company shall be issued or become outstanding after the date
of this Agreement other than upon exercise of Company Options and Warrants
outstanding as of the date of this Agreement. Section 2.2(a) of the Company
Disclosure Schedule sets forth a complete and correct list, as of the date of
this Agreement, of all Rights that exist with respect to the Company or any of
its Subsidiaries, including Company Options and Warrants. Such list sets forth
(x) the name of each holder and the number of shares of Company Common Stock
subject to each such option, the date of grant, the exercise price per share and
the term of each such option and (y) the name of each holder of each such
Warrant, the number of shares each such Warrant entitles the holder to purchase,
the date of issuance and the exercise price of such Warrant and the expiration
date of such Warrant. On the Closing Date, the Company shall deliver to Parent
an updated Section 2.2(a) of the Company Disclosure Schedule hereto current as
of such date. As of the date of this Agreement, the Company has not issued any
additional shares of its capital stock or Company Options in respect thereof,
except for shares of Company Common Stock issued upon the exercise of the
Company Options and Warrants referred to above. All shares of Company Common
Stock subject to issuance as described above shall, upon issuance on the terms
and conditions specified in the instruments pursuant to which they are issuable,
be duly authorized, validly issued, fully paid and nonassessable.
(b) None of the Company or any of its Subsidiaries has any contract or
other obligation to repurchase, redeem or otherwise acquire any shares of
Company Common Stock or any capital stock of any of, or other equity interests
in, the Company or the Company's Subsidiaries, or make any investment (in the
form of a loan, capital contribution or otherwise) in any of the Company's
Subsidiaries or any other Person. All of the outstanding shares of capital stock
and voting securities of (and any other equity interests in) each Subsidiary of
the Company are owned, directly or indirectly, by the Company and are duly
authorized, validly issued, fully paid and nonassessable, and those shares of
capital stock and voting securities of (and any other equity interests in) each
of the Company's Subsidiaries owned by the Company, directly or indirectly, are
free and clear of all Liens. There are no outstanding Rights with respect to any
such Subsidiary, or other instruments otherwise obligating the Company or any
such Subsidiary to issue, transfer, sell, purchase, redeem or otherwise acquire
any of its securities or equity interests.
(c) Neither the Company nor any of its Subsidiaries owns, or has any
contract or other obligation to acquire, any equity securities or other
securities of any Person (other than Subsidiaries of the Company) or any direct
or indirect equity or ownership interest in any other business. Neither the
Company nor any Subsidiary is a general partner of any general or limited
partnership or the managing member of any limited liability company.
2.3 AUTHORITY; NO VIOLATION.
(a) The Company has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The Company has taken all corporate action necessary in order (i) to authorize
the execution and delivery of, and performance of its obligations under this
Agreement and (ii) subject only to receipt of the Company Stockholder Approval
approving this Agreement and the consents and approvals
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identified in Section 2.5, to consummate the Merger and the other transactions
contemplated hereby. This Agreement has been duly and validly authorized,
executed and delivered by the Company. Assuming due authorization, execution and
delivery by Parent and Merger Sub, this Agreement constitutes the valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except as such enforcement may be limited by (i) the effect of
bankruptcy, insolvency, reorganization, receivership, conservatorship,
arrangement, moratorium or other laws affecting or relating to the rights of
creditors generally or (ii) the rules governing the availability of specific
performance, injunctive relief or other equitable remedies and general
principles of equity, regardless of whether considered in a proceeding in equity
or at law.
(b) Neither the execution and delivery of this Agreement by the Company nor
the consummation by the Company of the Merger and the other transactions
contemplated hereby, nor compliance by the Company with any of the terms or
provisions of this Agreement, will (i) violate any provision of the Certificates
of Incorporation or bylaws or other charter or organizational documents of the
Company or any of its Subsidiaries or (ii) assuming that the consents and
approvals referred to in Section 2.5 are duly obtained, (x) violate any Laws or
Regulations, judgment, order, writ, decree or injunction applicable to the
Company or any of its Subsidiaries or any of their respective properties or
assets or (y) violate, conflict with, result in a breach of any provision of or
the loss of any benefit under, constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, result in
the termination of or a right of termination or cancellation under, accelerate
the performance required by or rights or obligations under, or result in the
creation of any Lien upon any of the respective properties or assets of the
Company or any of its Subsidiaries under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement, contract, or other instrument or obligation to which the
Company or any of its Subsidiaries is a party, or by which they or any of their
respective properties, assets or business activities may be bound or affected,
except (in the case of clause (ii) (y) above) for such violations, conflicts,
breaches, defaults or the loss of benefits which, either individually or in the
aggregate, would not constitute a Company Material Adverse Effect. Since
December 31, 2002, the Company has not received notice from any of its
stockholders of an intention of such stockholder to cumulate votes in any
election of directors.
2.4 SUBSIDIARIES; SUBSIDIARIES' ACTIVITIES. Section 2.4 of the Company
Disclosure Schedule sets forth a list of all Subsidiaries of the Company, along
with (i) the date, purpose, and jurisdiction of incorporation or formation for
each Subsidiary, and (ii) any commercial, business, or other activities each
Subsidiary has engaged in, is engaging in, or will engage in (including an
indication of any Subsidiaries that are currently inactive or dormant).
2.5 CONSENTS AND APPROVALS. Except for (i) any approvals or filings
required by the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), (ii) the Company Stockholder Approval, (iii) the filing with
the SEC of (A) the Proxy Statement and (B) such reports under the Securities
Exchange Act as may be required in connection with this Agreement and the
transactions contemplated by this Agreement, (iv) the filing of the Certificate
of Merger with the Secretary of State of the State of Delaware pursuant to the
Delaware Law, (v) such filings as may be required under the rules and
regulations of the NASDAQ, (vi) the consents, notices and approvals set forth in
Section 2.5 of the Company Disclosure Schedule and
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(vii) such additional consents, notices and approvals, the failure of which to
make or obtain would not have a Company Material Adverse Effect, no consents or
approvals of any Governmental Entity or any third party are necessary in
connection with (A) the execution and delivery by the Company of this Agreement
and (B) the consummation by the Company of the Merger and the other transactions
contemplated by this Agreement.
2.6 SEC DOCUMENTS; FINANCIAL STATEMENTS.
(a) The Company has furnished or made available to Parent complete and
correct copies of the Company SEC Documents filed with the SEC (including via
XXXXX) by the Company since January 1, 2003, and, prior to the Effective Time,
the Company shall have furnished or made available to Parent complete and
correct copies of any Company SEC Documents filed with the SEC (including via
XXXXX) by the Company after the date of this Agreement and prior to the
Effective Time. As of their respective filing dates, the Company SEC Documents
complied, or, in the case of SEC Documents filed after the date of the Agreement
will comply, in all material respects with the requirements of the Securities
Exchange Act and the Securities Act, and none of the Company SEC Documents
contained, or, in the case of SEC Documents filed after the date of the
Agreement will contain, any untrue statement of a material fact or omitted, or
in the case of Company SEC Documents filed after the date of this Agreement will
omit, to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under which they
were made, not misleading, except to the extent amended or superseded by a
Company SEC Document filed prior to the date of this Agreement.
(b) The financial statements of the Company, including the notes thereto,
included in the Company SEC Documents and the financial statements of the
Company furnished to Parent for the quarter ended March 31, 2005 (collectively,
the "Company Financial Statements") complied, or in case of Company Financial
statements filed after the date of this Agreement, will comply, in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto as of their respective dates,
and have been prepared in accordance with GAAP applied on a basis consistent
throughout the periods indicated. The Company Financial Statements fairly
present, or in the case of Company Financial Statements filed after the date of
this Agreement, will fairly present, in all material respects the consolidated
financial condition and operating results of the Company and its Subsidiaries at
the dates and during the periods indicated therein (subject, in the case of
unaudited statements, to normal and recurring year-end adjustments). Neither the
Company nor any of its Subsidiaries has sponsored or established any special
purpose vehicle or entity that would be required to be consolidated with the
Company or a Company Subsidiary pursuant to Interpretation No. 46R of the
Financial Accounting Standards Board that has not been so consolidated.
(c) The Company is in compliance in all material respects with the
provisions of SOX applicable to it, including Section 404 thereof, and the
certifications provided and to be provided pursuant to Sections 302 and 906
thereof were accurate, or in the case of certifications provided after the date
of this Agreement will be accurate, when made.
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2.7 ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Since December 31, 2004, the Company and each of its Subsidiaries
has, in all material respects, conducted its business in the ordinary course
consistent with past practice and there has not occurred:
(i) any change, event or condition that has or is reasonably likely to have
a Company Material Adverse Effect;
(ii) any acquisition, sale or transfer of any material asset of the Company
or any of its Subsidiaries other than in the ordinary course of business
consistent with past practice or entry into or exit from any material line of
business of the Company of any of its Subsidiaries or any material change in its
or their material lending or operating policies;
(iii) any change in the Company's accounting methods or practices
(including any change in depreciation or amortization policies or rates)
materially affecting the Company's assets or any of its Subsidiaries' assets,
except as set forth in any Company SEC Document filed prior to the date of this
Agreement (but only to the extent set forth therein) or as have been required by
a change in GAAP;
(iv) any declaration, setting aside, or payment of a dividend or other
distribution with respect to the shares of the Company, or any direct or
indirect redemption, purchase or other acquisition by the Company or any of its
Subsidiaries of any of its shares of capital stock or other equity interests;
(v) any material contract entered into by the Company or any of its
Subsidiaries, other than in the ordinary course of business consistent with past
practice or made available to Parent, or any material amendment or termination
of, or default under, any material contract to which the Company or any of its
Subsidiaries is a party or by which it is bound;
(vi) any amendment or change to the Certificate of Incorporation or bylaws
of the Company;
(vii) any material change in the risk management or hedging policies,
procedures or practices of the Company or any of its Subsidiaries, or any
failure to comply with such policies, procedures and practices;
(viii) any material election with respect to Taxes or material changes in
Tax accounting methods; or
(ix) any agreement by the Company or any of its Subsidiaries to do any of
the things described in the preceding clauses (i) through (viii) (other than
negotiations with Parent and its representatives regarding the transactions
contemplated by this Agreement).
(b) Except as set forth in Section 2.7(b) of the Company Disclosure
Schedule, since December 31, 2004, neither the Company nor any of its
Subsidiaries has, (i) increased the wages, salaries, compensation, pension, or
other fringe benefits or perquisites payable to any executive officer or
director from the amount thereof in effect as of December 31, 2004,
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(ii) granted any severance, termination, change-in-control or similar pay to,
entered into any contract to make or grant any severance, termination,
change-in-control or similar pay to, or paid any bonus other than customary
bonuses for fiscal 2004 to any executive officer or director or (iii) granted
any Rights with respect to the Company or any Company Subsidiary to any officer,
director or employee, other than grants made in the ordinary course of business
consistent with past practice pursuant to the Company Stock Plans prior to the
date of this Agreement.
2.8 UNDISCLOSED LIABILITIES. Except as set forth in Section 2.8 of the
Company Disclosure Schedule, neither the Company nor any of its Subsidiaries has
any material obligations or liabilities of any nature (matured or unmatured,
fixed or contingent) other than (i) those set forth or adequately provided for
in the consolidated balance sheet (and the related notes thereto) of the Company
and its Subsidiaries included in the Company SEC Documents filed prior to the
date of this Agreement, (ii) those incurred in connection with the execution of
this Agreement and (iii) those incurred in the ordinary course of business
consistent with past practice since December 31, 2004 that, individually or in
the aggregate, do not constitute a Company Material Adverse Effect.
2.9 LEGAL PROCEEDINGS. Except as set forth in Section 2.9 of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party
to any, and there are no pending or, to the Knowledge of the Company,
threatened, legal, administrative, arbitral or other proceedings, claims,
actions or governmental or regulatory investigations of any nature against the
Company or any of its Subsidiaries which individually or in the aggregate, has
had, or would reasonably be expected to have, a Company Material Adverse Effect,
nor, to the Knowledge of the Company, is there any basis for any proceeding,
claim, action or investigation against the Company or any of its Subsidiaries
that would have, or would reasonably be expected to have, a Company Material
Adverse Effect. There is no injunction, order, judgment or decree imposed upon
the Company, any of its Subsidiaries or the assets of the Company or any of its
Subsidiaries which has had, or would reasonably be expected to have, a Company
Material Adverse Effect.
2.10 TAXES AND TAX RETURNS.
(a) (i) The Company and each of its Subsidiaries have filed or caused to be
filed all Tax Returns required to be filed with any Tax authority, (ii) all such
Tax Returns are correct and complete in all material respects, (iii) the Company
and its Subsidiaries have paid or caused to be paid all Taxes that are due and
payable in respect of such Tax Returns, other than Taxes which are being
contested in good faith and are adequately reserved against or provided for (in
accordance with GAAP) in the Company Financial Statements and (iv) the Company
and each of its Subsidiaries do not have any material liability for Taxes for
any current or prior tax periods in excess of the amount reserved or provided
for in the Company Financial Statements.
(b) Section 2.10(b) of the Company Disclosure Schedule identifies all
pending material audits or examinations with respect to any Tax Returns of the
Company and its Subsidiaries. The consolidated federal income Tax Returns of the
Company and its Subsidiaries have not been examined by the IRS, and the material
state Tax Returns of the Company and its Subsidiaries have not been examined by
any relevant state taxing authority.
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(c) There are no disputes pending with respect to, or claims or assessments
asserted in writing for any material amount of Taxes upon the Company or any of
its Subsidiaries.
(d) The Company and each of its Subsidiaries have withheld and paid all
Taxes required to have been withheld and paid in connection with any amounts
paid or owing to any employee, independent contractor, stockholder, creditor or
any third party.
(e) Neither the Company nor any of its Subsidiaries (i) is a party to a Tax
allocation or Tax sharing agreement (other than an agreement solely among
members of a group the common parent of which is the Company) or (ii) has any
liability for the Taxes of any Person (other than any of the Company or any of
its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law).
(f) Except as would not have, individually or in the aggregate, a Company
Material Adverse Effect, the Company and each of its Subsidiaries are in
compliance with all applicable rules and regulations regarding the solicitation,
collection and maintenance of any forms, certifications and other information
required in connection with federal, state, local or foreign Tax withholding or
reporting.
(g) None of the Company and its Subsidiaries has been a party to any
"reportable transaction" within the meaning of Treasury Regulations Section
1.6011-4(b)(1).
(h) No waivers of statute of limitations have been given by or requested
with respect to any Taxes of the Company or its Subsidiaries.
(i) Each Subsidiary of the Company that is a U.S. domestic corporation for
U.S. federal income tax purposes has at all times been a member of the
consolidated group, for purposes of filing any U.S. federal income tax returns,
of which the Company was the common parent (the "Consolidated Group"). Section
2.10(i) of the Company Disclosure Schedule sets forth a list, which is accurate
in all material respects, of (i) the consolidated net operating loss
carry-forwards of the Consolidated Group as of December 31, 2004 (and the net
operating loss carry-forwards of the Company and its Subsidiaries for state
income tax purposes) and (ii) the related taxable years of the Consolidated
Group in which such consolidated net operating loss carry-forwards expire.
2.11 EMPLOYEE BENEFIT PLANS.
(a) (i) Section 2.11(a) of the Company Disclosure Schedule sets forth a
list of all "employee benefit plans," as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and all other
employee benefit or compensation arrangements, employment agreements, change in
control agreements, perquisite programs or payroll practices, including, without
limitation, any such arrangements or payroll practices providing severance pay,
sick leave, vacation pay, salary continuation for disability, retirement
benefits, deferred compensation, bonus pay, incentive pay, stock options
(including those held by directors, employees, and consultants), stock purchase,
hospitalization insurance, medical insurance, life insurance, scholarships or
tuition reimbursements, that are maintained by the Company, any of its
Subsidiaries or any entity within the same "controlled group" as the
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Company or any of its Subsidiaries, within the meaning of Section 4001(a)(14) of
ERISA (a "Company ERISA Affiliate") or to which the Company, any of its
Subsidiaries or a Company ERISA Affiliate is obligated to contribute thereunder
for current or former directors, officers, employees or consultants of the
Company, any of its Subsidiaries or a Company ERISA Affiliate (the "Company
Employee Benefit Plans").
(b) Complete and correct copies of the following documents, with respect to
each of the Company Employee Benefit Plans, have been delivered to Parent by the
Company: (i) all Company Employee Benefit Plans and related trust documents, and
amendments thereto; (ii) the most recent Forms 5500 for the past two years and
(iii) summary plan descriptions.
(c) There are no pending material actions, claims or lawsuits which have
been asserted, instituted or, to the Company's Knowledge, threatened, against
the Company Employee Benefit Plans, the assets of any of the trusts under such
plans or the plan sponsor or the plan administrator, or against any fiduciary of
the Company Employee Benefit Plans with respect to the operation of such plans
(other than routine benefit claims).
(d) None of the Company Employee Benefit Plans is a "multiemployer plan,"
as defined in Section 3(37) of ERISA (the "Company Multiemployer Plan"). Neither
the Company, any of its Subsidiaries nor any Company ERISA Affiliate has
withdrawn in a complete or partial withdrawal from any Company Multiemployer
Plan, nor has any of them incurred any liability due to the termination or
reorganization of a Company Multiemployer Plan.
(e) No liability under Title IV of ERISA has been or is expected to be
incurred by the Company or any of its Subsidiaries with respect to any ongoing,
frozen or terminated "single-employer plan", within the meaning of Section
4001(a)(15) of ERISA. Neither the Company, any of its Subsidiaries nor any
Company ERISA Affiliate has incurred any outstanding liability under Section
4062 of ERISA to the Pension Benefit Guaranty Corporation or to a trustee
appointed under Section 4042 of ERISA. Neither the Company, any of its
Subsidiaries nor any Company ERISA Affiliate has engaged in any transaction
described in Section 4069 of ERISA. No notice of a "reportable event", within
the meaning of Section 4043 of ERISA for which the reporting requirement has not
been waived or extended, other than pursuant to Pension Benefit Guaranty
Corporation ("PBGC") Reg. Section 4043.33 or 4043.66, has been required to be
filed for any pension plan or by any Company ERISA Affiliate within the 12-month
period ending on the date hereof or will be required to be filed in connection
with the transaction contemplated by this Agreement. Neither the Company nor any
of its Subsidiaries maintains, or is required, either currently or in the
future, to provide medical benefits to employees, former employees or retirees
after their termination of employment, other than pursuant to applicable Laws
and Regulations.
(f) Each Company Employee Benefit Plan that is intended to qualify under
Section 401 of the Code, and each trust maintained pursuant thereto, received a
favorable determination letter from the IRS covering all tax law changes prior
to the Economic Growth and Tax Relief Reconciliation Act of 2001, and, to the
Company's Knowledge, nothing has occurred with respect to the operation of any
such Company Employee Benefit Plan that would cause the loss of such
qualification or exemption or the imposition of any material liability, penalty
or tax under ERISA or the Code. Any voluntary employees' beneficiary association
within the
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meaning of Section 501(c)(9) of the Code has (i) received an opinion letter from
the IRS recognizing its exempt status under Section 501(c)(9) of the Code and
(ii) filed a timely notice with the IRS pursuant to Section 505(c) of the Code,
and neither the Company nor any of its Subsidiaries is aware of circumstances
likely to result in the loss of such exempt status under Section 501(c)(9) of
the Code.
(g) All contributions (including all employer contributions and employee
salary reduction contributions) required to have been timely made under any of
the Company Employee Benefit Plans to any funds or trusts established thereunder
or in connection therewith have been made by the due date thereof, other than a
failure to make contributions that is not material. Neither any Company Employee
Benefit Plan which is subject to ERISA that is an "employee pension benefit
plan" within the meaning of Section 3(2) of ERISA (a "Pension Plan") nor any
single-employer plan of a Company ERISA Affiliate has an "accumulated funding
deficiency" (whether or not waived) within the meaning of Section 412 of the
Code or Section 302 of ERISA and no Company ERISA Affiliate has an outstanding
funding waiver. Neither any Pension Plan nor any single-employer plan of a
Company ERISA Affiliate has been required to file information pursuant to
Section 4010 of ERISA for the current or most recently completed plan year. It
is not reasonably anticipated that required minimum contributions to any Pension
Plan under Section 412 of the Code will be materially increased by application
of Section 412(l) of the Code. Neither the Company nor any of its Subsidiaries
has provided, or is required to provide, security to any Pension Plan or to any
single-employer plan of a Company ERISA Affiliate pursuant to Section 401(a)(29)
of the Code.
(h) There has been no violation of ERISA or the Code with respect to the
filing of applicable reports, documents and notices regarding the Company
Employee Benefit Plans with the Secretary of Labor or the Secretary of the
Treasury or the furnishing of required reports, documents or notices to the
participants or beneficiaries of the Company Employee Benefit Plans.
(i) None of the Company, its Subsidiaries, any Company Employee Benefit
Plan which is subject to ERISA, any trust created under any such Company
Employee Benefit Plan or any trustee or administrator of any such Company
Employee Benefit Plan or trust, has engaged in a "prohibited transaction" (as
such term is defined in Section 406 of ERISA or Section 4975 of the Code) or any
other breach of fiduciary responsibility that could reasonably be expected to
subject the Company, any of its Subsidiaries or any officer of the Company or of
any of its Subsidiaries to any tax or penalty on prohibited transactions imposed
by such Section 4975 or to any material liability under Section 502(i) of ERISA.
Neither the Company nor any of its Subsidiaries has incurred or reasonably
expects to incur a material tax or penalty imposed by Section 4980 of the Code
or any material liability under Section 4071 of ERISA.
(j) All Company Employee Benefit Plans subject to ERISA or the Code have
been maintained and administered in accordance with their terms and with all
provisions of ERISA and the Code, respectively (including rules and regulations
thereunder) and other applicable Laws and Regulations and all employees required
to be included as participants by the terms of such plans have been properly
included.
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(k) There has been no amendment to, announcement by the Company or any of
its Subsidiaries relating to, or change in employee participation or coverage
under, any Company Employee Benefit Plan which would increase materially the
expense of maintaining such plan above the level of the expense incurred
therefor for the most recent fiscal year. Neither the execution and delivery of
this Agreement, approval of this Agreement by the Company's stockholders nor the
consummation of the transactions contemplated hereby will (i) entitle any
employees of the Company or any of its Subsidiaries to severance pay or any
increase in severance pay upon any termination of employment after the date
hereof, (ii) accelerate the time of payment or vesting or result in any payment
or funding (through a grantor trust or otherwise) of compensation or benefits
under, or increase the amount payable or result in any other material obligation
pursuant to, any of the Company Employee Benefit Plans, (iii) limit or restrict
the right of the Company or any of its Subsidiaries or, after the consummation
of the transactions contemplated hereby, Parent to merge, amend or terminate any
of the Company Employee Benefit Plans or (iv) result in payments under any of
the Benefit Plans which would not be deductible under Section 280G of the Code.
Neither the Company nor any of its Subsidiaries is a party to any agreement,
contract, arrangement or plan that has resulted, or would result, separately or
in the aggregate, in the payment of any amount that will not be fully deductible
under the Code as a result of Section 162(m) of the Code. Neither the Company
nor any of its Subsidiaries has made or will make any payment that will not be
fully deductible under the Code as a result of Section 162(m) of the Code.
(l) Neither the Company nor any of its Subsidiaries maintains benefit or
compensation plans outside of the United States.
(m) The census information provided to Parent as set forth in Section
2.11(m) of the Company Disclosure Schedule accurately reflects the name, title,
date of hire, base salary, bonus, commissions, location of work and benefits
provided to each current employee of the Company and its Subsidiary as of July
31, 2005.
2.12 COMPLIANCE WITH APPLICABLE LAW AND REGULATORY MATTERS.
(a) The Company and each of its Subsidiaries (i) have complied with all
applicable Laws and Regulations, and are not in violation of, and have not
received any notices of violation with respect to, any Laws and Regulations in
connection with the conduct of their respective businesses or the ownership or
operation of their respective businesses, assets and properties, including state
usury, consumer lending and insurance Laws and Regulations, the Truth in Lending
Act, the Consumer Credit Protection Act, the Equal Credit Opportunity Act, the
Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Real
Estate Settlement Procedures Act, the Bank Secrecy Act, the USA PATRIOT Act, the
International Money Laundering Abatement and Anti-Terrorist Financing Act, the
Home Mortgage Disclosure Act, the Homeowners Protection Act, the Flood Disaster
Protection Act, the Federal Trade Commission Act, the Trading with the Enemy
Act, the International Emergency Economic Powers Act, the International Security
and Development Cooperation Act, the United Nations Participation Act, the Arms
Export Control Act and other federal, state, local and foreign Laws or
Regulations regulating mortgage banking, mortgage brokerage or agency,
automobile loans, student loans, other personal loans, and lending or servicing
loans generally, except for immaterial noncompliance or violations, (ii) is not
party to any agreement or memorandum of
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understanding with, or a party to any commitment letter or similar undertaking
to, or subject to any order, decree or directive particular to the Company or
its Subsidiaries by, any Governmental Entity, and (iii) since January 1, 2003,
has, timely filed all reports, registrations and statements, together with any
amendments required to be made with respect thereto, that were required to be
filed under any applicable Law or Regulation with any applicable Governmental
Entity. No material deficiencies have been asserted by any Governmental Entity
with respect to any such report, registration or statement that have not been
cured or satisfied.
(b) Set forth on Section 2.12(b) of the Company Disclosure Schedule are all
material licenses, permits, certificates, franchises and other authorizations
(collectively the "Authorizations") held by the Company and each of its
Subsidiaries, which constitute all Authorizations necessary for the ownership or
use of its and their assets and properties and the conduct of its and their
business as currently conducted. The Company and each of its Subsidiaries have
complied with, and are not in violation of, any Authorization. All such
Authorizations are in full force and effect and there are no proceedings pending
or, to the Knowledge of the Company or any of its Subsidiaries, threatened that
seek the revocation, cancellation, suspension or adverse modification thereof,
except for any revocation, cancellation, or suspension of any immaterial
Authorization or any immaterial modification of an Authorization.
(c) Section 2.12(c) of the Company Disclosure Schedule sets forth a
description of each Governmental Order applicable to the Company or any of its
Subsidiaries, and no such Governmental Order has had, or would reasonably be
expected to have, a Company Material Adverse.
(d) As of the date of this Agreement, to the Knowledge of the Company there
is no reason why (i) all regulatory approvals from any Governmental Entity
required for the consummation of the transactions contemplated by this Agreement
should not be obtained on a timely basis or (ii) any condition to the
consummation of the Merger and the other transactions contemplated by this
Agreement should not be satisfied on a timely basis.
(e) Neither the Company nor any of its Subsidiaries has received any notice
from a competent authority alleging that the Company or any Subsidiary has
failed to comply in any material respect with any applicable privacy law or data
or consumer protection Laws or Regulations.
(f) To the Knowledge of the Company, there are no facts or circumstances
that would require the Company or any of its Subsidiaries to give notice to any
customers, consumers or other similarly situated individuals, pursuant to
California Civil Code Sections 1798.29, et seq., or any similar Laws or
Regulations of any other jurisdiction, of any actual or perceived data security
breaches.
2.13 MATERIAL CONTRACTS.
(a) Except for those agreements and other documents (x) filed as exhibits
to its Annual Report on Form 10-K for the fiscal year ended December 31, 2004 or
set forth in Section 2.13(a) of the Company Disclosure Schedule, and (y) the
April 26, 2005 engagement
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letter signed by the Company and XX Xxxxxx Securities Inc., neither the Company
nor any of its Subsidiaries is a party to, bound by or subject to the following
(the following, together with the contracts described in or filed as exhibits to
the Company SEC Document and the contracts set forth in Section 2.13(a) of the
Company Disclosure Schedule, collectively the "Material Contracts"):
(i) any "material contract" within the meaning of Item 601(b)(10) of the
SEC's Regulation S-K;
(ii) any agreement, contract, arrangement, commitment or understanding that
restricts in any material respect the conduct of business by the Company or any
of its Subsidiaries, taken as a whole, or its or their ability to compete in any
line of business;
(iii) any agreement, contract, arrangement, commitment or understanding
that has aggregate future sums due from the Company or any of its Subsidiaries
during the period commencing on the date of this Agreement in excess of $250,000
per annum, unless terminable without material penalty without more than sixty
(60) days' notice to the counterparty;
(iv) any agreement, contract, arrangement, commitment or understanding that
is a lease, sublease or similar agreement with any Person;
(v) any agreement, contract, arrangement, commitment or understanding
having the effect of providing that the consummation of the Merger or the
execution, delivery or effectiveness of this Agreement will give rise under such
contract to any increased or accelerated material rights of an employee of the
Company or any of its Subsidiaries;
(vi) any agreement, contract, arrangement, commitment or understanding that
contains an "exclusivity" clause (that is, obligates the Company or any of its
Subsidiaries to conduct business with another party on an exclusive basis or
restricts the ability of the Company or any of its Subsidiaries to conduct
business with any Person);
(vii) any agreement, contract, arrangement, commitment or understanding
with respect to the employment of, or payment to, any present or former
directors, officers, employees, independent contractors, consultants or any
other Person involving payment of more than $100,000 per annum;
(viii) any agreement, contract, arrangement, commitment or understanding
with a Governmental Entity;
(ix) any agreement, contract, arrangement, commitment or understanding
entered into other than in the ordinary course of business consistent with past
practice for the acquisition of the securities of or any material portion of the
assets of any other Person or entity;
(x) any agreement, contract, commitment or instrument requiring payment by
the Company or its Subsidiaries in excess of $250,000 that expires or may be
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renewed at the option of any Person other than the Company or any of its
Subsidiaries so as to expire more than one year after the date of this
Agreement;
(xi) any trust indenture, mortgage, promissory note, loan agreement or
other contract, agreement or instrument for the borrowing of money, any currency
exchange, commodities or other hedging arrangement or any leasing transaction of
the type required to be capitalized in accordance with GAAP, in each case, where
the Company or any of its Subsidiaries is a lender, borrower or guarantor, other
than those entered into in the ordinary course of business consistent with past
practice where the Company or any of its Subsidiaries is a lender;
(xii) any agreement of guarantee, support, indemnification, assumption or
endorsement of, or any similar commitment with respect to, the obligations,
liabilities (whether accrued, absolute, contingent or otherwise) or indebtedness
of any other Person other than those entered into in the ordinary course of
business consistent with past practice;
(xiii) any joint venture, stockholders', partnership or similar agreement;
(xiv) any broker, distributor, agency, sales promotion or advertising
agreement involving payment by the Company or its Subsidiaries in excess of
$250,000;
(xv) any agreement, option or commitment or right with, or held by, any
third party to acquire, use or have access to any material assets or properties,
or any interest therein, of the Company or any of its Subsidiaries;
(xvi) any outbound license, sublicense or development agreement or other
agreement or any material inbound license, sublicense or development agreement
or other agreement (other than licenses for commercially available,
mass-marketed shrink-wrap software that has not been modified or customized for
the Company and provides for royalty payments not in excess of $50,000) that
affects or relates to material Intellectual Property owned, used, currently
intended to be used, or held for use by the Company or its Subsidiaries,
including, without limitation, any agreement pursuant to which any Person or
entity is authorized to use or has an ownership or security interest in any
Intellectual Property;
(xvii) any material contract or agreement which would require any consent
or approval of a counterparty as a result of the consummation of the
transactions contemplated by this Agreement; or
(xviii) any other agreement, contract, arrangement, commitment or
understanding the loss of which would have a Company Material Adverse Effect.
(b) (i) Each Material Contract is valid and binding on the Company or any
of its Subsidiaries, as applicable, (ii) the Company and each of its
Subsidiaries has performed all obligations required to be performed by it to
date under, are entitled to all accrued benefits under, and are not alleged to
be in default in respect of, each Material Contract, except as would not,
individually or in the aggregate, have a Company Material Adverse Effect and
(iii) each of the Material Contracts is in full force and effect, without
amendment, and there exists no default or event of default or event, occurrence,
condition or act, with respect to the Company or any of its
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Subsidiaries or, to the Company's Knowledge, with respect to any other
contracting party, which, with the giving of notice, the lapse of the time or
the happening of any other event or condition, would become a default or event
of default under any Material Contract, except, as would not, individually or in
the aggregate, have a Company Material Adverse Effect.
2.14 NON-COMPETITION/NON-SOLICITATION. Except as set forth on Section 2.14
of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries is a party to or bound by any non-competition or non-solicitation
agreement or any other agreement or obligation (i) that limits, purports to
limit, or would limit in any respect the manner in which, or the localities in
which, any business of the Company or its Affiliates is or could be conducted or
the types of business that the Company or its Affiliates conducts or may
conduct, (ii) that could reasonably be understood to limit or purport to limit
in any respect the manner in which, or the localities in which, any business of
Parent or its Affiliates is or could be conducted or the types of business that
Parent or its Affiliates conducts or may conduct or (iii) that limits, purports
to limit or would limit in any way the ability of the Company and its
Subsidiaries to solicit prospective employees or would so limit or purport to
limit the ability of Parent or its Affiliates to do so; PROVIDED, HOWEVER, that
this Section 2.14 shall not apply to any non-solicitation agreements or
obligations restricting the solicitation of borrowers with respect to the
refinancing of Loans that were sold by the Company or its Subsidiaries.
2.15 ASSETS.
(a) The Company and its Subsidiaries own, lease or have the right to use
all the material properties and assets necessary for or used or held for use in
the conduct of their respective business or otherwise owned, leased or used by
the Company or any of its Subsidiaries (all such properties and assets being
referred to as the "Assets"). Each of the Company and its Subsidiaries has good
title to, or in the case of leased or subleased Assets, valid and subsisting
leasehold interests in, all of the Assets, free and clear of all Liens, except
for defects in title, easements, restrictive covenants and similar encumbrances,
and Liens, that individually or in the aggregate, would not have a Company
Material Adverse Effect. Section 2.15(a) of the Company Disclosure Schedule
contains a complete and correct list of all real property and improvements
leased or subleased by the Company and its Subsidiaries or otherwise made
available for their use (the "Leases"). Copies of all Leases have been delivered
or otherwise made available to Parent by the Company.
2.16 ENVIRONMENTAL LIABILITY. There are no legal, administrative, arbitral
or other proceedings, claims or actions or any private environmental
investigations or remediation activities or governmental investigations of any
nature that would be reasonably likely to result in the imposition on the
Company or any of its Subsidiaries, of any liability or obligation arising under
common law or under any local, state or federal environmental statute,
regulation or ordinance, including CERCLA, pending or, to the Knowledge of the
Company, threatened against the Company or any of its Subsidiaries, which
liability or obligation would have a Company Material Adverse Effect. To the
Knowledge of the Company, there is no reasonable basis for any such proceeding,
claim, action or investigation that would impose any liability or obligation
that would have a Company Material Adverse Effect. Neither the Company nor any
of its Subsidiaries is subject to any agreement, order, judgment or decree by or
with any Governmental Entity or third party imposing any liability or obligation
with respect to the
-19-
foregoing that would, individually or in the aggregate, have a Company Material
Adverse Effect. The Company and each of its Subsidiaries have complied at all
times with all applicable Environmental Laws and to the Knowledge of the Company
there are no circumstances involving the Company or any of its Subsidiaries or
any currently or formerly owned properties, including security interests in any
property, that would reasonably be expected to result in any material claims,
liabilities or costs to the Company or any of its Subsidiaries relating to any
material Environmental Law. The Company has made available to Parent copies of
all environmental reports, studies, sampling data, correspondence, filings and
other environmental information in its possession or reasonably available to it
relating to the Company or any of its Subsidiaries.
2.17 STATE TAKEOVER LAWS.
The Company has taken all action required to be taken by it in order to
exempt this Agreement and the transactions contemplated hereby from, and this
Agreement and the transactions contemplated hereby are exempt from, (A) the
requirements of any applicable "moratorium," "control share," "fair price," or
other anti-takeover laws and regulation of any state (collectively, "Takeover
Laws"), including Section 203 of the Delaware Law, and (B) any other applicable
provision of the articles or certificate of incorporation and bylaws of the
Company or any of its Subsidiaries.
2.18 INSURANCE. The Company has in full force and effect the insurance
coverage with respect to its business and the businesses of its Subsidiaries set
forth in Section 2.18 of the Company Disclosure Schedule. There is no material
claim pending under any of such policies as to which coverage has been
questioned, denied or disputed by the underwriters of such policies or bonds.
All premiums due and payable under all such policies have been paid and the
Company and its Subsidiaries are otherwise in compliance in all material
respects with the terms of such policies. Since December 31, 2003 neither the
Company nor any of its Subsidiaries has received any written notice regarding
any threatened termination of, or material premium increase with respect to, any
of such policies.
2.19 INTELLECTUAL PROPERTY.
(a) Section 2.19(a) of the Company Disclosure Schedule lists all (i)
Registered Intellectual Property and other material Intellectual Property owned,
used, currently intended to be used, or held for use by the Company or any of
its Subsidiaries, and (ii) pending or threatened actions, proceedings or
investigations before any Governmental Entity (including the United States
Patent and Trademark Office or equivalent authority anywhere in the world), and
complaints, claims, notices or other communications received by the Company or
its Subsidiaries, in each case related to any such Intellectual Property,
including, but not limited to, each such patent, patent application, copyright
registration or application thereof, mask work registration or application
therefor, and trademark, service xxxx and domain name registration or
application therefor.
(b) Section 2.19(b) of the Company Disclosure Schedule lists (i) all
unregistered marks (including trademarks, trade names and service marks), (ii)
all unregistered copyrights, and (iii) each item of Software developed by or for
the Company or its Subsidiaries,
-20-
in each case necessary or material to the conduct of the business of the Company
and its Subsidiaries.
(c) The Company and its Subsidiaries (i) exclusively own all right, title
and interest in and to each item of Intellectual Property purportedly owned by
the Company or one of its Subsidiaries, free and clear of any Liens other than
Permitted Liens, and (ii) have a valid and enforceable right to use all
Intellectual Property used or held for use in connection with the operation of
their respective businesses as currently conducted or as currently proposed (by
the Company or one of its Subsidiaries) to be conducted. Each item of the
Intellectual Property referred to in the preceding sentence shall be owned by
the Company or its Subsidiaries or immediately available for use by the Company
or its Subsidiaries on substantially identical terms and conditions immediately
following the Effective Time, without any requirement for any consent from any
third party or any affirmative act by Parent (e.g., notice to any third party).
(d) Section 2.19(d) of the Company Disclosure Schedule lists each Company
IP Agreement, including, but not limited to, each license or other agreement or
authorization pursuant to which the Company or any of its Subsidiaries provided
a license to any third party with respect to any Intellectual Property. Except
for such Company IP Agreements specified in Section 2.19(d), no other Person has
any rights to any Intellectual Property owned by the Company or its
Subsidiaries, and to the Knowledge of the Company, no Person is engaging in any
activity that infringes upon, misappropriates, dilutes, violates or otherwise
interferes or conflicts with any of such Intellectual Property. No actions,
claims, proceedings or investigations alleging any of the foregoing are pending
or threatened against any Person by or on behalf of the Company or its
Subsidiaries. Each Company IP Agreement (i) is, and will continue to be
immediately following the Effective Time, valid, enforceable, binding on all
parties thereto and in full force and effect in accordance with its terms, and
(ii) represents the entire agreement between the respective parties thereto with
respect to the subject matter thereof.
(e) The Company and its Subsidiaries, and to the Company's Knowledge, any
third party, (i) are not, and shall not be as a result of the execution and
delivery of this Agreement or the performance of their obligations under this
Agreement, in breach of or default under any Company IP Agreement, and there has
been no event that would permit the termination, modification, acceleration or
impairment of such Company IP Agreement, and (ii) have not received any
complaints, claims, notices or other communications alleging any of the
foregoing. The consummation of the transactions contemplated hereby will not
constitute a breach of or default under, or result in the termination,
modification, acceleration or impairment of any right of the Company or its
Subsidiaries under, any Company IP Agreement. No Company IP Agreement contains
any term or condition that would become applicable or inapplicable or whose
scope would materially change as a result of the consummation of the
transactions contemplated hereby. Consummation of the transactions contemplated
by this Agreement will not trigger any modification, termination, or
acceleration under, or create any license or similar Lien on Intellectual
Property owned or used by the Parent or its Affiliates, except to the extent
that such license or Lien may be created as a result of a contract entered into
by the Parent and its Affiliates. Except as set forth in Section 2.19(e) of the
Company Disclosure Schedule, no royalties or other continuing payment
obligations are due from the Company or its Subsidiaries in respect of
Intellectual Property of any third party (other than payments for licensed
Intellectual Property that do not exceed $50,000 per annum for any individual or
series
-21-
of related license agreements), and all royalties and other payments due under
the Company IP Agreements have been paid when due.
(f) The Intellectual Property owned by, and the Intellectual Property
licensed to, the Company and its Subsidiaries include all of material
Intellectual Property used or held for use in connection with the operation of
their respective businesses as currently conducted or as currently proposed (by
the Company or one of its Subsidiaries) to be conducted, and there are no other
items of Intellectual Property that are material thereto, or for the continued
operation of such businesses immediately after Effective Time in substantially
the same manner as conducted prior to Effective Time. The Intellectual Property
owned, used or held for use by the Company and its Subsidiaries is subsisting,
valid, and enforceable, has not been adjudged invalid or unenforceable in whole
or in part, and is currently in compliance in all material respects with all
formal legal requirements necessary to maintain the validity and enforceability
thereof. Neither the Company, its Subsidiaries nor their respective businesses
are subject to any outstanding agreement or Governmental Order restricting the
use, modifying the scope, or impairing the validity or enforceability of any
Intellectual Property owned, used or held for use by the Company or its
Subsidiaries.
(g) The Company and its Subsidiaries have taken reasonable steps in
accordance with normal industry practice and in light of the nature of the
particular item of Intellectual Property to protect the proprietary nature of
each item of such Intellectual Property owned, used or held for use by the
Company or its Subsidiaries, and to maintain in confidence all confidential
Intellectual Property owned, used or held for use by the Company or any of its
Subsidiaries ("Company Confidential Information"). No employee, independent
contractor, or agent of the Company or any of its Subsidiaries (i) has
misappropriated any confidential information of any other Person in the course
of performance as an employee, independent contractor, or agent of the Company
or such Subsidiary, or (ii) is in default or breach of any term of any
employment agreement, nondisclosure agreement, assignment of invention
agreement, or similar agreement relating to Intellectual Property and/or
confidential information.
(h) To the extent that any Intellectual Property owned by the Company or
its Subsidiaries has been developed or created by any Person other than the
Company or its Subsidiaries, the Company or its Subsidiaries, as applicable,
have a written agreement with such Person with respect thereto transferring to
the Company or its Subsidiaries all right, title and interest in and to such
Intellectual Property by operation of law or by valid assignment. To the extent
internally developed, the Company and its Subsidiaries have followed reasonable
business practices in accordance with normal industry standards in developing
such Intellectual Property, including requiring each employee or contractor to
execute a written agreement in which such employee or contractor assigns to the
Company or its Subsidiaries all right, title and interest in and to such
Intellectual Property. Neither the Company nor its Subsidiaries has placed in
escrow or otherwise disclosed the source code or documentation for any Software
developed by or for the Company or any of its Subsidiaries.
(i) To the Knowledge of the Company, (i) there has been no misappropriation
of any Company Confidential Information by any third party, and (ii) no material
Company Confidential Information has been used by or disclosed to any Person
except pursuant to valid and appropriate non-disclosure and/or license
agreements, which have not been breached. The
-22-
operation of the businesses of the Company and its Subsidiaries as currently
conducted, and the use of the Intellectual Property owned, used or held for use
by the Company and its Subsidiaries and Technology Systems in connection
therewith, do not infringe upon, misappropriate, dilute, violate or otherwise
interfere or conflict with the Intellectual Property or other rights of any
Person, and no actions, claims, proceedings or investigations are pending or
threatened against the Company or its Subsidiaries, and the Company and its
Subsidiaries have not received any complaints, claims, notices or other
communications, in each case (x) alleging any of the foregoing, (y) challenging
the ownership, validity, registerability or enforceability of any such
Intellectual Property, or (z) based upon, or seeking to deny or restrict, the
use, licensing or transfer by the Company or its Subsidiaries of any such
Intellectual Property or Technology Systems.
(j) Section 2.19(j) of the Company Disclosure Schedule sets forth a list of
all Internet domain names and their expiration dates owned, used, currently
intended to be use or held for use by the Company or its Subsidiaries
(collectively, the "Domain Names"). The Company or its Subsidiaries have, and
after the Effective Time will have, a current, valid and enforceable
registration of each Domain Name and the right to continue to conduct their
respective businesses as currently conducted under the Domain Names.
2.20 INFORMATION TECHNOLOGY.
(a) The electronic data processing, information, record keeping,
communications, telecommunications, hardware, Software, networks, peripherals,
portfolio trading and computer systems, all other information technology
equipment, including any outsourced systems, services, or processes, all related
documentation and Intellectual Property, in each case which are owned, used or
held for use by the Company or its Subsidiaries (collectively, "Technology
Systems") are adequate for the operation of their respective businesses as
currently conducted or as currently proposed (by the Company or one of its
Subsidiaries) to be conducted. There has not been any material malfunction,
default, or failure with respect to any of the Technology Systems that has not
been remedied or replaced. None of the Technology Systems will fail to receive
input of, recognize, store, retrieve, process or generate output of dates and
date related data without any error, ambiguity, interruption or malfunction that
would materially and adversely affect the operations of the Company or any of
its Subsidiaries.
(b) Since January 1, 2004, the Technology Systems have not suffered any
unplanned material disruption, malfunction, default or failure. Except pursuant
to the terms of relevant third party agreements, the Technology Systems are free
from any material Liens. Access to business critical parts of the Technology
Systems is not shared with any third party.
(c) Neither the Company nor any of its Subsidiaries has received notice, or
is otherwise aware, of any circumstances, including the execution of this
Agreement, which would enable any third party to terminate any of the Company's
and/or its Subsidiaries' material agreements or arrangements relating to the
Technology Systems.
(d) Neither the Company nor any of its Subsidiaries has received notice of
any, and there is no pending or threatened, claim or action alleging that the
Technology Systems,
-23-
or Company's or its Subsidiaries' use of the Technology Systems, violate any
non-disclosure and/or non-use agreement.
(e) The Company and its Subsidiaries own or have a valid right to access
and use all Technology Systems and Third-Party Data. The Technology Systems
operate and perform materially in accordance with their documentation and
specifications, and otherwise as required in connection with the businesses of
the Company and its Subsidiaries. The consummation of the transactions
contemplated hereby will not modify, impair or interrupt, as applicable, (i) the
Company's, each Subsidiary's, and their customers' and suppliers' access to and
use of, or their right to access and use, the Technology Systems and Third-Party
Data. The operation of the Technology Systems, and the use, collection, storage
and dissemination of data (including Third-Party Data), by or on behalf of the
Company and its Subsidiaries in connection with their respective businesses does
not violate any applicable Laws or Regulations.
(f) The Technology Systems do not contain any disabling devices, viruses,
Trojan programs, worms, time bombs, bugs, faults or other devices or effects
that would (i) enable or assist any Person to access without authorization the
Technology Systems or any Third-Party Data, or (ii) otherwise adversely affect
the operation or functionality of the Technology Systems or any other Software
or systems. The Company and its Subsidiaries have taken all reasonable steps in
accordance with normal industry practice to (x) secure the Technology Systems
and Third-Party Data from unauthorized access or use by any Person, and (y)
ensure the uninterrupted and error-free operation of the Technology Systems,
including the implementation of reasonable backup, business continuity and
disaster recovery technology and arrangements (the details of which are set
forth in Section 2.20(f) of the Company Disclosure Schedule). No Technology
Systems have been the target of any defacement, denial-of-service, or other
attack by hackers, and, to the Company's Knowledge, no Person has gained
unauthorized access to any Technology Systems. None of the Technology Systems
contains any shareware, open source code, or other Software whose use requires
disclosure or licensing of any Intellectual Property.
2.21 RELATED-PARTY TRANSACTIONS; INTERESTS OF OFFICERS AND DIRECTORS.
(a) There is no indebtedness between the Company or any of its
Subsidiaries, on the one hand, and any of its directors or officers, or any
relative, beneficiary or spouse living with such person or any Affiliate of any
of the foregoing (collectively, a "Company Related Person") or Affiliate of the
Company, on the other, other than usual and customary advances made in the
ordinary and usual course of business for business purposes and consistent with
past practices and not in excess of $75,000. No such Company Related Person or
Affiliate provides or causes to be provided any assets, services (other than
services as an officer or director) or facilities to the Company. The Company
does not provide or cause to be provided any assets, services or facilities to
any such Company Related Person or Affiliate (other than with respect to their
employment as directors, officers or employees of the Company). The Company does
not beneficially own, directly or indirectly, any investment in or issued by any
such Company Related Person or Affiliate. There are no contracts or agreements
with any such Company Related Person or Affiliate to which the Company is a
party or by which it is bound.
-24-
(b) No Company Related Person has any material interest in any property,
real or personal, tangible or intangible or used in the business of the Company
and its Subsidiaries, or in any supplier, distributor or customer of the Company
and its Subsidiaries, except as disclosed in the Company SEC Documents and
except for the normal rights of a stockholder and rights under the Company
Options.
2.22 OPINION. Prior to the execution of this Agreement, the Company has
received an opinion from X.X. Xxxxxx Securities Inc. to the effect that as of
the date of this Agreement and based upon and subject to the matters set forth
therein, the Merger Consideration is fair to the stockholders of the Company
from a financial point of view. Such opinion has not been amended or rescinded
as of the date of this Agreement.
2.23 BROKER'S FEES. Except for X.X. Xxxxxx Securities Inc., neither the
Company nor any of its Subsidiaries has employed any broker or finder or
incurred any liability for any broker's fees, commissions or finder's fees in
connection with the Merger or related transactions contemplated by this
Agreement.
2.24 COMPANY INFORMATION. None of the information to be supplied by the
Company for inclusion or incorporation by reference in any document filed with
any other regulatory agency in connection herewith (including the Proxy
Statement) will, at the time such document is filed, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Proxy Statement
will comply as to form in all material respects with the requirements of the
Securities Exchange Act and the rules and regulations thereunder.
2.25 BOOKS AND RECORDS. The books and records of the Company and its
Subsidiaries have been properly and accurately maintained, and there are no
material inaccuracies or discrepancies contained or reflected therein.
2.26 ACCOUNTING CONTROLS. The Company and its Subsidiaries have devised and
maintained systems of internal accounting controls sufficient to provide
reasonable assurances, in the judgment of the Board of Directors of the Company,
that: (i) all transactions are executed in accordance with management's general
or specific authorization; (ii) all transactions are recorded as necessary to
permit the preparation of financial statements in conformity with generally
accepted accounting principles consistently applied with respect to any criteria
applicable to such statements and to maintain accountability for assets; (iii)
access to the assets of the Company and its Subsidiaries is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
2.27 RISK MANAGEMENT. All swaps, caps, floors, option agreements, futures
and forward contracts and other similar risk management arrangements, whether
entered into for the Company's own account, or for the account of one or more of
the Company's Subsidiaries or their customers (each a "Risk Management
Contract"), were entered into (i) in accordance with prudent business practices
and all applicable laws, rules, regulations and regulatory policies and
-25-
(ii) with counterparties believed to be financially responsible at the time; and
each of them constitutes the valid and legally binding obligation of the Company
or one of its Subsidiaries, enforceable in accordance with its terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general equity
principles), and are in full force and effect. The Company has furnished or made
available to Parent a list of all Risk Management Contracts that have been
entered into as of July 31, 2005. Neither the Company nor its Subsidiaries, nor
to the Company's Knowledge any other party thereto, is in breach of any of its
obligations under any Risk Management Contract.
2.28 EMPLOYEE MATTERS.
(a) The Company and each of its Subsidiaries are in compliance in all
material respects with all applicable Laws and Regulations respecting the
employment of employees and the engagement of leased employees, consultants and
independent contractors, including, without limitation, all Laws and Regulations
regarding discrimination and/or harassment, affirmative action, terms and
conditions of employment, wage and hour requirements (including, without
limitation, the proper classification, compensation and related withholding with
respect to employees, leased employees, consultants and independent
contractors), leaves of absence, reasonable accommodation of disabilities,
occupational safety and health, workers' compensation and employment practices.
Neither the Company nor any of its Subsidiaries is engaged in any unfair labor
practice. Neither the Company nor any of its Subsidiaries is a party to any
collective bargaining agreement or other labor union contract; nor does the
Company know of any activities or proceedings of any labor union to organize any
such employees.
(b) As of the date of this Agreement, no executive officers or Key
Employees of the Company or any of its Subsidiaries have given notice to the
Company or any of its Subsidiaries, nor are the Company or any of its
Subsidiaries otherwise aware, that any such employee intends to terminate his or
her employment with the Company or any of its Subsidiaries.
(c) As of the date of this Agreement, to the knowledge of the Company, no
executive officer or Key Employee of the Company or any of its Subsidiaries is
in violation in any respect of any term of any employment or services contract,
patent disclosure agreement, noncompetition agreement, or any restrictive
covenant to a former employer which would reasonably be expected to impede the
right of any such executive officer or Key Employee to be employed or engaged by
the Company or any of its Subsidiaries because of the nature of the business
conducted or presently proposed to be conducted by the Company or any of its
Subsidiaries or to the use of trade secrets or proprietary information of
others.
(d) None of the Company, any Subsidiary of the Company, Parent or any
Subsidiary of Parent shall have any liability under the Workers Adjustment and
Retraining Notification Act, as amended, or the employee protection laws of any
state, locality or foreign jurisdiction, with respect to any events occurring or
conditions existing on or prior to the Effective Time.
-26-
2.29 MORTGAGE BANKING AND HOME EQUITY LOAN BUSINESSES; AUTO LOAN BUSINESS;
LENDING BUSINESS GENERALLY. Except to the extent that any breach, failure or
inaccuracy, individually or in the aggregate, would not reasonably be expected
to have a Company Material Adverse Effect:
(a) LICENSES AND QUALIFICATIONS. (i) The Company and each of its
Subsidiaries is in good standing under all applicable Laws and Regulations as a
mortgage broker and/or lender, (ii) there is no pending or, to the Knowledge of
the Company, threatened, cancellation or reduction of any mortgage sale
agreement, home equity loan sale agreement, or auto loan sale agreement ("Loan
Sale Agreement"), to which the Company or any of its Subsidiaries is a party and
the obligations of the Company and each of its Subsidiaries, as the case may be,
under each such Loan Sale Agreement are being performed by the Company and each
of its Subsidiaries, as the case may be, in accordance with its terms, and (iii)
except as set forth in Section 2.29(a)(iii) of the Company Disclosure Schedule,
there is no breach by the Company or any of its Subsidiaries under any Loan Sale
Agreement and no third party has exercised or is threatening to exercise its
contractual right to require the Company or any of its Subsidiaries to
repurchase any loan that was originated, closed and funded by the Company or its
Subsidiaries that is held for either the Company's or its Subsidiary's account,
whether or not for future sale or delivery (a "Loan") from such third party due
to a breach of a representation, warranty or covenant by the Company or its
Subsidiary under a Loan Sale Agreement.
(b) LOAN QUALITY; PIPELINE.
(i) As of the date of this Agreement, no Loan has been held for sale for
more than 90 days past the date of funding other than as set forth in Section
2.29(b) of the Company Disclosure Schedule, and subsequent to the date of this
Agreement there will have been no increase in the aggregate outstanding
principal balance of such Loans held for sale for more than 90 days past the
date of funding that would constitute a Company Material Adverse Effect.
(ii) As of the date of this Agreement, no Loan held for investment is (x)
more than 90 days past due with respect to any scheduled payment of principal or
interest, (y) in foreclosure or litigation or (z) subject to bankruptcy
proceedings commenced by or in respect of the borrower, other than as set forth
in Section 2.29(b) of the Company Disclosure Schedule, and subsequent to the
date of this Agreement there will have been no increase in the aggregate
outstanding principal balance of such Loans more than 90 days past due, in
foreclosure or litigation, or subject to bankruptcy that would constitute a
Company Material Adverse Effect.
(c) COMPLIANCE. Each Loan was underwritten and originated, and the loan
documents and loan files maintained by the Company or any Company Subsidiary
with respect thereto are being maintained by the Company or Company Subsidiary,
as the case may be, in compliance with all applicable Laws and Regulations and,
if applicable, the requirements of the Person acquiring such Loan and Insurer
insuring such Loan (if any) in effect and applicable at the time such insurance
was obtained, except, in each case, for immaterial violations. Neither the
Company nor any of its Subsidiaries has done or omitted to do, or caused to be
done or omitted to be done, any act, the effect of which would operate to
invalidate, impair or be a breach of (1) any approvals or licenses of any
Governmental Entity, (2) any FHA insurance or
-27-
commitment of the FHA to insure, (3) any VA guarantee or commitment of the VA to
guarantee, (4) any private mortgage insurance or commitment of any private
mortgage insurer to insure, (5) any title insurance policy, (6) any hazard
insurance policy, (7) any flood insurance policy, (8) any fidelity bond, direct
surety bond, or errors and omissions insurance policy required by HUD, GNMA,
FNMA, FHA, FHLMC, VA or private mortgage insurer, (9) any surety or guaranty
agreement or (10) any agreement pursuant to which the Company or any of its
Subsidiaries sold Loans to an Investor. None of the Loans is a "high cost,"
"covered," "threshold" or "predatory" loan or could be classified under any
similar designation under any applicable Laws and Regulations enacted to combat
predatory lending practices. Since January 1, 2002, none of the Company or any
Company Subsidiary has (x) engaged in any of the practices listed in OCC
Advisory Letter AL 2000-7 as "indications that an institution may be engaging in
abusive lending practices" or as practices that "may suggest the potential for
fair lending violations", (y) engaged in any "predatory" or "abusive" lending
practices as described in the Expanded Guidance for Subprime Lending Programs,
issued by the Office of the Comptroller of the Currency, the Board of Governors
of the Federal Reserve System, the Federal Deposit Insurance Corporation and the
Office of Thrift Supervision on January 31, 2001, or (z) originated, owned or
serviced or currently owns or services any Loan subject to the requirements of
12 C.F.R. ss. 226.32.
(d) SERVICING. The Loans are serviced by the Company in accordance with
applicable Laws and Regulations and with the requirements of any applicable
Investor and Loan Sale Agreement, except for immaterial failures to comply with
such requirements. No Loan is or has been serviced using predatory servicing
practices.
(e) APPLICATION OF FUNDS. All monies received with respect to each Loan and
related escrow accounts have been properly accounted for and applied.
(f) PAYOFF STATEMENTS. All payoff and assumption statements with respect to
each Loan were, at the time provided, true and correct, except for immaterial
discrepancies.
(g) ESCROW ACCOUNTS. Unless otherwise prohibited by Laws or Regulations or
pursuant to an executed escrow waiver, the Company and its Subsidiaries have
collected all escrows related to each mortgage loan (including each home equity
loan) that was originated, closed and funded by the Company or its Subsidiaries
that is held for either the Company's or its Subsidiary's account, whether or
not for future sale or delivery (a "Mortgage Loan"), and all escrow accounts
have been maintained by the Company and its Subsidiaries, as the case may be, in
accordance with all applicable Laws and Regulations and the requirements of
Investors and Insurers. The Company and each of the Company Subsidiaries have
credited to the account of mortgagors all interest required to be paid on any
escrow account in accordance with applicable Laws and Regulations and the terms
of such agreements and loan documents.
(h) SINGLE FAMILY LOANS. All of the Mortgage Loans were secured by
one-to-four-family residential real property or, to the extent that a Mortgage
Loan was secured by property other than a one-to-four-family residential
property, such Mortgage Loan has not been sold to any Person where the Company
or any of its Subsidiaries could have any recourse obligation.
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(i) POOLS. Other than Loans pending delivery to Investors, none of the
Loans is or has been included by the Company or any of its Subsidiaries in any
pool or securitization.
(j) MORTGAGE INSURANCE. Each Mortgage Loan that is required to be covered
by FHA insurance is insured under the National Housing Act or qualifies for
insurance thereunder and timely and proper application has been made for such
insurance. Each Mortgage Loan that is required to be guaranteed by the VA is
guaranteed under the provisions of Chapter 37 of Title 38 of the United States
Code or qualifies for such guarantee and timely and proper application has been
made for such guarantee. As to each FHA insurance certificate, each VA guarantee
certificate, and each Mortgage Loan that is required to be insured by private
mortgage insurance, the Company and each of its Subsidiaries, as the case may
be, has complied with applicable provisions of the insurance or guarantee
contract and applicable Laws and Regulations.
(k) INSURANCE. Each Mortgage Loan has been covered by a policy of hazard
insurance and flood insurance, to the extent required by the Loan Sale Agreement
relating thereto or any Laws and Regulations or Investor or Insurer requirements
applicable to such Mortgage Loan, all in a form usual and customary in the
mortgage banking industry. Any and all claims under such insurance policies have
been submitted and processed in accordance with the applicable Investor's
requirements.
(l) TITLE INSURANCE. To the extent required by the applicable Investor,
each Mortgage Loan was covered by an American Land Title Association lender's
title insurance policy or other generally acceptable form of policy of insurance
acceptable to the relevant Investor, and each such title insurance policy was
issued by a title insurer acceptable to the applicable Investor and qualified to
do business in the jurisdiction where the collateral securing such loan was
located, and insured the originator and its successors and assigns as to the
first priority lien of the mortgage in the original principal amount of the
Mortgage Loan. The applicable Investor, as assignee of the originator's rights,
is an insured of such lender's title insurance policy, and such lender's policy
is in full force and effect. Neither the Company nor any of its Subsidiaries has
performed any act or omission that would impair the coverage of such lender's
policy.
(m) AUDITS AND INQUIRIES. Except for customary ongoing quality control
reviews, no audit or investigation by a Governmental Entity, an Investor or an
Insurer is pending or, to the Knowledge of the Company, threatened that is
reasonably likely to result in:
(1) a claim of a failure to comply with applicable
regulations,
(2) rescission of any insurance or guaranty contract
or agreement of the Company or any of its Subsidiaries,
(3) payment, by the Company or any of its
Subsidiaries, of a penalty (other than any immaterial payment) to any
Governmental Entity, an Investor or an Insurer; or
(4) revocation of any Authorization set forth in
Section 2.12(b) of the Company Disclosure Schedule, including any
Authorization to do business, of the Company or any of its Subsidiaries.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF PARENT
Except as disclosed in the Parent Disclosure Schedule (with specific
reference to the section of this Agreement to which the information stated in
such disclosure relates; PROVIDED that (i) disclosure in any section of such
Parent Disclosure Schedule shall be deemed to be disclosed with respect to any
other Section of this Agreement to the extent that it is readily apparent from
the face of such disclosure that such disclosure is applicable to such other
Section and (ii) the mere inclusion of an item in such Parent Disclosure
Schedule as an exception to a representation or warranty shall not be deemed an
admission that such item represents a material exception or material fact, event
or circumstance or that such item has had or would have a Parent Material
Adverse Effect) or as would not constitute a Parent Material Adverse Effect,
Parent represents and warrants to the Company as follows and as set forth in the
Parent Disclosure Schedule:
3.1 CORPORATE ORGANIZATION, STANDING AND POWER. Each of Parent and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization. Each of Parent and
its Subsidiaries has the corporate and other power to own its properties and to
carry on its business as now being conducted and is duly qualified to do
business and is in good standing in each jurisdiction in which the failure to be
so qualified and in good standing would constitute a Parent Material Adverse
Effect. Neither Parent nor any of its Subsidiaries is in violation of any of the
provisions of its certificate or articles of incorporation or bylaws or other
charter or organizational documents, each as amended.
3.2 AUTHORITY; NO VIOLATION.
(a) Each of Parent and Merger Sub has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. Each of Parent and Merger Sub has taken all corporate
action necessary in order (A) to authorize the execution and delivery of, and
performance of its obligations under this Agreement and (B) subject only to
receipt of the consents and approvals identified in Section 3.3, to consummate
the Merger and the other transactions contemplated hereby. This Agreement has
been duly and validly authorized, executed and delivered by Parent and Merger
Sub. Assuming due authorization, execution and delivery by the Company, this
Agreement constitutes the valid and binding obligations of Parent and Merger
Sub, enforceable against Parent and Merger Sub in accordance with its terms,
except as such enforcement may be limited by (i) the effect of bankruptcy,
insolvency, reorganization, receivership, conservatorship, arrangement,
moratorium or other laws affecting or relating to the rights of creditors
generally or (ii) the rules governing the availability of specific performance,
injunctive relief or other equitable remedies and general principles of equity,
regardless of whether considered in a proceeding in equity or at law.
(b) Neither the execution and delivery of this Agreement by Parent nor
Merger Sub, nor the consummation by Parent or Merger Sub of the Merger and the
other transactions contemplated hereby, nor compliance by Parent or Merger Sub
with any of the terms or provisions of this Agreement, will (i) violate any
provision of the Certificates of Incorporation
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or Bylaws or other charter or organizational documents of Parent or Merger Sub
or (ii) assuming that the consents and approvals referred to in Section 3.3 are
duly obtained, (x) violate any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to Parent or any of its
Subsidiaries or any of their respective properties or assets or (y) violate,
conflict with, result in a breach of any provision of or the loss of any benefit
under, constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of or a right
of termination or cancellation under, accelerate the performance required by or
rights or obligations under, or result in the creation of any Lien upon any of
the respective properties or assets of Parent or any of its Subsidiaries, any of
the terms, conditions or provisions of any note, bond, mortgage, indenture, deed
of trust, license, lease, agreement, contract, or other instrument or obligation
to which Parent or any of its Subsidiaries is a party, or by which they or any
of their respective properties, assets or business activities may be bound or
affected, except (in the case of clause (ii) (y) above) for such violations,
conflicts, breaches, defaults or the loss of benefits which, either individually
or in the aggregate, would not constitute a Parent Material Adverse Effect.
3.3 CONSENTS AND APPROVALS. Except for (i) any approvals or filings
required by the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), (ii) the filing with the SEC of (A) the Proxy Statement and (B)
such reports under the Securities Exchange Act as may be required in connection
with this Agreement and the transactions contemplated by this Agreement, (iii)
the filing of the Certificate of Merger with the Secretary of State of the State
of Delaware pursuant to the Delaware Law, (iv) such filings as may be required
under the rules and regulations of the NASDAQ, (v) the consents, notices and
approvals set forth in Section 3.3 of the Parent Disclosure Schedule and (vi)
such additional consents, notices and approvals, the failure of which to make or
obtain would not have a Parent Material Adverse Effect, no consents or approvals
of any Governmental Entity or any third party are necessary in connection with
(A) the execution and delivery by Parent and Merger Sub of this Agreement and
(B) the consummation by Parent and Merger Sub of the Merger and the other
transactions contemplated by this Agreement.
3.4 LEGAL PROCEEDINGS. Neither Parent nor any of its Subsidiaries is a
party to any, and there are no pending or, to the Knowledge of Parent,
threatened, legal, administrative, arbitral or other proceedings, claims,
actions or governmental or regulatory investigations of any nature against
Parent or any of its Subsidiaries which individually or in the aggregate, has
had, or would reasonably be expected to have, a Parent Material Adverse Effect,
nor, to the Knowledge of Parent, is there any basis for any proceeding, claim,
action or investigation against Parent or any of its Subsidiaries that would
have, or would reasonably be expected to have, a Parent Material Adverse Effect.
There is no injunction, order, judgment or decree imposed upon Parent, any of
its Subsidiaries or the assets of Parent or any of its Subsidiaries which has
had, or would reasonably be expected to have, a Parent Material Adverse Effect.
3.5 COMPLIANCE WITH APPLICABLE LAW AND REGULATORY MATTERS.
(a) Parent and each of its Subsidiaries have complied with all applicable
Laws and Regulations, and are not in violation of, and have not received any
notices of violation with respect to, any Laws and Regulations in connection
with the conduct of their respective businesses or the ownership or operation of
their respective businesses, assets and properties,
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except for such noncompliance and violations as do not constitute a Parent
Material Adverse Effect.
(b) There are no Governmental Orders applicable to Parent or any of its
Subsidiaries which constitute a Parent Material Adverse Effect.
(c) As of the date of this Agreement, to the Knowledge of Parent there is
no reason why (i) all regulatory approvals from any Governmental Entity required
for the consummation of the transactions contemplated by this Agreement should
not be obtained on a timely basis or (ii) any condition to the consummation of
the Merger and the other transactions contemplated by this Agreement should not
be satisfied on a timely basis.
3.6 BROKER'S FEES. Neither Parent nor any of its Subsidiaries has employed
any broker or finder or incurred any liability for any broker's fees,
commissions or finder's fees in connection with the Merger or related
transactions contemplated by this Agreement.
3.7 PARENT INFORMATION. None of the information to be supplied by Parent
for inclusion or incorporation by reference in any document filed with any
regulatory agency in connection herewith (including the Proxy Statement) will,
at the time such document is filed, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
3.8 FINANCING. Parent has, or will have prior to the Effective Time,
sufficient cash, available lines of credit or other sources of immediately
available funds to enable it to make payment of the aggregate Merger
Consideration and related fees and expenses.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE TIME. During the period from
the date of this Agreement to the Effective Time, except as expressly
contemplated or permitted by this Agreement, the Company shall, and shall cause
each of its Subsidiaries to, (a) conduct its business in the usual, regular and
ordinary course consistent with past practice, (b) use commercially reasonable
best efforts consistent with past practice and policies to preserve intact its
present business organizations, keep available the services of its present
officers and employees and preserve its relationships with Persons having
significant business dealings with it and (c) take no action which would
adversely affect or delay in any material respect the ability of either Parent
or the Company or any Subsidiary of Parent or the Company to obtain any
necessary approvals of any regulatory agency or other Governmental Entity
required for the transactions contemplated hereby.
4.2 CONDUCT OF BUSINESS OF THE COMPANY. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, except as set forth in Section 4.2 of the
Company Disclosure Schedule or except as expressly contemplated by this
Agreement, the Company shall not do, cause or permit any of the following, or
allow, cause or permit any of its Subsidiaries to do, cause or permit any of the
following, without the prior written consent of Parent:
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(a) Cause or permit any amendment, modification, alteration or rescission
of its certificate or articles of incorporation, bylaws or other charter or
organizational documents;
(b) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of its capital stock
(other than dividends or distributions by any wholly-owned Subsidiary of the
Company to the Company or another wholly owned Subsidiary thereof) or split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock, or repurchase or otherwise acquire, directly or
indirectly, any shares of its capital stock except from former employees,
directors and consultants in accordance with agreements providing for the
repurchase of shares in connection with any termination of service to it or any
of its Subsidiaries and the acceptance of shares of Company Common Stock in
payment of the exercise price or withholding taxes incurred by any option holder
in connection with the exercise of stock options granted under a Company Stock
Plan;
(c) Grant any Rights with respect to the Company or any of its
Subsidiaries, or accelerate, amend or change the period of exercisability or
vesting of options or other rights granted under its stock plans or otherwise or
authorize cash payments in exchange for any options or other rights granted
under any of such plans, in each case except as otherwise required by such plans
or any existing agreements set forth in Section 4.2(c) of the Company Disclosure
Schedule;
(d) Issue, deliver or sell or authorize or propose the issuance, delivery
or sale of, or purchase or propose the purchase of, any shares of its capital
stock or Rights with respect to the Company or any of its Subsidiaries, other
than (i) the issuance of shares of Company Common Stock pursuant to the exercise
of Company Options outstanding under the Company Stock Plans as of the date of
this Agreement as set forth in Section 2.2(a) of the Company Disclosure
Schedule, (ii) the issuance of shares of Company Common Stock pursuant to the
exercise of the Warrants outstanding as of the date of this Agreement and (iii)
pursuant to agreements existing as of the date of this Agreement as set forth on
Section 4.2(d) of the Company Disclosure Schedule;
(e) (i) Enter into any material lease for real property or material
operating lease or (ii) sell, lease, license or otherwise dispose of or encumber
any of its properties or assets which are material, individually or in the
aggregate, to the business of the Company and its Subsidiaries (taken as a
whole), except in each case in the ordinary course of business consistent with
past practice and except for the sale of real estate owned in accordance with
current policies of the Company or contracts set forth on Section 4.2(e) of the
Company Disclosure Schedule with respect thereto;
(f) Other than in the ordinary course of business consistent with past
practice, (i) incur any indebtedness for borrowed money, (ii) assume, guarantee,
endorse or otherwise as an accommodation become responsible for the obligations
of any other Person or (iii) cancel, release, assign or modify any material
amount of indebtedness of any other Person;
(g) Make any capital expenditures, capital additions or capital
improvements except (i) in the ordinary course of business consistent with past
practice that do not exceed
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$250,000 individually or $1,000,000 in the aggregate over any twelve (12)-month
period and (ii) pursuant to contracts or commitments set forth on Section 4.2(g)
of the Company Disclosure Schedule;
(h) Other than in the ordinary course of business consistent with past
practice, enter into any Material Contract;
(i) (i) Adopt or amend in any manner that will materially increase the cost
of the Company maintaining any Company Employee Benefit Plan (except as required
by Laws and Regulations), (ii) enter into any employment agreement with any
director or officer, (iii) pay any special bonus or special remuneration to any
employee or director other than pursuant to existing agreements, other than in
an amount not in excess of $10,000 individually or $100,000 in the aggregate,
(iv) increase the salaries, wage rates, bonus, pension, welfare, severance, or
other benefits or, pay any bonus (other than as permitted pursuant to clause
(iii) of this Section 4.2(i)) to or make any equity awards to any of the
directors, officers or employees of the Company or its Subsidiaries (other than
increases in annual base salary on the anniversary of the employee's last
increase, or in connection with a promotion, in each case in the ordinary course
of business consistent with past practice), (v) except pursuant to Section 1.4
of this Agreement, take any action to accelerate the vesting or payment of any
compensation or benefits under any Company Employee Benefit Plan, to the extent
not already provided in any such plan, or (vi) forgive any loans to directors,
officers or employees of the Company or any of its Subsidiaries;
(j) Grant or provide any severance, termination, change-in-control or
similar pay to, or enter into any severance, termination, change-in-control or
similar agreement with, any director, officer or employee, in each case, except
payments made pursuant to written plans or agreements outstanding, or Company
policies in effect on, the date of this Agreement and set forth on Section
4.2(j) of the Company Disclosure Schedule;
(k) Make any written communications to the officers or employees of the
Company or any of its Subsidiaries pertaining to compensation or benefit matters
that are effected by the transactions contemplated by this Agreement without the
prior written consent of Parent (which consent shall not be unreasonably
withheld, conditioned or delayed);
(l) Acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets which are material, individually or in the aggregate, to the Company and
its Subsidiaries (taken as a whole), or acquire or agree to acquire any equity
securities of, or other equity interest in, any corporation, partnership,
limited liability company, association or business organization which securities
or equity interests acquired or agreed to be acquired would constitute greater
than five percent (5%) of the outstanding securities or equity of such entity;
(m) Make any change to its financial accounting methods or practices,
except as may be required by GAAP, Regulation S-X or other rule or regulation
promulgated by the SEC;
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(n) Other than in the ordinary course of business consistent with past
practice or as required by applicable Laws and Regulations, make or change any
material election in respect of Taxes, adopt or change in any material respect
any accounting method in respect of Taxes, enter into any material closing
agreement, settle any material claim or assessment in respect of Taxes, or
consent to any extension or waiver of the limitation period applicable to any
material claim or assessment in respect of Taxes;
(o) Except as required by applicable Laws and Regulations, or written rule,
instruction or directive by a Governmental Entity which is furnished to Parent
promptly following receipt thereof: (i) implement or adopt any material change
in its risk management or hedging policies, procedures or practices or (ii) fail
to follow in any material respect its existing policies or practices with
respect to managing its exposure to risk;
(p) Other than in the ordinary course of business consistent with past
practice, (i) sell, assign, or grant any security interest in any Intellectual
Property owned by the Company or its Subsidiaries or Company IP Agreement, (ii)
grant to any third party any license in, to or under any Intellectual Property
owned by the Company or its Subsidiaries, (iii) develop, create, or invent any
Intellectual Property jointly with any third party, (iv) disclose or allow to be
disclosed to any Person any Intellectual Property not heretofore a matter of
public knowledge, except pursuant to judicial or administrative process, (v)
permit any item of Intellectual Property owned by the Company or one of its
Subsidiaries (or any right, title or interest of the Company or any of its
Subsidiaries in, to or under any other Intellectual Property) that is used or
held for use in the business of the Company or any of its Subsidiaries as
currently conducted or as currently proposed (by the Company or one of its
Subsidiaries) to be conducted to lapse or to be abandoned, dedicated, or
disclaimed, or (vi) fail to use commercially reasonable best efforts to perform
all applicable filings, recordings, and other acts, and to pay all required fees
and taxes, to maintain and protect its interest in each and every item of
Intellectual Property owned, used, currently intended to be used, or held for
use by the Company or any of its Subsidiaries;
(q) Settle any claim, action or proceeding, except for any claim, action or
proceeding involving solely money damages in an amount, individually and in the
aggregate for all such settlements, not more than $250,000 and that would not
reasonably be expected to establish an adverse precedent or basis for subsequent
settlements or require material changes in business practices;
(r) Make any loan or advance other than in the ordinary course of business
consistent in all material respects with lending policies and practices as in
effect on the date hereof;
(s) Grant annual restricted stock bonuses or, except in the ordinary course
of business consistent with past practice, annual cash bonuses, other than as
may be required pursuant to agreements existing as of the date of this
Agreement;
(t) Enter into or amend any agreements pursuant to which any other party is
granted exclusive marketing or other exclusive rights of any type or scope with
respect to any of its products or technology;
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(u) Materially reduce the amount of any insurance coverage provided by
existing insurance policies;
(v) Revalue any of its assets other than in the ordinary course of business
consistent with past practice or as required by applicable Laws or Regulations;
(w) Change Domain Names or fail to renew existing Domain Name registrations
on a timely basis; or
(x) Take or agree in writing to take, any of the actions described in
Sections 4.2(a) through (w) above.
4.3 NO SOLICITATION.
(a) The Company shall not, nor shall it permit or authorize any of its
Subsidiaries or any officer, director, employee, accountant, counsel, financial
advisor, agent or other representative of the Company or any of its Subsidiaries
(collectively, the "Company Representatives") to, (i) solicit or initiate, or
encourage, directly or indirectly, any inquiries regarding or the submission of,
any Takeover Proposal (as defined below), (ii) participate in any discussions or
negotiations regarding, or furnish to any Person any information or data with
respect to, or take any other action to knowingly facilitate the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Takeover Proposal or (iii) enter into any agreement with respect to any Takeover
Proposal or approve or resolve to approve any Takeover Proposal; PROVIDED,
HOWEVER, that nothing contained in this Section 4.3 or any other provision of
this Agreement shall prohibit the Company or its Board of Directors from (A)
taking and disclosing to the Company's stockholders a position with respect to a
tender or exchange offer by a Third Party pursuant to Rules 14d-9 and 14e-2 or
Item 1012(a) of Regulation MA promulgated under the Securities Exchange Act or
(B) making such disclosure to the Company's stockholders as, in the good faith
judgment of the Company's Board of Directors, after receiving advice from
outside counsel, is required under applicable Laws and Regulations; PROVIDED
that the Company may not, except as permitted by Section 4.3(b), withdraw or
modify, or propose to withdraw or modify, its approval or recommendation of this
Agreement or the transactions contemplated hereby, including the Merger, or
approve or recommend, or propose to approve or recommend any Takeover Proposal,
or enter into any agreement with respect to any Takeover Proposal. Upon
execution of this Agreement, the Company shall, and it shall cause the Company
Representatives to, immediately cease any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any Takeover
Proposal. Notwithstanding the foregoing, prior to approval of the Agreement by
the stockholders of the Company, the Company may furnish information concerning
its business, properties or assets to any Person or group pursuant to
confidentiality agreements with terms and conditions at least as restrictive on
such Person or group as the Confidentiality Agreement is on Parent, and may
negotiate and participate in discussions and negotiations with such Person or
group concerning a Takeover Proposal if: (x) such Person or group has submitted
a Superior Proposal, which is pending at the time the Company determines to take
such action; and (y) the Board of Directors of the Company determines in good
faith, based upon advice of outside counsel, that such action is required to
discharge the Company's Board of Director's fiduciary duties to the Company's
stockholders under the Delaware Law. The Company shall not release or permit the
release of
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any Person from, or waive or permit the waiver of any provision of, any such
confidentiality agreement or any other confidentiality, standstill or similar
agreement to which the Company is a party or under which the Company has any
rights.
The Company will promptly (and in any event within one (1) business day)
advise Parent in writing of the existence of any proposal, discussion,
negotiation or inquiry received by the Company with respect to any Takeover
Proposal, and the Company will promptly communicate to Parent the material terms
and conditions of any proposal, discussion, negotiation or inquiry which it may
receive and the identity of the Person or group making such proposal or inquire
or engaging in such discussions or negotiations. The Company will promptly
provide to Parent any non-public information concerning the Company or its
Subsidiaries provided to any other Person or group which was not previously
provided to Parent. The Company will keep Parent reasonably informed of the
status and details of any such Takeover Proposal.
As used in this Agreement, the following terms have the meanings set forth
below:
"SUPERIOR PROPOSAL" means an unsolicited written proposal by a Third Party
(defined below) to acquire, directly or indirectly, more than 50% of the shares
of Company Common Stock then outstanding or all or substantially all of the
assets of the Company, and (i) otherwise on terms which the Board of Directors
of the Company determines in good faith (after consultation with its independent
financial advisors and outside counsel) to be more favorable to the Company's
stockholders from a financial point of view than the Merger and (ii) which, in
the good faith reasonable judgment of the Company's Board of Directors, is
reasonably likely to be consummated within a reasonable time, taking into
consideration (with respect to both subsections (i) and (ii) hereof) all
financial, regulatory, legal and other aspects of such proposal.
"TAKEOVER PROPOSAL" means any inquiry, proposal or offer, whether in
writing or otherwise, from a Third Party to acquire beneficial ownership (as
defined under Rule 13d-3 of the Securities Exchange Act) of assets that
constitute 25% or more of the consolidated revenues, net income or assets of the
Company and its Subsidiaries or 25% or more of (x) the Company Common Stock or
outstanding voting power, (y) any new series or new class of preferred stock
that would be entitled to a class or series vote with respect to the Merger or
(z) any other class of equity securities of the Company or any of its
Subsidiaries pursuant to a merger, consolidation or other business combination,
sale of shares of capital stock, sale of assets, tender offer, exchange offer or
similar transaction with respect to either the Company or any of its
Subsidiaries, including any single or multi-step transaction or series of
related transactions, which is structured to permit such Third Party or another
Third Party to acquire beneficial ownership of assets that constitute 25% or
more of the consolidated revenues, net income or assets of the Company and its
Subsidiaries, or 25% or more of the equity interest in either the Company or any
of its Subsidiaries.
"THIRD PARTY" means any Person or group other than Parent, Merger Sub or
any affiliate thereof.
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(b) Except as set forth in this Section 4.3(b), neither the Company's Board
of Directors nor any committee thereof shall (i) withdraw or modify, or propose
to withdraw or modify, in a manner adverse to Parent or Merger Sub, the approval
or recommendation by the Company's Board of Directors or any such committee of
this Agreement or the transactions contemplated hereby, including the Merger,
(ii) approve or recommend, or propose to approve or recommend, any Takeover
Proposal or (iii) enter into any agreement with respect to any Takeover
Proposal. Notwithstanding the foregoing, prior to approval of the Agreement by
the stockholders of the Company, the Company's Board of Directors may withdraw
or modify its approval or recommendation of this Agreement or the transactions
contemplated hereby, including the Merger, approve or recommend a Superior
Proposal, or enter into an agreement with respect to a Superior Proposal, in
each case if (A) the Company shall have received a Superior Proposal which is
pending at the time the Company determines to take such action, (B) the
Company's Board of Directors shall have determined in good faith, based upon
advice of outside counsel, that such action is required to discharge the
Company's Board of Director's fiduciary duties to the Company's stockholders
under the Delaware Law and (C) at least three (3) business days shall have
passed following Parent's receipt of written notice from the Company advising
Parent that the Company's Board of Directors has received such a Superior
Proposal which it intends to accept, specifying the material terms and
conditions of such Superior Proposal, and Parent does not make an offer that the
Board of Directors shall have concluded in its good faith judgment, after
consultation with its financial advisors and outside counsel, is as favorable
(taking into account the Termination Fee) to the Company's stockholders as such
Superior Proposal, and (D) concurrently with taking such action the Company
shall pay any applicable fee required by Section 7.3.
4.4 CONDUCT OF PARENT AND MERGER SUB. Parent and Merger Sub, from the date
of this Agreement until the Effective Time, will not and will not permit
Parent's Subsidiaries to: (a) take any action that is intended or reasonably
expected to result in any of its representations and warranties set forth in
this Agreement being or becoming untrue in any material respect at any time
prior to the Effective Time, or in any of the conditions to the Merger set forth
in Article VI not being satisfied or in a violation of any provision of this
Agreement, except, in every case, as may be required by applicable Laws and
Regulations; (b) take any action that would materially impede or delay the
ability of the parties to obtain any necessary approvals of any Governmental
Entity required for the transactions contemplated hereby; or (c) agree to, or
make any commitment to, take or authorize, any of the foregoing.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 REGULATORY MATTERS.
(a) As promptly as practicable following the date of this Agreement, the
Company shall prepare, allow Parent to review and then file with the SEC a proxy
statement and other proxy materials in preliminary form and shall use its
commercially reasonable best efforts to respond to any comments of the SEC or
its staff and to cause the Proxy Statement to be mailed to the Company's
stockholders as promptly as practicable after responding to all such comments to
the satisfaction of the SEC. The Company shall notify Parent promptly of the
time when the preliminary proxy statement, the Proxy Statement and any amendment
or supplement thereto has
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been filed, and of the receipt of any comments from the SEC or its staff
regarding, and of any request by the SEC or its staff for amendments or
supplements to, the preliminary proxy statement or the Proxy Statement, or for
additional information, and will supply Parent with copies of all correspondence
between the Company or any of its representatives, on the one hand, and the SEC,
on the other hand, with respect to the preliminary proxy statement, the Proxy
Statement or the Merger. If at any time prior to the Company Stockholders'
Meeting there shall occur any event that is required to be set forth in an
amendment or supplement to the Proxy Statement, the Company shall as promptly as
practicable prepare and mail to its stockholders such an amendment or
supplement. The Company shall consult with Parent prior to mailing the Proxy
Statement, or any amendment or supplement thereto, to which Parent timely and
reasonably objects. Parent shall cooperate with the Company in the preparation
of the Proxy Statement or any amendment or supplement thereto.
(b) Each of Parent and the Company shall, and shall cause its Subsidiaries
to, use its commercially reasonable best efforts to, (i) take, or cause to be
taken, all actions necessary, proper or advisable to comply promptly with all
legal requirements which may be imposed on such party or its Subsidiaries with
respect to the Merger, including, without limitation, obtaining any third party
consent which may be required to be obtained in connection with the Merger and
the other transactions contemplated by this Agreement, to remove any restraint
or prohibition preventing the consummation of the Merger and the other
transactions contemplated by this Agreement, and, subject to the conditions set
forth in Article VI, to consummate the Merger and the other transactions
contemplated by this Agreement and (ii) obtain (and cooperate with the other
party to obtain) any consent, authorization, order or approval of, or any
exemption by, any Governmental Entity which is required to be obtained by Parent
or the Company, respectively, or any of their respective Subsidiaries in
connection with the Merger and the other transactions contemplated by this
Agreement. The parties hereto shall cooperate with each other promptly to
prepare and file all necessary documentation, to effect all applications,
notices, petitions and filings (including, to the extent necessary, any
notification required by the HSR Act), and to obtain as promptly as practicable
all permits, consents, approvals and authorizations of all third parties and
Governmental Entities which are necessary or advisable to consummate the Merger
and the other transactions contemplated by this Agreement. Each of Parent and
the Company shall have the right to review in advance and, to the extent
practicable, each will consult the other on, all the information relating to the
other or any of its Subsidiaries, which appear in any filing made with any third
party or any Governmental Entity in connection with the transactions
contemplated by this Agreement, in each case subject to applicable Laws and
Regulations relating to the exchange of information. In exercising the foregoing
right, each of the parties hereto shall act reasonably and as promptly as
practicable. The parties hereto agree that they will consult with each other
with respect to the obtaining of all permits, consents, approvals and
authorizations of all third parties and Governmental Entities necessary or
advisable to consummate the transactions contemplated by this Agreement and each
party will keep the other apprised of the status of matters relating to
completion of the transactions contemplated herein. Each of Parent and the
Company shall use its commercially reasonable best efforts to resolve any
objections that may be asserted by any Governmental Entity with respect to this
Agreement, the Merger or the other transactions contemplated by this Agreement.
Each of Parent and the Company shall not, and shall cause its respective
Subsidiaries not to, engage in any action or transaction that would materially
delay or materially impair the ability of the Company, Parent or Merger Sub to
consummate the Merger.
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Parent and the Company further covenant and agree, with respect to a threatened
or pending preliminary or permanent injunction or other order, decree or ruling
or statute, rule, regulation or executive order that would adversely affect the
ability of the parties hereto to consummate the transactions contemplated
hereby, to use their respective commercially reasonable best efforts to prevent
the entry, enactment or promulgation thereof, as the case may be.
(c) Parent and the Company shall, upon request, furnish each other with all
information concerning themselves, their respective Subsidiaries, directors,
officers, employees and stockholders and such other matters as may be reasonably
necessary or advisable in connection with the Proxy Statement or any other
statement, filing, notice, application or other document made by or on behalf of
Parent, the Company or any of their respective Subsidiaries to any Governmental
Entity in connection with the Merger and the other transactions contemplated by
this Agreement.
(d) Parent and the Company shall promptly advise each other upon receiving
any communication from any Governmental Entity whose consent or approval is
required for consummation of the transactions contemplated by this Agreement
which causes such party to believe that there is a reasonable likelihood that
any such consent or approval will not be obtained or that the receipt of any
such approval will be materially delayed.
5.2 ACCESS TO INFORMATION. Subject to the Confidentiality Agreement, the
Company agrees to provide Parent and Parent's officers, directors, employees,
accountants, counsel, financial advisors, agents and other representatives
(collectively, the "Parent Representatives"), from time to time prior to the
Effective Time or the termination of this Agreement, such information as Parent
shall reasonably request with respect to the Company and its Subsidiaries and
their respective businesses, financial conditions and operations. Except as
required by Laws or Regulations, Parent shall hold, and shall cause Parent's
Affiliates and the Parent Representatives to hold, any non-public information
received from the Company, directly or indirectly, in accordance with the
Confidentiality Agreement.
5.3 STOCKHOLDER APPROVAL.
(a) As promptly as practicable following the date of this Agreement, the
Company shall take all action necessary under all applicable Laws and
Regulations to call, give notice of and hold a meeting of the holders of the
Company's capital stock to vote on a proposal to adopt this Agreement and any
other matters required to be approved for consummation of the Merger and the
transactions contemplated hereby (the "Company Stockholders' Meeting"). The
Company Stockholders' Meeting shall be held (on a date selected by the Company
in consultation with Parent) as promptly as practicable after the mailing of the
Proxy Statement. The Company shall use its commercially reasonable best efforts
to ensure that all proxies solicited in connection with the Company
Stockholders' Meeting are solicited in compliance with all applicable Laws and
Regulations. Subject to the fiduciary duties of the Company's Board of
Directors, the Proxy Statement shall include a recommendation of the Company's
Board of Directors that the stockholders of the Company adopt this Agreement
(the "Company Board Recommendation").
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(b) The Company hereby represents that its Board of Directors has adopted a
resolution contemplated by Section 251 of the Delaware Law recommending that the
stockholders approve this Agreement and, subject to its fiduciary duties, will
keep such resolution in effect and will use all commercially reasonable best
efforts to obtain from its stockholders a vote approving this Agreement. The
Company shall be obligated to hold the Company Meeting notwithstanding any
Takeover Proposal or other event or circumstance. The Company agrees that it
will not submit any Takeover Proposal to its stockholders for a vote.
(c) Parent agrees to cause all shares of Company Common Stock owned by
Parent or any subsidiary of Parent to be voted in favor of the adoption of the
Agreement and consummation of the Merger at the Company Stockholders' Meeting.
5.4 PUBLIC DISCLOSURE. Unless otherwise permitted by this Agreement, Parent
and the Company shall consult with each other before issuing any press release
or otherwise making any public statement or making any other public (or
non-confidential) disclosure (whether or not in response to an inquiry)
regarding the terms of this Agreement or any of the transactions contemplated
hereby, and neither shall issue any such press release or make any such
statement or disclosure without the prior approval of the other (which approval
shall not be unreasonably withheld, conditioned or delayed), except as may be
required by Laws or Regulations or by obligations pursuant to any listing
agreement with any national securities exchange or the NASDAQ, in which case the
party proposing to issue such press release or make such public statement or
disclosure shall use its commercially reasonable best efforts to consult with
the other party before issuing such press release or making such public
statement or disclosure.
5.5 COMMERCIALLY REASONABLE BEST EFFORTS; FURTHER ASSURANCES. Each of the
parties to this Agreement shall use its commercially reasonable best efforts to
effect the transactions contemplated hereby and to fulfill and cause to be
fulfilled the conditions to Closing under this Agreement. Each party hereto, at
the reasonable request of another party hereto, shall execute and deliver such
other instruments and do and perform such other acts and things as may be
necessary or desirable for effecting the consummation of this Agreement and the
transactions contemplated hereby.
5.6 EMPLOYEES; EMPLOYEE BENEFIT MATTERS.
(a) For a transition period not to exceed one year following the Effective
Time, Parent shall, or shall cause its applicable Subsidiaries to, provide those
individuals employed by the Company or one of its Subsidiaries as of the
Effective Time (collectively, the "Covered Employees") with base salaries and
other compensation opportunities and benefits (other than stock options and
other equity based plans) no less favorable, in the aggregate, to the base
salaries and other compensation opportunities and benefits provided to the
Covered Employees immediately prior to the Effective Time. Following such
transition period, Parent shall, or shall cause its applicable Subsidiaries to,
provide such Covered Employees with base salaries and other compensation
opportunities and benefits substantially comparable, in the aggregate, to the
base salaries and other compensation opportunities and benefits (other than
stock options and other equity based plans) provided to employees similarly
situated to such Covered Employees of Popular Financial Holdings, Inc. and its
Subsidiaries. For the avoidance
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of doubt, nothing herein shall limit the right of Parent or any of its
Subsidiaries to terminate the employment of any Covered Employee at any time or
require Parent or any of its Subsidiaries to maintain any particular
compensation or benefit program.
(b) To the extent that a Covered Employee becomes eligible to participate
in a compensation or benefit plan maintained by Parent or any of its
Subsidiaries, other than those of the Company or its Subsidiaries, Parent shall
cause such employee benefit plan to (i) recognize the service of such Covered
Employee with the Company or its Subsidiaries (and their respective
predecessors) for purposes of eligibility, vesting and benefit accrual (other
than under any "final average pay" defined benefit pension plan) under such
compensation or benefit plan of Parent or any of its Subsidiaries to the same
extent such service was recognized immediately prior to the Effective Time under
a comparable Company Benefit Plan in which such Covered Employee was a
participant immediately prior to the Effective Time or, if there is no such
comparable benefit plan, to the same extent such service was recognized under
the Company's 401(k) Plan immediately prior to the Effective Time, PROVIDED that
such recognition of service shall not operate to duplicate any benefits with
respect to the Covered Employee, and (ii) with respect to any health, dental or
vision plan of Parent or any of its Subsidiaries (other than the Company and its
Subsidiaries) in which any Covered Employee is eligible to participate in the
plan year that includes the year in which such Covered Employee is eligible to
participate, (x) cause any pre-existing condition limitations under such Parent
or Subsidiary plan to be waived with respect to such Covered Employee to the
extent such limitation would have been waived or satisfied under the Company
Benefit Plan in which such Covered Employee participated immediately prior to
such eligibility, and (y) recognize any medical or other health expenses
incurred by such Covered Employee in the year that includes the date on which
such Covered Employee becomes eligible to participate for purposes of any
applicable deductible and annual out-of-pocket expense requirements under any
such health, dental or vision plan of Parent or any of its Subsidiaries.
(c) Parent shall, or shall cause the Company to, honor all written
contractual obligations of the Company and its Subsidiaries to their respective
current and former employees, directors and independent contractors, including,
but not limited to, all obligations under employment, severance and consulting
plans and arrangements and under all Company Employee Benefit Plans, if
applicable.
(d) Prior to the Effective Time, if requested by Parent in writing, subject
to applicable law and the terms of the applicable plan the Company shall take
all actions necessary to terminate the Company's 401(k) Plan and all Company
employee benefit plans effective immediately prior to or simultaneous with the
Effective Time. Prior to the Effective Time, if requested by Parent in writing,
to the extent permitted by applicable Laws and Regulations and the terms of the
applicable plan or arrangement, the Company shall cause to be amended the
employee benefit plans and arrangements of it and its Subsidiaries to the extent
necessary to provide that no employees of Parent and its Subsidiaries shall
commence to participate therein following the Effective Time unless the
Surviving Corporation or such Subsidiary explicitly authorizes such
participation. In addition, prior to the Effective Time, to the extent permitted
by applicable Laws and Regulations and the terms of the applicable plan or
arrangement, Parent shall cause to be amended, or take any actions that Parent
deems appropriate, the employee benefit plans and arrangements of it and its
Subsidiaries to the extent necessary to provide that
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no employees of the Company and its Subsidiaries shall commence to participate
therein following the Effective Time unless Parent or such Subsidiary explicitly
authorizes such participation.
(e) Nothing in this Section 5.6 shall be interpreted as preventing the
Surviving Corporation from amending, modifying or terminating any Parent benefit
plans, Company Benefit Plans, or other employee benefit plans, contracts,
arrangements, commitments or understandings, in accordance with their terms and
applicable Laws and Regulations.
5.7 DIRECTOR AND OFFICER INDEMNIFICATION.
(a) The Certificate of Incorporation and Bylaws of the Surviving
Corporation shall, with respect to indemnification of officers, directors,
employees and agents, not be amended, repealed or otherwise modified after the
Effective Time in any manner that would adversely affect the rights thereunder
of the persons who at any time prior to the Effective Time were identified as
prospective indemnitees under the Certificate of Incorporation or Bylaws of the
Company in respect of actions or omissions occurring at or prior to the
Effective Time (including the transactions contemplated hereby), unless such
modification is required by Law.
(b) From and after the Effective Time, Parent shall, to the fullest extent
permitted by applicable Laws and Regulations, indemnify, defend and hold
harmless, and provide advancement of expenses to, the present and former
officers, directors, employees and agents of the Company or any of its
Subsidiaries in their capacities as such (each, an "Indemnified Party") against
all losses, claims, damages, costs, expenses, liabilities or judgments or
amounts that are paid in settlement of or in connection with any claim based in
whole or in part on or arising in whole or in part out of the fact that such
Indemnified Party is or was a director, officer, employee or agent of the
Company or any Subsidiary of the Company, and pertaining to any matter existing
or occurring, or any acts or omissions occurring, at or prior to the Effective
Time, whether asserted or claimed prior to, or at or after, the Effective Time
(including matters, acts or omissions occurring in connection with the approval
of this Agreement and the consummation of the Merger and the other transactions
contemplated by this Agreement) or taken at the request of Parent pursuant to
Section 5.5.
(c) Parent shall cause the individuals serving as officers and directors of
the Company or any of its Subsidiaries immediately prior to the Effective Time
to be covered for a period of six years from the Effective Time by the
directors' and officers' liability insurance policy maintained by the Company
(PROVIDED that Parent may substitute therefor policies with substantively the
same coverage and amounts and on terms and conditions which are reasonably
comparable to those of such policy) with respect to acts or omissions occurring
prior to the Effective Time that were committed by such officers and directors
in their capacity as such; PROVIDED that in no event shall Parent be required to
expend annually in the aggregate an amount in excess of 200% of the annual
premiums currently paid by the Company for such insurance (the "Insurance
Amount"); PROVIDED, FURTHER, that if Parent is unable to maintain such policy
(or such substitute policy) as a result of the preceding proviso, Parent shall
obtain as much comparable insurance as is available for the Insurance Amount.
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(d) In the event Parent or any of its successors or assigns or the
Surviving Corporation or any of its successors or assigns (i) consolidates with
or merges into any other Person and shall not be the continuing or surviving
corporation or entity of such consolidation or merger or (ii) transfers or
conveys all or substantially all of its properties and assets to any Person,
then, and in each such case, to the extent necessary, proper provision shall be
made so that the successors and assigns of Parent or the Surviving Corporation,
as applicable, assume the obligations set forth in this section.
(e) The provisions of this Section 5.7 shall survive the Effective Time and
are intended to be for the benefit of, and shall be enforceable by, each
Indemnified Party and his or her heirs and representatives.
5.8 ADVICE OF CHANGES. The Company and Parent shall promptly advise each
other of any change or event having a Company Material Adverse Effect or Parent
Material Adverse Effect, as applicable.
5.9 SECTION 16B-3. Parent, Merger Sub and the Company shall take
commercially reasonable actions as may be required to cause the transactions
contemplated by this Agreement and any other dispositions of equity securities
of the Company by each individual who is a director or officer of the Company to
be exempt under Rule 16b-3 promulgated under the Securities Exchange Act.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) STOCKHOLDER APPROVAL. This Agreement shall have been duly adopted by
the Company Stockholder Approval.
(b) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect; nor shall there be any statute,
rule, regulation or order enacted, entered, or enforced which prevents or
prohibits the consummation of the Merger. In the event an injunction or other
order shall have been issued, each party agrees to use its commercially
reasonable best efforts to have such injunction or other order lifted.
(c) GOVERNMENTAL APPROVALS. Parent, the Company and Merger Sub and their
respective Subsidiaries shall have obtained from each Governmental Entity all
approvals, waivers and consents necessary for consummation of the Merger and the
other transactions contemplated hereby, including, without limitation, such
approvals, waivers and consents as may be required under the Securities Exchange
Act, the HSR Act and the applicable Laws and Regulations of any state.
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6.2 CONDITIONS TO OBLIGATION OF THE COMPANY. The obligation of the Company
to consummate the Merger is also subject to the fulfillment or written waiver by
the Company prior to the Effective Time of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Parent set forth in this Agreement shall be true and correct in all material
respects, in each case as of the date of this Agreement and as of the Closing
Date as though made on such date, except to the extent such representations and
warranties are expressly made only as of an earlier date, in which case as of
such earlier date; PROVIDED that, if any of such representations and warranties
shall not be true and correct (for this purpose disregarding any qualification
or limitation as to materiality or a Parent Material Adverse Effect), then the
condition stated in this clause (a) shall be deemed satisfied unless the
cumulative effect of all inaccuracies of such representations and warranties
(for this purpose disregarding any qualification or limitation as to materiality
or Parent Material Adverse Effect) shall result in a Parent Material Adverse
Effect. The Company shall have received a certificate signed on behalf of Parent
by a senior officer of Parent to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF PARENT. Parent shall have performed in
all material respects all obligations required to be performed by it under this
Agreement at or prior to the Effective Time, and the Company shall have received
a certificate, dated the Closing Date, signed on behalf of Parent by a senior
officer of Parent to such effect.
6.3 CONDITIONS TO OBLIGATION OF THE PARENT. The obligations of Parent and
Merger Sub to consummate the Merger are also subject to the fulfillment or
written waiver by Parent prior to the Effective Time of each of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Company set forth in Sections 2.2(a) and 2.2(b) of this Agreement shall be
true and correct (other than for such failures to be true and correct as are de
minimis in effect), and the remaining representations and warranties of the
Company set forth in this Agreement shall be true and correct in all material
respects, in each case as of the date of this Agreement and as of the Closing
Date as though made on such date, except to the extent such representations and
warranties are expressly made only as of an earlier date, in which case as of
such earlier date; PROVIDED that, if any of such representations and warranties
(other than the representations and warranties contained in Sections 2.2(a) and
2.2(b), which shall be true and correct other than for such failures to be true
and correct as are de minimis in effect) shall not be true and correct (for this
purpose disregarding any qualification or limitation as to materiality or a
Company Material Adverse Effect), then the condition stated in this clause (a)
shall be deemed satisfied if and only if the cumulative effect of all
inaccuracies of such representations and warranties (for this purpose
disregarding any qualification or limitation as to materiality or Company
Material Adverse Effect) shall not be or have a Company Material Adverse Effect.
Parent shall have received a certificate signed on behalf of the Company by its
Chief Executive Officer and Chief Financial Officer to the foregoing effect.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall have
performed in all material respects its obligations required to be performed by
it under this Agreement at or prior to the Effective Time, and Parent shall have
received a certificate signed
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on behalf of the Company by its Chief Executive Officer and Chief Financial
Officer to such effect.
(c) THIRD PARTY CONSENTS. The Company shall have obtained all consents or
approvals of all Persons, other than those covered in paragraph (c) of Section
6.1 hereto, required for the execution, delivery and performance of this
Agreement, the consummation of the Merger or the other transactions contemplated
hereby and such consents or approvals shall be in full force and effect, unless
the failure to obtain any such consent or approval or of such consent or
approval not to be in full force and effect is not reasonably likely to have,
individually or in the aggregate, a Company Material Adverse Effect.
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 TERMINATION. Whether before or after approval of the matters presented
in connection with the Merger by the stockholders of the Company, this Agreement
may be terminated upon written notice (other than in the case of Section 7.1(a)
below) from the terminating party to the non-terminating party specifying the
subsection of this Section 7.1 pursuant to which such termination is effected:
(a) by mutual consent of Parent and the Company at any time prior to the
Effective Time;
(b) by either Parent or the Company at any time prior to the Effective Time
if the Closing shall not have occurred on or before January 31, 2006, except to
the extent that the failure of the Merger then to be consummated arises out of
or results from the action or inaction of the party seeking to terminate
pursuant to this Section 7.1(b);
(c) by Parent at any time prior to the Effective Time, if (i) the Company
shall breach any of its representations, warranties or obligations hereunder to
an extent that would cause the conditions set forth in either Section 6.3(a) or
6.3(b) not to be satisfied and such breach shall not have been cured within 30
business days of receipt by the Company of written notice of such breach
(provided that the right to terminate this Agreement by Parent shall not be
available to Parent if Parent is at that time in material breach of this
Agreement), (ii) the Board of Directors of the Company shall withdraw or modify
the Company Board Recommendation in a manner adverse to Parent or shall have
resolved to do so, (iii) the Company shall breach in any material respect its
obligations set forth in Sections 4.3(a) of this Agreement or (iv) the Board of
Directors of the Company shall have recommended, endorsed, accepted or agreed to
a Takeover Proposal or shall have resolved to do so;
(d) by the Company at any time prior to the Effective Time, if Parent shall
breach any of its representations, warranties or obligations hereunder to an
extent that the representations and warranties of Parent shall not be true and
correct in all material respects, in each case as of the date of this Agreement
and as of the Effective Time as though made on such date, except to the extent
such representations and warranties are expressly made only as of an earlier
date, in which case as of such earlier date; PROVIDED, HOWEVER, that Company may
not terminate this Agreement if the cumulative effect of all inaccuracies of
such representations and
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warranties (for this purpose disregarding any qualification or limitation as to
materiality or Parent Material Adverse Effect) shall not be or have a Parent
Material Adverse Effect, or such breach shall have been cured within 30 business
days following receipt by Parent of written notice of such breach and that the
right to terminate this Agreement by the Company shall not be available to the
Company if the Company is at that time in material breach of this Agreement;
(e) by the Company at any time prior to approval of the Agreement by the
stockholders of the Company in order to enter into an agreement relating to a
Superior Proposal in accordance with Section 4.3; PROVIDED that neither the
Company nor any of the Company Representatives has violated in any material
respect any of the restrictions set forth in Section 4.3 and the Company
simultaneously pays any applicable fee to Parent required by Section 7.3;
(f) by either Parent or the Company if at any time prior to the
Effective Time any permanent injunction or other order of a court or other
competent authority preventing the consummation of the Merger shall have
become final and nonappealable; and
(g) by either Parent or the Company if the Company Stockholder Approval
shall not have been obtained at the Company Stockholders' Meeting.
7.2 EFFECT OF TERMINATION. In the event of termination of this Agreement as
provided in Section 7.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of Parent, Merger Sub or the
Company or their respective officers, directors, stockholders or Affiliates;
PROVIDED that (a) the provisions of Section 5.4 (Public Disclosure), Section 7.3
(Expenses and Termination Fees), Section 9.8 (Governing Law) and this Section
7.2 shall remain in full force and effect and survive any termination of this
Agreement and (b) nothing herein shall relieve any party from liability for
fraud or willful material breach in connection with this Agreement or the
transactions contemplated hereby.
7.3 EXPENSES AND TERMINATION FEE.
(a) Subject to subsections (b), (c), (d) and (e) of this Section 7.3,
whether or not the Merger is consummated, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby
(including, without limitation, the fees and expenses of its advisers, brokers,
finders, agents, accountants and legal counsel) shall be paid by the party
incurring such expense.
(b) In the event that the Company wishes to terminate this Agreement
pursuant to Section 7.1(e), then simultaneously with termination the Company
shall pay by wire transfer of same-day funds to Parent the Termination Fee.
(c) In the event that Parent shall terminate this Agreement pursuant to
Section 7.1(c)(ii) or (iii), then, upon such termination, the Company shall pay
by wire transfer of same-day funds to Parent an amount equal to one-fourth of
the Termination Fee; furthermore, if a definitive agreement or letter of intent
is entered into by the Company with respect to a Takeover Proposal, or a
Takeover Proposal is consummated, within 12 months of such termination of this
Agreement, then the Company shall, on the earlier of the date such agreement or
letter of intent is entered into or a Takeover Proposal is consummated, pay by
wire transfer of same-day funds to Parent an amount equal to three-fourths of
the Termination Fee; PROVIDED, HOWEVER, that for
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the purpose of this Section 7.3(c), all references in the definition of Takeover
Proposal to "25%" shall instead be deemed to refer to "a majority".
(d) In the event that (i) any of (A) Parent shall terminate this Agreement
pursuant to Section 7.1(c)(i) other than as a result of any unintentional breach
of this Agreement by the Company or (B) Parent or Company shall terminate this
Agreement pursuant to Section 7.1(b) as a result of a failure to consummate the
Merger prior to the date set forth in Section 7.1(b) caused by a material breach
(other than an unintentional material breach) of this Agreement by the Company
or pursuant to Section 7.1(g), and, (ii) prior to the time of such termination a
BONA FIDE Takeover Proposal with respect to the Company has been publicly made
or otherwise made known to the Board of Directors of the Company or its
stockholders and not irrevocably withdrawn prior to termination, and (iii) a
definitive agreement or letter of intent is entered into by the Company with
respect to a Takeover Proposal, or a Takeover Proposal is consummated, within 12
months of such termination of this Agreement, the Company shall, on the earlier
of the date such agreement or letter of intent is entered into or Takeover
Proposal consummated, pay by wire transfer of same-day funds the Termination Fee
to Parent; PROVIDED, HOWEVER, that for the purpose of this Section 7.3(d), all
references in the definition of Takeover Proposal to "25%" shall instead be
deemed to refer to "a majority".
(e) In the event that Parent shall terminate this Agreement pursuant to
Section 7.1(c) (iv), then, upon such termination, the Company shall pay by wire
transfer of same-day funds to Parent the Termination Fee; PROVIDED, HOWEVER,
that for the purpose of this Section 7.3(e), all references in the definition of
Takeover Proposal to "25%" shall instead be deemed to refer to "a majority".
(f) In no event shall the Company be obligated to pay to Parent under this
Section 7.3 an aggregate amount in excess of the Termination Fee and any amounts
owed to Parent pursuant to Section 7.3(a) except that termination will not
relieve a breaching party from liability for fraud or any willful material
breach of this Agreement giving rise to such termination.
(g) The Company acknowledges that the agreements contained in this Section
7.3 are an integral part of the transactions contemplated by this Agreement and
that, without these agreements, the Parent would not enter into this Agreement;
accordingly, if the Company fails promptly to pay any amount due pursuant to
this Section 7.3, and, in order to obtain such payment, the Parent commences a
suit which results in a judgment against the Company for the payment set forth
in this Section 7.3, the Company shall reimburse the Parent's costs and expenses
(including reasonable attorneys' fees) in connection with such suit, together
with interest on any amount due pursuant to this Section 7.3 from the date such
amount becomes payable until the date of such payment at the prime rate
published in THE WALL STREET JOURNAL in effect on the date such payment was
required to be made.
7.4 AMENDMENT. The boards of directors of the parties hereto may cause this
Agreement to be amended at any time by execution of an instrument in writing
signed on behalf of each of the parties hereto; provided that an amendment made
subsequent to approval of this Agreement by the stockholders of the Company
shall not (i) alter or change the amount or kind of consideration to be received
on conversion of Company Common Stock or (ii) alter or change
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any of the terms and conditions of the Agreement if such alteration or change
would adversely affect the holders of Company Common Stock in any material
respect.
7.5 EXTENSION; WAIVER. At any time prior to the Effective Time any party
hereto may, to the extent legally allowed, (i) extend the time
for the performance of any of the obligations or other acts of the other
parties hereto, (ii) waive any inaccuracies in the representations and
warranties made to such party contained herein or in any document
delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein.
Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed
on behalf of such party.
ARTICLE VIII
DEFINITIONS
8.1 CERTAIN DEFINED TERMS. Unless the context otherwise requires, the
following terms, when used in this Agreement, shall have the respective meanings
specified below (such meanings to be equally applicable to the singular and
plural forms of the terms defined):
"1997 Company Stock Option Plan" shall mean E-LOAN's 1997 Stock Plan as
amended and restated as of August 30, 1999.
"Affiliate" of a Person shall mean any Person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, such Person.
"Agreement" shall have the meaning stated in the preamble to this document.
"Assets" shall have the meaning stated in Section 2.15(a).
"Authorizations" shall have the meaning stated in Section 2.12(b).
"CERCLA" shall mean the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended.
"Certificate of Merger" shall mean the certificate of merger in the form
mutually agreed to by Parent and the Company, or, in the absence of such
agreement, "Certificate of Merger" shall mean this Agreement.
"Closing" shall mean the consummation of the Merger.
"Closing Date" shall have the meaning stated in Section 1.2.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall mean E-LOAN, Inc., a Delaware corporation.
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"Company 401(k) Plan" shall mean the E-LOAN 401(k) Plan.
"Company Board Recommendation" shall have the meaning stated in Section
5.3(a).
"Company Common Stock" shall mean common stock, par value of $0.001 per
share, of the Company.
"Company Confidential Information" shall have the meaning stated in Section
2.19(g).
"Company Disclosure Schedule" shall mean the document dated the date of the
Agreement delivered by the Company to Parent prior to the execution and delivery
of the Agreement and referring to the representations and warranties of the
Company in the Agreement.
"Company Dissenting Shares" shall mean all shares, if any, of the
outstanding capital stock of the Company for which appraisal rights have been
perfected under Section 262 of the Delaware Law.
"Company Employee Benefit Plans" shall have the meaning stated in Section
2.11(a).
"Company ERISA Affiliate" shall have the meaning stated in Section 2.11(a).
"Company Financial Statements" shall have the meaning stated in Section
2.6(b).
"Company IP Agreements" shall mean any agreement that relates to the
Intellectual Property owned, used or held for use by the Company or any of its
Subsidiaries or Technology Systems, including, but not limited to, all (a)
licenses of Intellectual Property (i) by the Company or any of its Subsidiaries
to any third party, (ii) by any third party to the Company or any of its
Subsidiaries, or (iii) between or among the Company and/or any of its
Subsidiaries, (b) agreements, licenses and leases between the Company or any of
its Subsidiaries and any third party relating to the transfer, development, use,
maintenance, support or transmission of Intellectual Property or Technology
Systems, or the modification, framing, linking, advertisement, or other
practices with respect to Internet websites, (c) agreements pursuant to which
any Person has an ownership or security interest in any Intellectual Property or
Technology Systems, and (d) consents, settlements, decrees, orders, injunctions,
judgments, or rulings governing the use, validity, or enforceability of
Intellectual Property owned, used or held for use by the Company or its
Subsidiaries or Technology Systems.
"Company Material Adverse Effect" shall mean any effect that (a) is
material and adverse to the business, financial condition or results of
operations of the Company and its Subsidiaries taken as a whole (excluding any
effect resulting from (i) events, facts or circumstances relating to the economy
in general, including market fluctuations and changes in interest rates, or to
the Company's industry in general and not specifically relating to the Company
or any of its Subsidiaries, (ii) changes in legal or regulatory conditions that
affect in general the businesses in which the Company and its Subsidiaries are
engaged, (iii) the fact that the Company is partnering with Parent and its
Affiliates or the announcement by Parent or its
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Affiliates regarding its plans or intentions regarding the operation or conduct
of the business of the Company or its Subsidiaries or (iv) any change in
applicable accounting requirements or principles which occurs or becomes
effective after the date of this Agreement, provided that in the case of each of
(i), (ii) and (iv) such changes shall not be so excluded to the extent that they
have a materially more adverse effect on the Company than that experienced by
similarly situated companies in the industry) or (b) prevents the Company from
consummating the Merger and the other transactions contemplated by this
Agreement.
"Company Multiemployer Plan" shall have the meaning stated in Section
2.11(d).
"Company Options" shall mean all rights, obligations, commitments or
agreements of any character, whether fixed or contingent (other than the
Warrants), calling for the purchase or issuance of any shares of Company Common
Stock or any other equity securities of the Company or any securities
representing the right to purchase or otherwise receive any shares of Company
Common Stock.
"Company Preferred Stock" shall mean the preferred stock, par value of
$0.001 per share, of the Company.
"Company Related Person" shall have the meaning stated in Section 2.21(a).
"Company Representative" shall have the meaning stated in Section 4.3(a).
"Company SEC Documents" shall mean (i) the Company's Annual Reports on Form
10-K for each fiscal year of the Company beginning on or after January 1, 2003,
(ii) its Quarterly Reports on Form 10-Q for each of the first three fiscal
quarters in each of the fiscal years of the Company referred to in clause (i)
above, (iii) all proxy statements relating to the Company's meetings of
stockholders (whether annual or special) held, and all information statements
relating to stockholder consents, since the beginning of the first fiscal year
referred to in clause (i) above, (iv) its Current Reports on Form 8-K filed
since the beginning of the first fiscal year referred to in clause (i) above,
(v) all other forms, reports, registration statements, financial statements and
other documents (other than preliminary materials if the corresponding
definitive materials have been provided to Parent pursuant to this definition)
filed or submitted by the Company with the SEC since the beginning of the first
fiscal year referred to in clause (i) above.
"Company Stock Plans" shall mean the employee and director stock plans of
the Company, any agreements evidencing the grant of any equity-based
compensatory awards under the employee and director stock plans of the Company
and other documents governing any equity-based compensatory awards.
"Company Stockholder Approval" shall mean the affirmative vote of the
holders of a majority of the votes of the outstanding shares of Company Common
Stock entitled to vote thereon.
"Company Stockholders' Meeting" shall have the meaning stated in Section
5.3(a).
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"Confidentiality Agreement" shall mean the Confidentiality Agreement dated
as of [?], between Parent and the Company, as it may be amended from time to
time.
"Consolidated Group" shall have the meaning stated in Section 2.10(h).
"Covered Employees" shall have the meaning stated in Section 5.6(a).
"Delaware Law" shall mean the Delaware General Corporation Law.
"Domain Names" shall have the meaning stated in Section 2.19(j).
"Effective Time" shall mean the date and time when the Merger becomes
effective, as set forth in the Certificate of Merger, or if not so set forth,
upon the filing of the Certificate of Merger with the Secretary of State of the
State of Delaware.
"ERISA" shall have the meaning stated in Section 2.11(a).
"Exchange Agent" shall mean Parent's transfer agent, Mellon Shareholder
Services or another bank or trust company selected by Parent and reasonably
acceptable to the Company.
"Exchange Fund" shall mean the cash deposited by Parent with the Exchange
Agent pursuant to Section 1.13.
"FHA" means the Federal Housing Administration.
"FHLMC" means the Federal Home Loan Mortgage Corporation.
"FNMA" means the Federal National Mortgage Association.
"GAAP" means United States generally accepted accounting principles.
"GNMA" means the Government National Mortgage Association.
"Governmental Entity" shall mean any court, administrative agency or
commission or other governmental, prosecutorial or regulatory authority or
instrumentality.
"Governmental Order" means any order, writ, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental Entity.
"HSR Act" shall have the meaning stated in Section 2.5.
"HUD" means the United States Department of Housing and Urban Development.
"Indemnified Party" shall have the meaning stated in Section
5.7(b).
"Insurance Amount" shall have the meaning stated in Section 5.7(c).
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"Insurer" or "Insurers" means the FHA, the VA or any private mortgage or
other insurer, pool insurance insurer and any insurer or guarantor under any
standard hazard insurance policy, any federal or private flood insurance policy,
any title insurance policy, any earthquake insurance policy, and any successor
thereto.
"Intellectual Property" shall mean all (i) copyrights and mask works,
including copyright and mask work registrations and copyright and mask work
applications, (ii) trademarks, including trademark registrations and
applications for registration, (iii) patents, patent applications and statutory
invention registrations, (iv) service marks, including service xxxx
registrations and applications for registration, (v) trade names, trade dress,
logos, Internet domain names and other source identifiers, including
registrations and applications for registration thereof, (vi) computer software,
databases, applications and programs, including source code, object code,
algorithms, structure, display screens, software engines, data, websites,
website content and links, layouts, development tools, instructions, templates
and computer software user interfaces, all versions, updates, corrections,
enhancements and modifications thereof, and all documentation related thereto
(collectively, "SOFTWARE"), (vii) confidential and proprietary information,
including know-how and trade secrets, (viii) customer lists, (ix) proprietary
technology, (x) processes and formulae, (xi) marketing materials, (xii)
inventions and (xiii) designs.
"Investor" means any Person who (1) owns Loans, or (2) is a party (other
than the Company or any Company Subsidiary) to an Investor Commitment or to a
Loan Sale Agreement with the Company or any Company Subsidiary.
"Investor Commitment" means the commitment of a Person to purchase a Loan
owned by the Company or any Subsidiary of the Company.
"IRS" shall mean the Internal Revenue Service.
"Key Employees" shall mean those persons set forth in Exhibit 8.1.
"Knowledge" with respect to the Company or any of its Subsidiaries shall
mean actual knowledge of any of those persons set forth in Section 8.1(a) of the
Company Disclosure Schedule.
"Laws and Regulations" means all federal, state, local and foreign
statutes, laws, codes, rules, regulations and ordinances.
"Leases" shall have the meaning stated in Section 2.15(a).
"Lien" shall mean any lien, claim, charge, option, encumbrance, mortgage,
pledge or security interest or other restrictions of any kind.
"Loans" shall have the meaning stated in Section 2.29(a).
"Loan Sale Agreement" shall have the meaning stated in Section 2.29(a).
"Material Contracts" shall have the meaning stated in Section 2.13.
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"Merger" shall have the meaning stated in Recital B.
"Merger Consideration" shall have the meaning stated in Section 1.4(a).
"Merger Sub" shall mean New Popular Acquisitions Corporation, a Delaware
corporation and wholly-owned subsidiary of Parent.
"Mortgage Loan" shall have the meaning stated in Section 2.29(g).
"NASDAQ" shall mean the Nasdaq Stock Market, Inc.
"Parent" shall mean Popular, Inc., a Puerto Rico corporation.
"Parent Disclosure Schedule" shall mean the disclosure schedule, dated the
date of this Agreement, delivered by Parent to the Company with reference to the
specific section of the Agreement to which each disclosure relates.
"Parent Material Adverse Effect" shall mean any material adverse effect on
the ability of Parent to timely consummate the Merger and the other transactions
contemplated by this Agreement.
"Parent Representative" shall have the meaning stated in Section 5.2(a).
"PBGC" shall have the meaning stated in Section 2.11(e).
"Pension Plan" shall have the meaning stated in Section 2.11(g).
"Permitted Lien" shall mean any Lien consisting of (i) carriers',
warehousemen's, mechanics', landlords', materialmen's, repairmen's or similar
common law or statutory liens or encumbrances arising in the ordinary course of
business which are not delinquent or remain payable without penalty, (ii)
encumbrances for Taxes and other assessments or governmental charges or levies
not yet due and delinquent, and (iii) any other Liens that individually or in
the aggregate do not have and would not reasonably be expected to have a Company
Material Adverse Effect.
"Person" shall mean any individual, entity or Governmental Entity.
"Proxy Statement" shall mean a definitive form relating to the meeting of
the Company's stockholders to be held in connection with this Agreement and the
transactions contemplated hereby.
"Registered" means issued by, registered with, renewed by or the subject of
a pending application before any Governmental Entity or domain name registrar.
"Regulation S-X" shall mean 17 CFR ss.210.1-01, et. seq.
"Rights" means, with respect to any Person, securities or obligations
convertible into or exercisable or exchangeable for, or giving any Person any
right to subscribe for or acquire, or any subscriptions, options, warrants,
puts, calls or commitments or agreements of any
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character relating to, or any stock appreciation right or other instrument the
value of which is determined in whole or in part by reference to the market
price or value of, shares of capital stock or other securities of, or other
equity interests in, such Person.
"Risk Management Contract" shall have the meaning stated in Section 2.27.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Software" shall have the meaning stated in Section 8.1 under the
definition of "Intellectual Property."
"SOX" means the Xxxxxxxx-Xxxxx Act of 2002.
"Subsidiary" of any Person shall mean any corporation, partnership, limited
liability company, joint venture or other entity in which such Person (a) owns,
directly or indirectly, 50% or more of the outstanding voting securities or
equity interests or otherwise controls or (b) is a general partner or managing
member.
"Superior Proposal" shall have the meaning stated in Section 4.3(a).
"Surviving Corporation" shall mean the entity into which Merger Sub has
merged, following the Effective Time.
"Takeover Proposal" shall have the meaning stated in Section 4.3(a).
"Tax" or "Taxes" shall mean all federal, state, local, and foreign income,
excise, gross receipts, gross income, ad valorem, profits, gains, property,
capital, sales, transfer, use, value-added, stamp, documentation, payroll,
employment, severance, withholding, duties, intangibles, franchise, backup
withholding, and other taxes (including estimated taxes), charges, levies or
like assessments together with all penalties and additions to tax and interest
thereon.
"Tax Returns" shall mean all returns and reports required to be filed with,
or supplied to, any federal, state, local or foreign tax authority with respect
to Taxes.
"Technology Systems" shall have the meaning stated in Section 2.20(a).
"Termination Fee" shall mean $12 million.
"Third Party" shall have the meaning stated in Section 4.3(a).
"Third-Party Data" means third-party databases, data feeds and data used or
held for use in connection with the respective businesses of the Company or its
Subsidiaries.
"VA" means the United States Department of Veterans Affairs.
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"Warrants" shall mean all the warrants to purchase shares of Company Common
Stock, which warrants were initially issued pursuant either to (A) the Stock
Purchase Warrant dated February 23, 2001, issued to Greenwich Capital Financial
Products, Inc. or (B) the Stock Purchase Warrant dated April 1, 2005, issued to
Greenwich Capital Financial Products, Inc.
ARTICLE IX
GENERAL PROVISIONS
9.1 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The
representations, warranties and agreements set forth in this Agreement shall
terminate at the Effective Time, except that the agreements set forth in Article
I, Section 5.4 (Public Disclosure), Section 5.5 (Commercially Reasonable Best
Efforts; Further Assurances), Section 5.6 (Employees; Employee Benefit Matters),
Section 5.8 (Director and Officer Indemnification), Section 7.3 (Expenses and
Termination Fee) and this Article IX shall survive the Effective Time.
9.2 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation), mailed by registered or certified mail (return receipt requested)
or delivered by an express courier (with confirmation) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to Parent, to:
Popular, Inc.
000 Xxxxx Xxxxxx Xxxxxx
0xx Xxxxx
Xxxx Xxx, Xxxxxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
Fax: (000) 000-0000
with copies to:
Popular, Inc.
000 Xxxxx Xxxxxx Xxxxxx
0xx Xxxxx
Xxxx Xxx, Xxxxxx Xxxx 00000
Attention: Xxxxxxxx Xxxxxx xx Xxxxxxx, Esq.
Fax: (000) 000-0000
and
Popular Financial Holdings, Inc.
000 Xxxxxxxxxx Xxxxx
Xxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxx X. Xxxxxxx, Esq.
Fax: (000) 000-0000
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and
Xxxxxxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
(b) if to the Company, to:
E-LOAN, Inc.
0000 Xxxxxxxxxx Xxxx Xxxx
Xxxxxxxxxx, Xxxxxxxxxx 00000
Attention: Chief Legal Officer
Fax: (000) 000-0000
with a copy to:
Wachtell, Lipton, Xxxxx & Xxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxxxx, Esq.
Fax: (000) 000-0000
9.3 INTERPRETATION. When a reference is made in this Agreement to Exhibits
or Schedules, such reference shall be to an Exhibit or Schedule to this
Agreement unless otherwise indicated. The words "include," "includes" and
"including" when used herein shall be deemed in each case to be followed by the
words "without limitation." The phrase "the date of this Agreement" and terms of
similar import, unless the context otherwise requires, shall be deemed to refer
to the date set forth in the first paragraph of this Agreement. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
9.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
9.5 ENTIRE AGREEMENT. This Agreement and the documents and instruments and
other agreements specifically referred to herein or delivered pursuant hereto,
including the Exhibits, the Schedules, including the Company Disclosure Schedule
and Parent Disclosure Schedule, constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, except for the Confidentiality Agreement,
which shall continue in full force and effect, and shall survive any termination
of this Agreement or the Closing, in accordance with its terms.
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9.6 ASSIGNMENT. Neither this Agreement nor any of the rights, interests or
obligations shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other parties.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their respective successors
and assigns.
9.7 THIRD PARTY BENEFICIARIES. Except as set forth in Section 5.7 (Director
and Officer Indemnification), this Agreement (including the documents and
instruments referred to herein) is not intended to confer upon any Person other
than the parties hereto any rights or remedies hereunder.
9.8 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without reference to such
state's principles of conflicts of law. Each of the parties hereto irrevocably
consents to the exclusive jurisdiction of the Delaware Court of Chancery (and if
the Delaware Court of Chancery shall be unavailable, any Delaware State court
and the Federal court of the United States of America sitting in the State of
Delaware) in connection with any matter based upon or arising out of this
Agreement or the matters contemplated herein, agrees that process may be served
upon them in any manner authorized by the laws of the State of Delaware for such
persons and waives and covenants not to assert or plead any objection which they
might otherwise have to such jurisdiction and such process.
9.9 RULES OF CONSTRUCTION. The parties hereto agree that they have been
represented by counsel during the negotiation, preparation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document shall be construed against the party drafting such agreement or
document.
9.10 ATTORNEYS' FEES. In any action at law or suit in equity to enforce
this Agreement or the rights of any of the parties hereunder, the prevailing
party in such action or suit shall be entitled to receive its reasonable
attorneys' fees and costs and expenses incurred in such action or suit.
9.11 WAIVER OF JURY TRIAL. THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT WHICH ANY PARTY MAY HAVE TO TRIAL BY JURY IN
RESPECT OF ANY PROCEEDING, LITIGATION OR COUNTERCLAIM BASED ON, OR ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. IF
THE SUBJECT MATTER OF ANY LAWSUIT IS ONE IN WHICH THE WAIVER OF JURY TRIAL IS
PROHIBITED, NO PARTY TO THIS AGREEMENT SHALL PRESENT AS A NON-COMPULSORY
COUNTERCLAIM IN ANY SUCH LAWSUIT ANY CLAIM BASED ON, OR ARISING OUT OF, UNDER OR
IN CONNECTION WITH THIS AGREEMENT. FURTHERMORE, NO PARTY TO THIS AGREEMENT SHALL
SEEK TO CONSOLIDATE ANY SUCH ACTION IN WHICH A JURY TRIAL CANNOT BE WAIVED.
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9.12 SEVERABILITY. In the event that any provision of this Agreement, or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void, invalid or unenforceable, the remainder of
this Agreement shall continue in full force and effect and the application of
such provision to other Persons or circumstances shall be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further agree
to replace such illegal, void, invalid or unenforceable provision of this
Agreement with a legal, valid and enforceable provision that shall achieve, to
the extent possible, the economic, business and other purposes of such illegal,
void, invalid or unenforceable provision.
[Remainder of Page Intentionally Left Blank. Signature Page Follows.]
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IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the date first above written.
POPULAR, INC. E-LOAN, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx By: /s/ Xxxx X. Xxxxxxxxxx
----------------------- ----------------------
Name: Xxxxxxx X. Xxxxxxxx Name: Xxxx X. Xxxxxxxxxx
Title: Executive Vice President Title: President and Chief Executive
Officer
NEW POPULAR ACQUISITIONS CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: President
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