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EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
XXXXXXX FINANCIAL SERVICES CORPORATION,
BAC ACQUIRING CORP.,
BSC ACQUIRING CORP.,
BLOOMFIELD ACCEPTANCE COMPANY, L.L.C.
BLOOMFIELD SERVICING COMPANY, L.L.C.
AND
XXXXXX X. XXXXX, XXXXXXXXX X. XXXXX, XXXXXX XXXXXXXXXX,
XXXXX XXXXXXX, XXXXXXXX XXXXXXXXX, XXXXXXX XXXXXXX,
XXXXX XXXXXXXX, XXXXX X. XXXXXXX,
XXXXXXXXX X. XXXXXXXX AND XXXXXXX X. XXXXX
FEBRUARY 17, 1998
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TABLE OF CONTENTS
PAGE
ARTICLE 1. THE MERGER.......................................................2
1.1. The Mergers.......................................................2
1.2. Surviving Companies...............................................2
1.3. Merger Consideration..............................................2
1.4. Conversion of Shares..............................................4
1.5. Closing...........................................................5
1.6. Closing Deliveries................................................6
1.7. Articles of Incorporation.........................................8
1.8. Bylaws............................................................9
1.9. Managers and Officers.............................................9
1.10. No Fractional Shares.............................................9
1.11. Issuance of Stock Options........................................9
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF BAC, BSC AND THE
SHAREHOLDERS..........................................................10
2.1. Organization and Qualification...................................10
2.2. Capitalization...................................................10
2.3. Authorization....................................................11
2.4. Non-Contravention................................................12
2.5. Financial Statements.............................................12
2.6. Accounts Receivable..............................................12
2.7. Liabilities......................................................12
2.8. Brokerage and Loan Sale Activities...............................12
2.9. Investigations; Litigation.......................................13
2.10. Absence of Certain Changes......................................13
2.11. Title to Property; Condition....................................13
2.12. Tax Returns.....................................................13
2.13. Insurance.......................................................14
2.14. Benefit Plans...................................................14
2.15. Contracts and Commitments; No Default...........................15
2.16. Labor Matters...................................................15
2.17. Intellectual Property Rights....................................15
2.18. Hazardous Substances and Hazardous Wastes.......................16
2.19. Brokers.........................................................16
2.20. Shareholders' Representations...................................16
2.21. Accuracy of Information.........................................18
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF PARENT.........................18
3.1. Organization.....................................................18
3.2. Authority and Validity of Agreement..............................18
3.3. Consents and Approvals...........................................18
3.4. Capitalization...................................................19
3.5. Deliveries......................................................19
3.6. Liabilities.....................................................19
3.7. Non-Contravention................................................19
3.8. Brokers..........................................................19
3.9. Accuracy of Information..........................................20
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ARTICLE 4. COVENANTS........................................................20
4.1 Affirmative Covenants of the Companies and the Shareholders......20
4.2 Negative Covenants of the Companies..............................20
4.3. Confidentiality..................................................22
4.4. Further Assurances; Cooperation; Notification....................23
4.5. Access...........................................................23
ARTICLE 5. CONDITIONS TO OBLIGATION OF PARENT AND ACQUIRING SUBS............24
ARTICLE 6. CONDITIONS TO THE OBLIGATIONS OF BAC, BSC AND THE
SHAREHOLDERS..........................................................25
ARTICLE 7. TERMINATION AND ABANDONMENT......................................25
7.1. Methods of Termination...........................................25
7.2. Procedure Upon Termination.......................................26
ARTICLE 8. SURVIVAL AND INDEMNIFICATION.....................................26
8.1. Survival.........................................................26
8.2. Indemnification by Parent........................................27
8.3. Indemnification by Shareholders..................................27
8.4 Escrow of Parent Common Stock....................................27
8.5 Disclosure of Known Breaches.....................................28
8.6. Limitation on Indemnification....................................28
8.7. Indemnification De Minimis Threshold.............................29
8.8. Claims for Indemnification.......................................30
8.9. Netting of Claims................................................31
8.10. Claims Period...................................................31
8.11. Rejected Settlement of Claims...................................31
8.12. Limitation of Indemnification Obligations.......................31
ARTICLE 9. MISCELLANEOUS PROVISIONS.......................................31
9.1. Expenses.........................................................31
9.2. Amendment and Modification.......................................31
9.3. Waiver of Compliance; Consents...................................32
9.4. No Third Party Beneficiaries.....................................32
9.5. Notices..........................................................32
9.6. Assignment.......................................................33
9.7. Governing Law....................................................33
9.8. Counterparts.....................................................33
9.9. Headings.........................................................33
9.10. Entire Agreement................................................34
9.11. Injunctive Relief...............................................34
9.12. Arbitration.....................................................34
9.13. Attorneys Fees..................................................34
9.14. Venue Jurisdiction..............................................35
9.14. Time of the Essence.............................................35
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of February 17, 1998 (the
"Agreement"), is by and among XXXXXXX FINANCIAL SERVICES CORPORATION, a Michigan
corporation ("Parent"), BAC ACQUIRING CORP., a Michigan corporation and a wholly
owned subsidiary of Parent ("BAC Acquiring Sub"), BSC ACQUIRING CORP., a
Michigan corporation and a wholly owned subsidiary of Parent ("BSC Acquiring
Sub") (BAC Acquiring Sub and BSC Acquiring Sub together being the "Acquiring
Subs"), Bloomfield Acceptance Company, L.L.C., a Michigan limited liability
company ("BAC"), Bloomfield Servicing Company, L.L.C., a Michigan limited
liability company ("BSC") (BAC and BSC together being the "Companies"), XXXXXX
X. XXXXX, a shareholder of BAC and BSC ("Xxxxx"), XXXXXXXXX X. XXXXX, a
shareholder of BAC and BSC ("Xxxxx"), XXXXXX XXXXXXXXXX, a shareholder of BAC
and BSC ("Drolshagen"), XXXXX XXXXXXX, a shareholder of BAC and BSC ("Xxxxxxx"),
XXXXXXXX XXXXXXXXX, a shareholder of BAC and BSC ("Xxxxxxxxx"), XXXXXXX XXXXXXX,
a shareholder of BAC and BSC ("Xxxxxxx"), XXXXX XXXXXXXX, a shareholder of BAC
("Xxxxxxxx"), XXXXX X. XXXXXXX, a shareholder of BAC and BSC ("Xxxxxxx"),
XXXXXXXXX X. XXXXXXXX, a shareholder of BAC and BSC ("Zelenock") and XXXXXXX X.
XXXXX, a shareholder of BAC and BSC ("Urban") (each a "Shareholder" and
collectively, the "Shareholders").
RECITALS
A. BAC and BSC are both currently Michigan limited liability companies.
However, BAC and BSC have heretofore elected to be taxed as corporations.
Therefore, the references in this Agreement to the Shareholders of BAC and BSC,
respectively, reflect the fact that the Companies have become corporate in their
status for Federal income tax purposes, that their members have become
"shareholders" in that regard and that the Shareholders' member interests are
treated as shareholdings.
B. The Boards of Directors of Parent and BAC Acquiring Sub and the
shareholder of BAC Acquiring Sub each have approved the merger of BAC Acquiring
Sub with and into BAC, upon the terms and subject to the conditions set forth
herein (the "BAC Merger") and deem it advisable and in the best interests of
their respective shareholders that the foregoing merger be consummated;
C. The Boards of Directors of Parent and BSC Acquiring Sub and the
shareholder of BSC Acquiring Sub each have approved the merger of BSC Acquiring
Sub with and into BSC, upon the terms and subject to the conditions set forth
herein (the "BSC Merger") and deem it advisable and in the best interests of
their respective shareholders that the foregoing merger be consummated;
D. The Boards of Directors of Parent and the Acquiring Subs and the
shareholder of the Acquiring Subs have determined that the BAC Merger and the
BSC Merger are in the best interests of Parent, the Acquiring Subs, and their
respective shareholders, and have approved and adopted this Agreement and
consented to the transactions contemplated hereby;
E. The Managers and Shareholders of BAC have determined that the BAC
Merger is in the best interests of BAC and its Shareholders, and have
unanimously approved and adopted this Agreement and consented to the
transactions contemplated hereby;
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F. The Managers and Shareholders of BSC have determined that the BSC
Merger is in the best interests of BSC and its Shareholders and have unanimously
approved and adopted this Agreement and consented to the transactions
contemplated hereby; and
G. For Federal income tax purposes, it is intended that the BAC Merger
and the BSC Merger (together the "Mergers") will qualify as reorganizations
within the meaning of Section 368(a)(2)(E) of the Internal Revenue Code of 1986,
as amended (the "Code").
NOW, THEREFORE, in reliance on the respective representations and
warranties and in consideration of the respective covenants and agreements
contained herein, the parties hereto agree as follows:
ARTICLE 1.
THE MERGER
1.1. The Mergers.
Simultaneously with the Closing (defined below), the parties will
effect the Mergers by filing with the appropriate authorities the required
number of duly executed Certificates of Merger substantially in the form of
Exhibits 1.1A and 1.1B, respectively. The Mergers will become effective at the
time specified in the respective Certificates of Merger (the "Effective Time").
1.2. Surviving Companies.
At the Effective Time, BAC Acquiring Sub will be merged with and into
BAC and BSC Acquiring Sub will be merged with and into BSC, in accordance with
the applicable provisions of the Michigan Business Corporation Act and the
Michigan Limited Liability Company Act (the "Acts"), whereupon the separate
existence of each of the Acquiring Subs will cease and BAC and BSC,
respectively, will continue as the surviving entities (the "Surviving
Companies"). The identity, existence, rights, privileges, powers, franchises,
properties and assets of BAC and BSC, respectively, shall continue unaffected
and unimpaired by the Merger, and all of the rights, privileges, powers,
franchises, properties, and assets of the respective Acquiring Subs shall be
vested in the respective Surviving Companies.
1.3. Merger Consideration.
The consideration payable to the Shareholders shall consist of the
following:
(a) At the Closing, as defined, Parent shall issue to the
Shareholders 272,727 shares of Parent common stock, without par value
(the "Initial Consideration"); and
(b) At the Closing, Parent shall issue 9,091 shares of Parent
common stock to certain Shareholders (the "Special Consideration"),
which stock will be placed in escrow pursuant to an escrow agreement to
be entered into between Parent, the Shareholders receiving the Special
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Consideration and an escrow agent (the "Special Consideration Escrow
Agreement"), substantially in the form attached hereto as Exhibit
1.3(b);
(c) On or before May 31, 1999, Parent will issue to the
Shareholders that number of shares of Parent common stock equal in
value to $500,000 (the "Additional Consideration", and collectively
with the Initial Consideration and the Special Consideration, the
"Shares") if, but only if, the business of the Surviving Companies has
attained (on a cumulative basis from the date of Closing) an annualized
Return on Investment, as defined below, of not less than 15.0% (the
"Required ROI") for the period ended March 31, 1999, subject to the
following adjustments:
(i) If the Required ROI under Section 1.3(c) above
has not been attained and the Additional Consideration has not
been earned during the period ended March 31, 1999, on or
before May 31, 2000, Parent will issue to the Shareholders
that number of shares of Parent common stock equal in value to
the Additional Consideration if, but only if, the business of
the Surviving Companies has attained (on a cumulative basis
from the date of Closing) the Required ROI as of the end of
any quarter annual period ending after March 31, 1999, but not
later than March 31, 2000; and
(ii) If the Required ROI under Section 1.3(c)(i)
above has not been attained and the Additional Consideration
has not been earned during the period ended March 31, 2000,
but the business of the Surviving Companies has attained (on a
cumulative basis from the date of Closing) an annualized
Return on Investment of not less than 10.0% (the "Minimum
ROI"), on or before May 31, 2000, Parent will issue to the
Shareholders that number of shares of Parent common stock
equal in value to the prorata portion of the shares of Parent
common stock which would have been issued had the Required ROI
been achieved. The shares of Parent common stock to be issued
will be equal in value to that portion of the Additional
Consideration determined by multiplying the Additional
Consideration by a fraction in which the numerator is the
actual cumulative Return on Investment through March 31, 2000,
and the denominator is the Required ROI, each measured on an
annualized basis through March 31, 2000.
(d) For purposes of this Section 1.3, Return on Investment
means the quotient, calculated on an annual basis, of (x) the earnings
before taxes (but after deduction of interest) of the Surviving
Companies for the applicable period, divided by (y) Parent's investment
in the business of the Surviving Companies. Parent's investment in the
business of the Surviving Companies shall equal the sum of $3,500,000
plus all capital expenditures in excess of $10,000. The computation of
Return on Investment shall be calculated:
(i) in accordance with generally accepted accounting
principles, applied on a basis consistent with prior periods;
(ii) after elimination of the accounting effect of
all intercompany transactions between the Surviving Companies;
and
(iii) after elimination of the accounting effect of
FASB 125 and any subsequent amendments to FASB 125, e.g.,
elimination of the adjustments to the financial statements
which set up any servicing rights, servicing liabilities,
forecasted
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securitization profits, interest-only strip receivables, etc.
as currently required by FASB 125 and any subsequent
amendments.
Return on Investment of the Surviving Companies for the period
ending March 31, 1999 will be determined on or before May 15, 1999 and
for the applicable four fiscal quarters ending on any quarter-annual
date thereafter through March 31, 2000, respectively, within forty-five
(45) days after the end of such period. The Additional Consideration
will be issued on or before the end of the month in which the
respective determination of Return on Investment is made.
(e) In the event that the Required ROI has not been achieved
on or before the measurement period ending March 31, 2000, due to the
timing of securitizations of loans, which securitizations occur
subsequent to that date, the achievement of both the Required ROI and
the Minimum ROI will be re-measured as of June 30, 2000 so as to take
into account on a prorata basis the income attributable to loans
securitized during the additional three month period from April 1, 2000
through June 30, 2000, provided that those loans have either been
closed (and warehoused) or were subject to accepted loan commitments in
force as of March 31, 2000 (and are closed so as to be included in a
completed securitization on or before June 30, 2000). In making that
redetermination, expenses incurred that are directly associated with
the closing and warehousing of those loans, and/or the related
securitization, during that three month period will be taken in
account, but not any other expenses.
(f) The shares of Parent common stock issued in respect of the
Additional Consideration will be valued by taking the average of the
mean between the bid and ask closing quotations (or, if available, the
closing prices) of such shares on the NASD Over the Counter Bulletin
Board (or equivalent trading market on which the shares are then
traded) for the last ten (10) trading days prior to the date set for
issuance of such shares.
1.4. Conversion of Shares.
At the Effective Time:
(a) The equity interest of each Shareholder of BAC and each
Shareholder of BSC outstanding immediately prior to the Mergers will,
by virtue of the BAC Merger and BSC Merger and without any action on
the part of the holder thereof, be converted into (i) the right to
receive the shares of Parent common stock issued in respect of the
Initial Consideration, as set forth below; (ii) the right to receive
the shares of Parent common stock issued in respect of the Special
Consideration, as set forth below; and (ii) the right to receive the
shares of Parent common stock, adjusted to the nearest whole number,
equal to each Shareholder's Distribution Percentage, as set forth
below, multiplied by the total number of shares, if any, of Parent
common stock issued in respect of the Additional Consideration as
determined in Section 1.3(c) and in accordance with Section 1.3(f)
above:
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Additional
Consideration
Initial Special Distribution
Shareholder Consideration Consideration Percentage
----------- ------------- ------------- ----------
Xxxxx 96,730 -- 23.400%
Xxxxx 96,730 -- 23.400%
Drolshagen 25,695 -- 8.671%
Xxxxxxx 17,130 -- 4.336%
Xxxxxxxxx 5,136 -- 0.864%
Xxxxxxx 13,689 -- 3.465%
Xxxxxxxx 1,708 -- 0.864%
Xxxxxxx 9,545 5,455 21.000%
Zelenock 4,773 2,727 10.500%
Urban 1,591 909 3.500%
-------- ------- ---------
272,727 9,091 100.000%
(b) The Shareholders will cease to have any rights as
Shareholders, members or otherwise of the Companies except such rights,
if any, as they may have pursuant to the Acts.
(c) Each share of common stock of BAC Acquiring Sub, no par
value, issued and outstanding immediately prior thereto will, by virtue
of the BAC Merger and without any action on the part of the holder
thereof, be converted into a membership interest in BAC.
(d) Each share of common stock of BSC Acquiring Sub, no par
value, issued and outstanding immediately prior thereto will, by virtue
of the BSC Merger and without any action on the part of the holder
thereof, be converted into a membership interest in BSC.
(e) Any tax obligation or liability incurred by any
Shareholder as a result of the receipt of any shares of Parent common
stock issued in respect of the Initial Consideration, the Special
Consideration and the Additional Consideration is solely the obligation
of such Shareholder.
1.5. Closing.
The completion of the transactions contemplated herein and the Mergers
(the "Closing") will be effective (for the sake of any Closing prorations and
adjustments) as of the close of business on February 28, 1998, and will be
consummated on March 4, 1998 or such other date as the parties mutually agree
(the "Closing Date"). The Closing will be held at such location as the parties
mutually agree.
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1.6 Closing Deliveries.
(a) Capitalized terms not defined in this Section are defined
elsewhere in this Agreement. At the Closing, the Companies and the
Shareholders shall properly execute (as necessary), or cause to be
executed, and deliver to Purchaser the following documents:
(i) The shareholders agreement between the
Shareholders, Parent and Parent's current Board of Directors
(the "Shareholders Agreement"), substantially in the form
attached hereto as Exhibit 1.6;
(ii) Consent to Transfer, substantially in the form
attached hereto as Exhibit 1.6(ii), among Parent, BAC, BSC,
Xxxxxxx Xxxxxxxx, P.C., Xxxxxxx, Zelenock and Urban, of the
Technology Agreement, dated effective January 29, 1998 among
Systems/Software Solutions, Inc., a Michigan corporation, BAC,
BSC, Xxxxxxx Xxxxxxxx, P.C., and certain of the Shareholders;
(iii) Employment Agreements for Xxxxx and Xxxxx;
(iv) The Escrow Agreement;
(v) The Special Consideration Escrow Agreement;
(vi) Investor Questionnaires for each
Shareholder;
(vii) Assignment of Membership Interests in BAC and
BSC, substantially in the form attached as Exhibit 1.6(vii);
(viii) An opinion of Xxxxxxx Zelenock, P.C.,
addressed to Parent, substantially in the form attached as
Exhibit 5(f);
(ix) A copy of each of the Companies' Articles of
Organization, certified by the Director of the Corporation,
Securities and Land Development Bureau of the Michigan
Department of Consumer and Industry Services (the
"Department"), and a Certificate of Status for each of the
Companies issued by the Department.
(x) A certificate for each of the Companies, executed
by an officer of each Company, to the effect that (i) all of
the representations, warranties and covenants made by the
Companies in this Agreement are true and correct in accordance
with their terms on the Closing Date with the same effect as
though made on and as of the Closing Date; and (ii) all
covenants and agreements undertaken to be performed by the
Companies under this Agreement have been taken or performed in
all material respects. Attached to such certificate shall be a
copy of the Companies' operating agreements and a copy of the
minutes or resolutions approving the transactions contemplated
in this Agreement, and the officers of the Companies executing
such certificates shall certify that, as of the
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Closing Date, such operating agreements and minutes or
resolutions are true, complete and correct, have not been
altered or repealed and are in full force and effect; and
(xi) Such other documents and instruments as are
contemplated in this Agreement or as Parent or Parent's
counsel may reasonably request in order to evidence or
consummate the transactions contemplated in this Agreement or
to effectuate the purpose or intent of this Agreement,
including but not limited to certain securities forms to be
filed on behalf of the Shareholders.
(b) At the Closing, Parent shall properly execute (if
necessary) and deliver to the Shareholders:
(i) Stock certificates representing the Initial
Consideration, which will be placed in escrow pursuant to the
Escrow Agreement;
(ii) Employment Agreements for Xxxxx and Xxxxx;
(iii) The Shareholders Agreement;
(iv) The Escrow Agreement;
(v) The Special Consideration Escrow Agreement;
(vi) An opinion of Jaffe, Raitt, Heuer & Xxxxx,
Professional Corporation counsel to Parent, addressed to the
Shareholders, substantially in the form attached as Exhibit
6(d);
(vii) A copy of Parent's Restated Articles of
Incorporation, certified by the Director of the Department,
and a Certificate of Good Standing for Parent issued by the
Department;
(viii) A certificate, executed by an officer of
Parent, to the effect that (i) all of the representations,
warranties and covenants made by Parent in this Agreement are
true and correct on the Closing Date with the same effect as
though made on and as of the Closing Date; and (ii) all
covenants and agreements undertaken to be performed by Parent
under this Agreement have been taken or performed. Attached to
such certificate shall be a copy of Parent's bylaws and a copy
of the minutes or resolutions approving the transactions
contemplated in this Agreement, and the officer of Parent
executing such certificate shall certify that, as of the
Closing Date, such bylaws and minutes or resolutions are true,
complete and correct, have not been altered or repealed and
are in full force and effect; and
(ix) Such other documents and instruments as are
contemplated in this Agreement or as the Shareholders or
Shareholder's counsel may reasonably request in order to
evidence or consummate the transactions contemplated in this
Agreement or to effectuate the purpose or intent of this
Agreement.
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(c) Under Section 4.2(b) of this Agreement, the Companies have
agreed not to declare or pay, or agree to declare or pay, in any manner
whatsoever, any dividend on, or make any other distribution in respect
of, outstanding shares of capital stock, securities, options or other
interests, except from Excess Cash. Therefore, at Closing, "Excess
Cash" shall be determined as that cash which remains after the
following adjustments, effective as of the close of business on
February 28, 1998:
(i) There shall be reserved funds necessary for
operation of the Companies' businesses in the ordinary course
immediately after Closing (i.e., aggregate current assets of
the Companies shall equal or exceed aggregate current
liabilities, after eliminating the effect of those
transactions identified in Section 1.3(d)(ii) and (iii) of
this Agreement, and there shall be on hand at least $25,000 in
cash for use by the Companies subsequent to the Effective
Time).
(ii) The Companies shall reserve and/or pay all funds
necessary for payment of closing expenses related to these
Transactions that are not in fact paid prior to Closing and
that are not such expenses that are incurred by Parent or its
Affiliates.
(iii) In determining Excess Cash, the Companies shall
adjust their income and expense as of the close of business on
February 28, 1998. Unless an expense is otherwise specifically
identifiable as related to a specific point in or period of
time, it will be assumed for Closing proration purposes that
expenses which are incurred for services provided or to be
provided with respect to periods beginning before March 1,
1998 and concluding after February 28, 1998, have been
incurred uniformly on a daily basis during the billing period
in which the adjustment and proration occurs.
(iv) If within 30 days following Closing, Parent has
not given the Shareholders notice of its objection to the
foregoing determination of Excess Cash (which notice must
contain a statement of the basis of Parent's objection), then
the determination of Excess Cash shall be final and binding on
all parties. If Parent gives notice of objection, then the
issues in dispute will be submitted for resolution by the
Parent's certified public accountants (the "Accountants"). In
that event: (i) all parties will be afforded an opportunity to
present to the Accountants any material relating to the
determination and to discuss the determination with the
Accountants; and (ii) the determination by the Accountants, as
set forth in a notice delivered to both parties by the
Accountants, will be binding and conclusive on the parties.
The foregoing procedure shall be deemed to be an "Arbitration
Proceeding" in accordance with and subject to the provisions
of Section 9.12 of this Agreement.
1.7. Articles of Organization.
The Articles of Organization of BAC and BSC, respectively, as in effect
immediately prior to the Effective Time will be the Articles of Organization of
the respective Surviving Companies until further amended in accordance with
applicable law.
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1.8. Operating Agreements.
The Operating Agreements of BAC and BSC, respectively, as in effect
immediately prior to the Effective Time will be amended and restated in the
forms attached as Exhibits 1.8A and 1.8B, respectively, and such amended and
restated Operating Agreements will be the Operating Agreements of the respective
Surviving Companies until amended or repealed in accordance with the Articles of
Organization of the respective Surviving Companies and applicable law.
1.9. Managers and Officers.
(a) Immediately after the Effective Time of the Mergers, the
managers and officers of the respective Surviving Companies will be as
set forth below, and will serve in such capacities until their
respective successors are duly elected and qualified:
BAC
MANAGERS OFFICERS
Xxxxxxx X. Xxxxxxxx Xxxxxx X. Xxxxx - President
Xxxx X. Xxxxxxxx Xxxxxxxxx X. Xxxxx - Executive Vice President
Xxxxxx X. Xxxxxxxx Xxxxxxx Xxxxxxx -Vice President
Xxxxxx X. Xxxxx Xxxxx Xxxxxxx - Vice President
Xxxxxxxxx X. Xxxxx Xxxxxx Xxxxxxxxxx - Vice President
Xxxxxxxx Xxxxxxxxx - Secretary and Treasurer
BSC
MANAGERS OFFICERS
Xxxxxxx X. Xxxxxxxx Xxxxxx X. Xxxxx - President
Xxxx X. Xxxxxxxx Xxxxxxxxx X. Xxxxx - Executive Vice President
Xxxxxx X. Xxxxxxxx Xxxxxxx Xxxxxxx -Vice President
Xxxxxx X. Xxxxx Xxxxxxxx Xxxxxxxxx - Secretary and Treasurer
Xxxxxxxxx X. Xxxxx Xxxxx Xxxxxxxx - Vice President
(b) It is contemplated that the boards of managers of each
Surviving Company will meet quarterly and that interim operating
decisions will be made by the officers of each Surviving Company,
respectively, and where necessary, by executive committees to be
populated by mostly officers of the respective Surviving Companies.
1.10 No Fractional Shares. Anything in this Agreement to the contrary
notwithstanding, any fractional shares of Parent common stock otherwise issuable
in the Merger shall be rounded upward or downward to the nearest whole number of
shares of Parent common stock. Fractional interests of .500 and greater shall be
rounded upward.
1.11 Issuance of Stock Options. In connection with the transactions
contemplated herein and to promote the success of the Surviving Companies,
including the attraction and retention of key employees, and to specifically
link their long term financial success to the success of Parent and the
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growth of its shareholder value, at the Closing Parent will award non-qualified
options to purchase up to 30,000 shares of Parent common stock pursuant to
Parent's Stock Option Plan (collectively, the "Stock Options"), in the amounts
and to those employees Xxxxx recommends to Parent's Compensation Committee, upon
the terms and conditions contained in the form of non-qualified stock option
agreement (the "Option Agreement"), attached hereto as Exhibit 1.11.
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES
OF BAC, BSC AND THE SHAREHOLDERS
Except as expressly set forth herein or in the disclosure letter
delivered to Parent by BAC, BSC and the Shareholders upon the execution and
delivery of this Agreement (the "Disclosure Letter"), BAC, BSC and each of the
Shareholders, jointly and severally, represent and warrant to Parent and to
Acquiring Subs that the following statements are true, complete and correct as
of the date hereof and shall be true, complete and correct as of the Closing
Date; provided, however, that the representations and warranties of L.B. shall
be limited to those matters concerning BAC only, and provided further that the
representations and warranties of L.B. are limited to Section 2.20 only, to
reflect the scope of her limited involvement with the Companies:
2.1. Organization and Qualification.
Each of the Companies is a limited liability company duly organized and
validly existing under the laws of the State of Michigan, has full power and
authority to carry on its business as it is now being conducted and to own,
lease and operate its properties and assets. Each of the Companies has
heretofore delivered to Parent complete and correct copies of its articles of
organization and operating agreement, as presently in effect. Each of the
Companies has delivered to Parent the appropriate documentation to show that the
Companies will be taxable as corporations for federal income tax purposes,
effective as of January 1, 1998. In addition, each of the Companies has
delivered to Parent a certificate of status, showing its existence and
qualification, from the State of Michigan bearing a date within thirty (30) days
of the date of this Agreement. Each of the Companies is duly qualified or
licensed to do business as a foreign limited liability company and is in good
standing in every jurisdiction in which the character or location of the
properties and assets owned, leased or operated by it or the nature of the
business conducted by it requires such qualification or licensing, except where
the failure to be so qualified, licensed or in good standing in such other
jurisdiction could not, individually or in the aggregate, have a material
adverse effect on the business of each of the Companies taken as a whole.
Neither of the Companies owns or controls any interest in any corporation,
partnership, joint venture or other business association or entity.
2.2. Capitalization.
BAC and BSC currently have the following members (which are referred to
in this Agreement as Shareholders) and member interests, which constitute all of
the outstanding ownership interests in the Companies:
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MEMBERS BAC BSC
------- --- ---
Xxxxx 32.81% 35.84%
Xxxxx 32.81% 35.84%
Drolshagen 12.16% 6.08%
Xxxxxxx 6.08% 6.08%
Xxxxxxxxx 1.21% 2.43%
Xxxxxxx 4.86% 4.86%
Xxxxxxxx 1.21% --
Xxxxxxx 5.32% 5.32%
Zelenock 2.66% 2.66%
Urban 0.89% 0.89%
------------------------------------------------------------
100.00% 100.00%
============================================================
All issued and outstanding shares of capital stock or other ownership
interests of each of the Companies are duly authorized, validly issued, fully
paid and nonassessable and have not been issued in violation of any preemptive
rights. There are no outstanding options, warrants, conversion privileges or
other rights to purchase or acquire any shares of capital stock or other equity
securities of either of the Companies or any outstanding securities that are
convertible into or exchangeable for such shares, securities or rights. There
are no contracts, commitments, understandings, arrangements or restrictions by
which either of the Companies or any of the Shareholders are bound to issue or
acquire any additional shares of its capital stock or other equity securities or
any options, warrants, conversion privileges or other rights to purchase or
acquire any capital stock or other equity securities of either of the Companies
or any securities convertible into or exchangeable for such shares, securities
or rights.
2.3. Authorization.
The Shareholders of each of the Companies have taken all action
required by law or the articles of organization of each of the Companies and
otherwise to authorize the execution, delivery and performance of this Agreement
and the consummation of the transactions described herein (the "Transactions").
No other consent or approval from any party is necessary to validly complete the
Transactions, other than as may be required under the Acts to effectuate the
Mergers. This Agreement has been duly and validly executed and delivered by the
Shareholders, BAC and BSC, and is the valid and binding legal obligation of each
of the Shareholders, BAC and BSC, enforceable against each of them in accordance
with its terms, subject to the effect of applicable bankruptcy, reorganization,
insolvency, moratorium, fraudulent conveyance and other laws affecting the
rights of creditors generally (the "Enforceability Exceptions"), or the
availability of specific performance, injunctive relief and other equitable
remedies and to general principles of equity (regardless of whether such
principles are considered in a proceeding in equity or at law).
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2.4. Non-Contravention.
Neither the execution, delivery and performance of this Agreement, nor
the consummation of the Transactions will: (i) violate or be in conflict with
any provision of the articles of organization or operating agreement of either
of the Companies; (ii) require that written consent first be obtained from any
third party (other than as required by the Act, specific to the Mergers only);
or (iii) constitute a default under, any instrument, agreement or obligation to
which either of the Companies is a party.
2.5. Financial Statements.
BAC has delivered to Parent the audited financial statements, including
balance sheet, statement of earnings and statement of cash flows, and notes
thereto, for BAC as of and for the fiscal years ended December 31, 1995, 1996
and 1997 (collectively, the "BAC Financial Statements"). The BAC Financial
Statements shall include the unqualified opinion of BAC's independent certified
accountants. BSC has delivered to Parent the audited financial statements,
including balance sheet, statement of earnings and statement of cash flows, and
notes thereto, for BSC as of and for the fiscal years ended December 31, 1995,
1996 and 1997 (collectively, the "BSC Financial Statements"). The BSC Financial
Statements shall include the unqualified opinion of BSC's independent certified
accountants. The BAC Financial Statements and the BSC Financial Statements each:
(i) were prepared in accordance with generally accepted accounting principles;
and (ii) fairly present the financial position and the results of operations of
BAC and BSC, respectively.
2.6. Accounts Receivable.
(i) The accounts receivable which are reflected in the BAC and
BSC Financial Statements or which arose subsequent thereto were validly obtained
in the ordinary course of business of BAC and BSC, respectively; and (ii) except
to the extent of applicable reserves shown in the balance sheets, all of the
receivables owing to each of the Companies constitute valid and enforceable
claims arising from bona fide arms-length transactions, and neither of the
Companies has received any written or oral claims, defenses or refusals to pay,
or granted any rights of set-off with respect to any receivables.
2.7. Liabilities.
To their knowledge, neither of the Companies has any liability or
obligation of any nature, whether asserted or unasserted, accrued, absolute or
contingent or otherwise, and whether due or to become due, that is not reflected
or reserved against on either the BAC Financial Statements, or the BSC Financial
Statements, except those that may have been incurred after December 31, 1997 in
the ordinary course of business and consistent with past practices.
2.8 Brokerage and Loan Sale Activities.
The business of the Companies includes originating and acting as
lender, correspondent, broker and servicing agent for commercial real estate
mortgages (with respect to directly originated whole loans) which are thereafter
sold, individually or on a pooled basis, to institutional purchasers or in
securitization transactions (collectively, the "Activities"). Neither of the
Companies has any liability or obligation of any nature, whether asserted or
unasserted, accrued, absolute or contingent or otherwise,
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and whether due or to become due, in connection with or arising from the
Activities that is not reflected or reserved against on either the BAC Financial
Statements, or the BSC Financial Statements, except those that may have been
incurred after December 31, 1997 in the ordinary course of business and
consistent with past practices. In connection with the Activities, the Companies
have entered into various servicing agreements, correspondent agreements and
purchase and sale agreements, a complete list of which is attached to the
Disclosure Letter. The Companies represent and warrant that they are in material
compliance with all of the representations and warranties made in all of the
servicing agreements, correspondent agreements and purchase and sale agreements
attached to the Disclosure Letter.
2.9. Investigations; Litigation.
There are no claims or actions by anyone against or affecting the
Companies that are pending or, to the knowledge of the Companies or any of the
Shareholders, that have been threatened. To the knowledge of the Companies or
any of the Shareholders, there is no basis for any such claim or action.
2.10. Absence of Certain Changes.
Since December 31, 1997, neither of the Companies has suffered any
adverse change in its condition (financial or otherwise), working capital,
assets, properties, liabilities, obligations, reserves or businesses, or
experienced any event or failed to take any action which could reasonably be
expected to have a material adverse effect on the business of such company.
2.11. Title to Property; Condition.
(a) BAC has good and marketable title in and to all of the
assets reflected in the BAC Financial Statements and all assets
purchased or otherwise acquired since December 31, 1997 (except for
such assets as may have been sold or otherwise disposed of in the
ordinary course of business), subject to no lien of any kind or nature;
(b) BSC has good and marketable title in and to all of the
assets reflected in the BSC Financial Statements and all assets
purchased or otherwise acquired since December 31, 1997 (except for
such assets as may have been sold or otherwise disposed of in the
ordinary course of business), subject to no lien of any kind or nature;
(c) The Companies own no, and at no prior time have owned any,
real property;
(d) The Companies do not sell from inventory; and
(e) To their knowledge, all facilities used by the Companies
in connection with their respective businesses are in good condition,
needing no major repairs and all operating equipment used by the
Companies is in good condition and operable for its intended purposes.
2.12. Tax Returns.
The Companies have delivered to Parent copies of all tax returns filed
on behalf of the Companies for 1995 and 1996 and will timely file with
appropriate taxing authorities and will provide Parent with copies of all tax
returns for the year 1997 as soon as such tax returns are available. Proper
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and accurate amounts have been and will be withheld by the Companies from their
respective employees and properly deposited in appropriate accounts, for all
periods up to and through the Closing Date in full and complete compliance with
the tax withholding, deposit and payment provisions of applicable federal, state
and local laws. Each of the Companies has filed the appropriate documentation to
elect to be taxable as corporations for federal income tax purposes as of
January 1, 1998 (the "Election"). Each of the Companies has filed all federal,
state and local, as well as other returns and reports that were required to be
filed for all periods for which returns were due up to and through the Closing
Date, and each of the Companies has made payments of all governmental taxes,
levies, duties, license and registration fees, charges or withholdings of any
nature whatsoever ("Taxes") shown to be due and payable in respect of such
returns, reports and Election. All such returns are true, correct and complete
in all material respects so that no claims for additional taxes, penalties or
interest will be asserted by any taxing authority including those arising out of
a late payment of Taxes. Neither of the Companies owes any deficiency for any
Taxes, and no tax returns are presently under audit or examination by any
federal, state or local tax authority, and neither the Companies nor the
Shareholders have received notice of any adjustments proposed or asserted by the
Internal Revenue Service or any other agency in respect of any liability for
Taxes arising out of or relating to the returns or the Election. Any and all
Taxes relating to the Companies or their operation in respect of periods prior
to March 1, 1998 are the sole and exclusive obligation of the Shareholders and
will be duly paid and discharged as and when they become due and payable. To the
extent any such taxes are levied against the Companies after February 28, 1998
but in respect of activities or items prior to March 1, 1998, if the
Shareholders fail to timely pay or otherwise provide to the satisfaction of
Parent for such taxes, the Companies may pay and discharge such Taxes and
thereafter be reimbursed therefor by the Shareholders without regard to the
limitations or restrictions, if any, contained in Section 8.6 of this Agreement.
2.13. Insurance.
The Disclosure Letter contains an accurate and complete list of all
policies of fire and other casualty, general liability, theft, life, workers'
compensation, health, directors and officers liability, business interruption
and other forms of insurance owned or held by the Companies, specifying the
insurer, the policy number, the term of the coverage and, in the case of any
"claims made" coverage, the same information as to predecessor policies for the
previous five years. All premiums that are due as of the date hereof and as of
the Closing Date with respect thereto have been paid (or will be paid in the
ordinary course within policy requirements) and no notice has been received by
either the Companies or the Shareholders that the present policies are not in
full force and effect. Neither of the Companies has been denied any form of
insurance and no policy of insurance has been revoked or rescinded during the
past three years, except as described in the Disclosure Letter.
2.14. Benefit Plans.
Neither of the Companies maintains, nor is party to, bound by or a
contributor to, or required to contribute to, (a) any employee pension benefit
plans whether or not qualified under Section 401(a) of the Code, (b) any
employee welfare benefit plans, or (c) any other compensation, fringe or welfare
plan or program, policy, understanding or arrangement providing plan benefits or
welfare, with respect to its employees or employees of others (collectively, the
"Employee Plans"). As used in this Section, the terms "employee pension benefit
plan" and "employee welfare benefit plan" will have the respective meanings
assigned to such terms in Section 3 of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"). Each Employee Plan meets all applicable
requirements of ERISA, and has been operated and administered in accordance with
the Code, ERISA and the plan document. All required
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government filings and disclosures have been timely and fully made, are true,
correct and complete in all material respects, and no prohibited transaction or
other act or omission which could result in the imposition of an excise tax has
occurred.
2.15. Contracts and Commitments; No Default.
The Disclosure Letter sets forth a complete and accurate list of all
written agreements or other binding commitments or proposals involving the
provision of goods or services to or by BAC or BSC involving an aggregate sale
price or consideration of more than $5,000, or which are not terminable without
penalty at the option of BAC or BSC upon no more than thirty (30) days' notice
(the "Contracts"). The aggregate amount of the liabilities or obligations for
the provision or purchase of goods or services by BAC and BSC under written
agreements or other binding commitments or proposals not listed in the
Disclosure Letter does not exceed $50,000. The Companies have made available to
Parent true and accurate copies of the Contracts. The Contracts are valid,
binding and in full force and effect, and are enforceable in accordance with
their respective material terms (subject to the Enforceability Exceptions).
Neither of the Companies is in default under any of the Contracts, nor has any
notice of default been received by either of the Companies. To their knowledge,
all other parties to the Contracts have performed or are performing all material
obligations required to be performed by them and are not in default thereunder.
2.16. Labor Matters.
The Disclosure Letter sets forth a list of all employees of the
Companies and includes their position, current salary and 1997 wage information
for each person. Except as set forth in the Disclosure Letter and except as are
not material to the business of either of the Companies: (i) each of the
Companies is and has at all times been in compliance with all applicable laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours, including without limitation any such laws
respecting employment discrimination and occupational safety and health
requirements, and has not and is not engaged in any unfair labor practice; (ii)
there is no unfair labor practice complaint against either of the Companies or
any of the Shareholders pending or, to the knowledge of each of the Companies
and the Shareholders, threatened before the National Labor Relations Board or
any other comparable government authority; (iii) there is no labor strike,
dispute, slowdown or stoppage actually pending or, to the knowledge of each of
the Companies and the Shareholders, threatened against or directly affecting
either of the Companies; (iv) no collective bargaining agreement is binding and
in force against either of the Companies or is currently being negotiated by
either of the Companies or the Shareholders; (v) neither of the Companies is
delinquent in payments to any person for any wages, salaries, commissions,
bonuses or other direct or indirect compensation for any services performed by
them or amounts required to be reimbursed to such persons, including without
limitation any amounts due under any pension plan, welfare plan or compensation
plan; and (vi) there has not been, within one year of the date hereof, any
written or verbal communication to Xxxxx or Xxxxx, by any current officer or key
employee of either of the Companies, expressing a desire to terminate such
person's employment.
2.17. Intellectual Property Rights.
Neither of the Companies owns or uses any patents, trade names, service
names, trademarks, service marks or copyrights, or applications therefor, nor
has it conducted business under any corporate, trade or fictitious name other
than its current corporate name. There are no pending or, to the
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knowledge of the Companies and the Shareholders, threatened claims of
infringement upon the rights to any intellectual or intangible property of
others or, except as set forth in the Disclosure Letter, any agreements or
undertakings with respect to any such rights.
2.18. Hazardous Substances and Hazardous Wastes.
To the knowledge of the Companies, there is not now, nor has there ever
been, any disposal, release or threatened release of Hazardous Materials (as
defined below) on, from or under properties leased by or to either of the
Companies or subject to pending or completed foreclosure procedures by BAC (the
"Properties"). There has not been generated by or on behalf of either of the
Companies any Hazardous Material, other than in compliance with applicable law.
No Hazardous Material has been disposed of or allowed to be disposed of by or on
behalf of either of the Companies on or off any of the Properties during the
period that either of the Companies leased the property which may, to the
knowledge of the Companies and the Shareholders, give rise to a clean-up
responsibility, personal injury liability or property damage claim against
either of the Companies or either being named a potentially responsible party
for any such clean-up costs, personal injuries or property damage or create any
cause of action by any third party against either of the Companies. For purposes
of this subsection, the terms "disposal," "release," and "threatened release"
shall have the definitions assigned thereto by the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, and the term
"Hazardous Material" means any hazardous or toxic substance, material or waste
or pollutants, contaminants or asbestos containing material which is or becomes
regulated by any Authority in any jurisdiction in which any of the Properties is
located. The term "Hazardous Material" includes without limitation any material
or substance which is (i) defined as a "hazardous waste" or a "hazardous
substance" under applicable Law, (ii) designated as a "hazardous substance"
pursuant to Section 311 of the Federal Water Pollution Control Act, (iii)
defined as a "hazardous waste" pursuant to Section 1004 of the Federal Resource
Conservation and Recovery Act, or (iv) defined as a "hazardous substance"
pursuant to Section 101 of the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
2.19. Brokers.
Neither the Shareholders nor either of the Companies or any of their
respective directors, officers or employees has employed any other broker,
finder, or financial advisor or incurred any liability for any brokerage fee or
commission, finder's fee or financial advisory fee, in connection with the
transactions contemplated hereby, nor is there any basis known to either of the
Companies or any of the Shareholders for any such fee or commission to be
claimed by any person or entity.
2.20. Shareholders' Representations.
In addition to the foregoing representations of each of the
Shareholders, each of the Shareholders individually represents and warrants to
Parent as follows:
(a) The Shareholder is acquiring the Shares pursuant to the
Mergers for such Shareholder's sole account (and such Shareholder
and/or such Shareholder's immediate family members and/or trusts for
their benefit will be the sole beneficial owner or owners thereof) for
the purpose of investment and not with a view to distribution thereof
within the meaning of the Securities Act of 1933, as amended and the
rules and regulations thereunder (the "Securities Act"), nor with any
present intention of distribution or selling such Shares in connection
with
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any such distribution, and such Shareholder understands that such
shares have not been registered under the Securities Act or any
applicable state securities law and therefore cannot be resold unless
they are registered under the Securities Act and any applicable state
securities laws or unless an exemption from registration is available.
The Shareholder acknowledges that the Shares will be subject to the
restrictions of Rule 144 of the Securities Act, which governs the
public sale in ordinary trading transactions of "restricted securities"
and of securities owned by affiliates. Restricted securities are
securities acquired directly or indirectly from an issuer or an
affiliate in a transaction not involving any public offering. In
addition, the Shareholder acknowledges that the Shares may also be
subject to the restrictions of Rule 145 of the Securities Act, which
restricts the resale of securities issued in connection with a
reclassification, merger or consolidation, or transfer of assets.
(b) The Shareholder has been provided with a copy of Parent's
prospectus dated November 13, 1997 (the "Prospectus") and has had
sufficient time to review and consider the Prospectus. The Shareholder
has been afforded an opportunity to ask questions of and receive
answers from representatives of Parent concerning the Prospectus and to
obtain any additional information by written request to verify the
accuracy of the Prospectus and to obtain copies of any documents
identified in the Prospectus. In addition to the Prospectus, there are
available over the Internet various public filings made by the Parent
with the Securities and Exchange Commission pursuant to its XXXXX
filing requirements (the "Parent Reports"). The Shareholder has had
access to, and has had sufficient time to review and consider, such
Parent Reports. The Shareholder has been afforded an opportunity to ask
questions of and receive answers from representatives of Parent
concerning the terms and conditions of the Transactions and to obtain
any additional information as such Shareholder has requested in writing
to verify the accuracy of the Parent Reports and copies of any exhibits
identified in such documents that such Shareholder has requested.
(c) The Shareholder has accurately and truthfully completed
and executed the Investor Questionnaire, in the form of Exhibit 2.20.
(d) The Shareholder has consented to the following legend on
the certificate or certificates for the Shares to be issued to each
such Shareholder in connection with the Mergers:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
APPLICABLE STATE SECURITIES LAWS AND MAY BE SOLD, PLEDGED,
ASSIGNED OR OTHERWISE TRANSFERRED ONLY IF A REGISTRATION
STATEMENT WITH RESPECT TO SUCH TRANSACTION IS IN EFFECT
PURSUANT TO THE PROVISIONS OF SUCH LAWS OR IF, IN THE OPINION
OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER, AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS IS AVAILABLE.
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2.21. Accuracy of Information.
No representation or warranty in this Agreement by the Companies or the
Shareholders, nor any statement in their Disclosure Letter, to the knowledge of
the Companies or the Shareholders contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained therein or herein not misleading.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
OF PARENT
Parent represents and warrants to the Shareholders that the following
statements are true, complete and correct as of the date hereof and shall be
true, complete and correct as of the Closing Date, with respect to Parent and
the Acquiring Subs, and their respective businesses:
3.1. Organization.
Each of Parent and the Acquiring Subs is a corporation duly organized,
validly existing and in good standing under the laws of the State of Michigan
and each has all requisite corporate power and authority to own, lease and
operate its respective properties and to carry on its business as it is now
being conducted. Acquiring Subs are recently-formed Michigan corporations that
have not conducted, and will not conduct prior to the Closing, any activities
other than those incident to their formation and in connection with the
consummation of the Mergers. Each of Parent and Acquiring Subs is duly qualified
and in good standing to do business in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification necessary and where the failure to qualify could have a
material adverse effect on the business, results of operations or financial
condition of the Parent and its subsidiaries taken as a whole.
3.2. Authority and Validity of Agreement.
The execution and delivery of this Agreement and the consummation of
the Transactions have been duly and validly authorized and approved by the
Boards of Directors of Parent and Acquiring Subs and the shareholder of the
Acquiring Subs, and no other corporate proceedings on the part of Parent or
either of the Acquiring Subs are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed by each of Parent and the Acquiring Subs and constitutes
valid and binding obligations of Parent and each of the Acquiring Subs,
enforceable against each of them in accordance with their terms, subject to the
Enforceability Exceptions or the availability of specific performance,
injunctive relief and other equitable remedies and to general principles of
equity (regardless of whether such principles are considered in a proceeding in
equity or at law).
3.3. Consents and Approvals.
The execution and delivery of this Agreement and the consummation of
the Transactions will not, except for any applicable requirements of the
Securities Act and state securities laws, and the filing
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and recordation of appropriate merger documents as required by the Acts, require
any filing with or permit, consent or approval of any authority.
3.4. Capitalization.
The authorized capital stock of the Parent consists of 10,000,000
shares of common stock and 10,000,000 shares of preferred stock, of which there
were 1,295,000 shares of Parent common stock issued and outstanding as of
January 31, 1998. The Shares to be issued and delivered in the Mergers will be,
at the time of issuance and delivery, validly issued, fully paid, nonassessable
and free of preemptive rights.
3.5 Deliveries
Parent has delivered to the Companies and the Shareholders the
Prospectus, copies of all filings with the Securities and Exchange Commission
since the date of the Prospectus and a disclosure letter ("Parent's Disclosure
Letter") provided by Parent to the Companies and the Shareholders prior to the
execution of this Agreement. Parent has delivered to the Companies and the
Shareholders, as part of its filings with the Securities and Exchange
Commission, a copy of Parent's special financial report on Form 10-K, including
audited financial statements for the period June 30, 1997 to September 30, 1997
and a copy of Parent's quarterly report on Form 10-Q, for the quarterly period
ended December 31, 1997. Except as set forth in Parent's Disclosure Letter,
Parent's 1997 audited financial statements and the financial statements
contained in Parent's quarterly report for the period ended December 31, 1997;
(i) were prepared in accordance with generally accepted accounting principles;
and (ii) fairly present the financial position and the results of operations of
Parent for the period therein reflected, subject in the case of the quarterly
statements to audit and customary year-end adjustments.
3.6 Liabilities
Except as described in Parent's Disclosure Letter, Parent does not have
any liability or obligation of any nature, whether asserted or unasserted,
accrued, absolute or contingent or otherwise, and whether due or to become due,
that is not reflected or reserved against on Parent's Financial Statements,
except those that may have been incurred after December 31, 1997 in the ordinary
course of business and consistent with past practices.
3.7. Non-Contravention.
Neither the execution, delivery and performance of this Agreement nor
the consummation of the transactions contemplated herein will: (i) violate or be
in conflict with any provision of the articles of incorporation or bylaws of
Parent or either of the Acquiring Subs; or (ii) to the knowledge of Parent
constitute a default under, any instrument or other agreement or obligation to
which the Parent or either of the Acquiring Subs is a party.
3.8. Brokers
Parent has employed no broker, finder, or financial advisor or incurred
any liability for any brokerage fee or commission, finder's fee or financial
advisory fee, in connection with the Transactions, nor is there any basis known
to Parent for any such fee or commission to be claimed by any person or entity.
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3.9. Accuracy of Information.
No representation or warranty in this Agreement by Parent, or any
statement in Parent's Disclosure Letter, to the knowledge of Parent, contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained therein or herein not
misleading. Except as disclosed in Parent's Disclosure Letter, Parent has no
knowledge of any information which if made public, would materially impact the
trading price of Parent's common stock.
ARTICLE 4.
COVENANTS
4.1 Affirmative Covenants of the Companies and the Shareholders. The
Companies and the Shareholders hereby covenant and agree with Parent and the
Acquiring Subs that, prior to the Closing, unless otherwise expressly
contemplated by this Agreement or consented to, in writing, by Parent, the
Companies each shall:
(a) Operate its business in the usual and ordinary course,
consistent with reasonable past practices;
(b) Use reasonable efforts to preserve intact its business
organization and assets, maintain its material rights and franchises,
retain the services of its officers, key employees and managers, and
maintain existing good relationships with its material customers,
clients, vendors and suppliers;
(c) Use reasonable efforts to keep in full force and effect
all liability insurance and bonds comparable in amount and scope of
coverage to that currently maintained;
(d) Confer with Parent from time-to-time at Parent's
reasonable request to report on all operational matters of a material
nature, and to report periodically, as Parent shall reasonably request,
on the general status of the ongoing operations of the business of the
Companies;
(e) Provide Parent with monthly financial statements fifteen
(15) days after the end of each month; and
(f) File their federal and state income tax returns, and all
required state and local income and franchise tax returns for the
fiscal tax year coinciding with or ending in 1997 (if applicable), on
or before the due date for filing such returns (including extensions).
4.2 Negative Covenants of the Companies.
Except as expressly contemplated by this Agreement, including the
completion of the contribution of $300,000 in Systems/Software Solutions, Inc.
pursuant to the Technology Agreement, or those actions otherwise consented to in
writing by Parent, which consent shall not be unreasonably withheld, from the
date of this Agreement until the Effective Time, the Companies each shall not do
any of the following:
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(a) (i) Increase the compensation payable or to become payable
to any director, officer, manager or employee, except for increases in
salary, bonuses or wages payable or to become payable in the ordinary
course of business and consistent with past practice to employees who
are not directors, officers or managers or as set forth on Schedule
4.2, (ii) grant any severance or termination pay (other than pursuant
to normal severance policy) to, or enter into any severance agreement
with, any director, officer, manager or employee providing for payment
in excess of $5,000, (iii) enter into any employment agreement of any
nature whatsoever with any director, officer, manager or employee that
would extend beyond the Effective Time, except on an at-will basis, or
(iv) establish, adopt, enter into or amend any employee benefit plan or
arrangement, except as may be required to comply with applicable law;
(b) Declare or pay, or agree to declare or pay, in any manner
whatsoever, any dividend on, or make any other distribution in respect
of, outstanding shares of capital stock, securities, options or other
interests, except from Excess Cash, determined as provided in Section
1.6(c) of this Agreement;
(c) Issue, deliver, award, grant or sell, or authorize the
issuance, delivery, award, grant or sale of (including the grant of any
security interests, liens, claims, pledges, limitations in voting
rights, charges or other encumbrances), any shares of any class of its
capital stock (including shares held in treasury), any securities
convertible into or exercisable or exchangeable for any such shares, or
any rights, warrants or options to acquire any such shares, or amend or
otherwise modify the terms of any such rights, warrants or options, the
effect of which shall be to make such terms more favorable to the
holders thereof;
(d) Acquire or agree to acquire, by merging or consolidating
with, by purchasing an equity interest in or a 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 of any
other person (other than the purchase of assets from suppliers or
vendors in the ordinary course of business);
(e) Sell, lease, exchange, mortgage, pledge, transfer or
otherwise dispose of, or agree to sell, lease, exchange, mortgage,
pledge, transfer or otherwise dispose of, any amount of any of its
operating assets, except for actions taken in the ordinary course of
business and consistent with reasonable past practices;
(f) Except as set forth in the Disclosure Letter, the
Shareholders agree not to sell or transfer their shares or other
ownership interests in the Companies;
(g) Adopt any amendments to the articles of organization or
operating agreements of the Companies;
(h) Change any methods of accounting in effect at December 31,
1997, or make (including an election to file a Subchapter S Return) or
rescind any express or deemed election relating to taxes, settle or
compromise any claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to Taxes, or
change any method of reporting income, gain, expense, loss or deduction
for foreign, federal, state, provincial or local income tax
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purposes from those employed in the preparation of income tax returns
for taxable years ending on or prior December 31, 1997, except as may
be required by law or for the purpose of implementing the Companies'
earlier election to be taxed as a corporation under the Code;
(i) Incur any obligation for borrowed money or purchase money
indebtedness, whether or not evidenced by a note, bond, debenture or
similar instrument, except for those borrowings made with the prior
written consent of Parent, or in the ordinary course of the Companies'
business;
(j) Agree in writing or otherwise to do any of the foregoing
unless the terms of such agreement are terminable upon the Effective
Time of the Merger contemplated in this Agreement;
(k) (i) perform any act which, if performed, would prevent or
excuse the performance of this Agreement by the Companies or which
would result in any representation or warranty herein contained of the
Companies to be untrue in any material respect and result in a material
adverse effect, if originally made on and as of the Effective Time, or
(ii) fail to perform any act which, if omitted to be performed, would
prevent or excuse the performance of this Agreement by the Companies or
which would result in any representation or warranty herein contained
of the Companies to be untrue in any material respect and result in a
material adverse effect, if originally made on and as of the Effective
Time; or
(l) Initiate, solicit or encourage (including by way of
furnishing any information or assistance in connection with) any
inquiries or the making of any offer that constitutes, or may
reasonably be expected to lead to, any "Competing Transaction" (as such
term is defined below), enter into discussions or negotiate with any
person or entity in furtherance of such inquiries or to obtain a
Competing Transaction. The Companies shall promptly notify Parent if
any such inquiries or proposals are received by the Companies or by any
of their respective officers, directors, financial advisors, attorneys,
accountants or other representatives. For purposes of this Agreement,
the term "Competing Transaction" shall mean any of the following
involving the Companies (other than the transactions contemplated by
this Agreement): (i) any merger, consolidation, share exchange,
business combination, or other similar transaction; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition of the
assets of the Companies or a subsidiary thereof, in a single
transaction except as permitted in Section 4.2 (e); (iii) any sale or
exchange for any outstanding shares of capital stock of the Companies
or any subsidiary thereof; or (iv) any agreement to, or announcement by
the Companies of a proposal, plan or intention, to do any of the
foregoing.
4.3. Confidentiality.
The parties hereto reconfirm that Confidentiality Agreement executed on
December 1, 1997, and in connection therewith, will not use, or permit the use
of, any of the information relating to any other party hereto furnished to it in
connection with the Transactions ("Information") in a manner or for a purpose
detrimental to such other party or otherwise than in connection with the
Transactions, and they will not disclose, divulge, provide or make accessible
(collectively, "Disclose"), or permit the Disclosure of, any of the Information
to any person or entity, other than their responsible directors, officers,
employees, investment advisors, accountants, counsel and other authorized
representatives and agents, except as may be required by judicial or
administrative process. Except as may be required of
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Parent, in the sole opinion of Parent's counsel, to comply with applicable
securities law, each of the parties agrees to keep in confidence the fact of and
content of the negotiations and the agreements concerning the Transactions and
the Mergers until such time as a joint public announcement is issued. In the
event Parent seeks to issue a public announcement, a copy of the proposed
announcement will be provided to Xxxxx not less than twenty four (24) hours
before the proposed issue time. If Parent and Xxxxx cannot agree to the language
of the announcement prior to the proposed issue time, Parent may nevertheless
issue the announcement if, in the sole opinion of Parent's counsel, the
announcement is required to comply with applicable securities laws. The parties
hereto also will promptly return to the party from whom originally received all
original and duplicate copies of written materials containing Information should
the Transactions not occur. Notwithstanding anything to the contrary, this
Section shall supersede and take precedence over paragraph 12 of that letter of
intent entered into between Parent, the Companies and the Shareholders, dated
January 7, 1998 (but not the Confidentiality Agreement referred to therein).
This Section 4.3 survives Closing and any termination of this Agreement.
4.4. Further Assurances; Cooperation; Notification.
(a) Each party hereto will, before, at and after Closing,
execute and deliver such instruments and take such other actions as the
other party or parties, as the case may be, may reasonably require in
order to carry out the intent of this Agreement, including, but not
limited to, any securities filings.
(b) At all times from the date hereof until the Closing, each
party will promptly notify the other in writing of the occurrence of
any event which it reasonably believes will or may result in a failure
by such party to satisfy the conditions specified in Article 5 and
Article 6 hereof.
4.5. Access.
(a) Between the date of this Agreement and the Closing and at
all times subject to the Confidentiality Agreement, BAC and BSC will
(a) afford Parent and its Representatives ("Parent's Advisors")
reasonable access to BAC's and BSC's officers, offices, contracts,
books and records, and other documents and data; (b) furnish Parent and
Parent's Advisors with copies of all such contracts, books and records,
and other existing documents and data as Parent may reasonably request;
and (c) furnish Parent and Parent's Advisors with such additional
financial, operating, and other data and information as Parent may
reasonably request.
(b) Between the date of this Agreement and the Closing and at
all times subject to the Confidentiality Agreement, Parent will (a)
afford the Companies and their Representatives (the "Companies'
Advisors") reasonable access to Parent's officers, offices, contracts,
books and records, and other documents and data; (b) furnish the
Companies and the Companies' Advisors with copies of all such
contracts, books and records, and other existing documents and data as
the Companies may reasonably request; and (c) furnish the Companies and
the Companies' Advisors with such additional financial, operating, and
other data and information as the Companies may reasonably request. For
purposes of this Section, the "Advisor" of a party is defined as any
director, officer, agent, consultant, advisor or other professional
representative of that party, including legal counsel, accountants and
financial advisors.
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ARTICLE 5.
CONDITIONS TO OBLIGATION OF PARENT AND ACQUIRING SUBS
The following are conditions to the obligations of the Parent and
Acquiring Subs to close the Transactions:
(a) No material adverse changes, which shall be defined as the
Companies' inability to perform their businesses substantially in the
manner and substantially to the extent previously performed, shall have
occurred with respect to the Companies, their businesses and the
markets for their products and services between December 31, 1997 and
the Closing;
(b) Each of the representations and warranties of the
Companies and the Shareholders contained in this Agreement shall be
true and correct in all material respects as of the Closing as though
made on and as of the Closing, and Parent shall have received an
officer's certificate from each of the Companies to that effect;
(c) The full performance in all material respects of all
obligations of each of the Companies and the Shareholders contained in
this Agreement;
(d) Both the BAC and BSC Financial Statements shall fully
comply with Regulation S-X of the Rules and Regulations so as to allow
Parent to satisfy its SEC filing and reporting obligations in respect
of the Transactions;
(e) The execution and delivery of the Shareholders Agreement
to Parent;
(f) The execution and delivery of the Technology Agreement;
(g) Parent's receipt of the opinion of Xxxxxxx Xxxxxxxx, P.C.,
counsel for the Companies, dated on the Closing Date, substantially in
the form attached as Exhibit 5(g);
(h) The execution and delivery of employment agreements by and
between the respective Surviving Companies and Xxxxx and Xxxxx, in the
form reasonably agreed to by and between Parent, Xxxxx and Xxxxx
respectively, and attached hereto as Exhibit 5(h) (the "Employment
Agreements");
(i) Consents from all other third parties whose consent is
necessary to the Transactions under this Agreement shall have in fact
been obtained or waived;
(j) The absence of indication that the following businesses
will cease to do business with the Companies after notice of the
proposed Transactions: Nomura Asset Capital Corporation, Lincoln
National Life Insurance Company (or its affiliates), Sun-America Life
Insurance Company (or its affiliates), Metropolitan Realty Corporation
and Allstate Life Insurance Company; and
(k) The absence of any injunction, court decree or similar
ruling which prohibits the consummation of the Transactions.
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ARTICLE 6.
CONDITIONS TO THE OBLIGATION OF BAC, BSC AND THE SHAREHOLDERS
The following are conditions to the obligations of the Companies and
the Shareholders to close the Transactions:
(a) No material adverse changes, which does not include a
decline in the market value of Parent common stock, but is defined as
Parent's inability to perform its business substantially in the manner
and substantially to the extent previously performed, shall have
occurred with respect to Parent, its business and the market for its
products and services between December 31, 1997 and the Closing;
(b) Each of the representations and warranties of Parent and
the Acquiring Subs contained in this Agreement shall be true and
correct in all material respects as of the Closing as though made on
and as of the Closing, and the Companies shall have received an
officer's certificate from the Parent and the Acquiring Subs to that
effect;
(c) The full performance in all material respects of all
obligations of the Parent contained in this Agreement;
(d) The Companies' receipt of the opinion of Jaffe, Raitt,
Heuer & Xxxxx, Professional Corporation, counsel for Parent, dated on
the Closing Date, substantially in the form attached as Exhibit 6(d);
(e) The execution and delivery of the Technology Agreement;
(f) The arrangement of a warehousing line of credit or other
credit or securitization facility, as deemed necessary by BAC and
Parent;
(g) The receipt by Xxxxx and Xxxxx of the Employment
Agreements; and
(h) The absence of any injunction, court decree or similar
ruling which prohibits the consummation of the Transactions.
ARTICLE 7.
TERMINATION AND ABANDONMENT
7.1. Methods of Termination.
This Agreement may be terminated and the transactions contemplated
herein may be abandoned in accordance with the following:
(a) By mutual written consent of Parent, each of the Acquiring
Subs, each of the Companies and Shareholders holding a majority in
interest in BAC and BSC;
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(b) By Parent and the Acquiring Subs, if a material breach of
a representation or warranty of Article 2 is discovered prior to
Closing and cannot be resolved pursuant to Section 8.5;
(c) By Parent and the Acquiring Subs, if any of the conditions
provided for in Article 5 have not been satisfied in all material
respects or waived in writing by Parent prior to Closing; or
(d) By the Companies and the Shareholders, if a material
breach of a representation or warranty of Article 3 is discovered prior
to Closing and cannot be resolved pursuant to Section 8.5;
(e) By the Companies and the Shareholders, if any of the
conditions provided for in Article 6 have not been satisfied in all
material respects or waived in writing by the Companies and
Shareholders prior to Closing; and
(f) By any party, if on March 10, 1998, the Transactions have
not closed.
7.2. Procedure Upon Termination.
In the event of termination and abandonment pursuant to
Section 7.1, written notice thereof will forthwith be given to the other party
or parties, and the provisions of this Agreement (except to the extent provided
in Section 9.1) will terminate, and the transactions contemplated herein will be
abandoned, without further action by any party hereto. If this Agreement is
terminated as provided herein: (i) each party will, upon request, redeliver all
documents, work papers and other material of any other party (and all copies
thereof) relating to the transactions contemplated herein, whether so obtained
before or after the execution hereof, to the party furnishing the same; (ii) the
confidentiality obligations of Section 4.3 will continue to be applicable; and
(iii) except as provided in this Section, no party will have any liability for a
breach of any representation, warranty, agreement, covenant or other provision
of this Agreement, unless such breach was due to a willful or bad faith action
or omission of such party or any representative, agent, employee or independent
contractor thereof.
ARTICLE 8.
SURVIVAL AND INDEMNIFICATION
8.1. Survival.
The representations, warranties and covenants of each of the parties
hereto will survive the Closing until two (2) years after the Closing Date,
except for the representations and warranties in Section 2.12, which shall
survive the Closing for the applicable statute of limitations under which claims
may be asserted.
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8.2. Indemnification by Parent.
Except as provided in Section 8.5, and subject to the limitation on
recourse set forth in Section 8.6, from and after the Effective Time Parent
agrees to indemnify each of the Shareholders from and against any and all loss,
liability or damage suffered or incurred by them (including any and all costs
and expenses, including without limitation reasonable legal fees and expenses
incurred, in connection with enforcing the indemnification rights of
Shareholders pursuant to this Section 8.2) by reason of: (i) any untrue
representation of or breach of warranty set forth in Article 3; and (ii) any
loss, liability or damage suffered or incurred by the Shareholders by reason of
any nonfulfillment of any covenant, agreement or undertaking of Parent in this
Agreement.
8.3. Indemnification by Shareholders.
Except as provided in Section 8.5 and subject to the limitation on
recourse set forth in Section 8.6, from and after the Effective Time the
Shareholders jointly and severally agree to indemnify Parent, each of the
Acquiring Subs, the Surviving Companies and their respective directors,
officers, employees and agents, from and against any and all loss, liability or
damage suffered or incurred by it (including any and all costs and expenses,
including without limitation reasonable legal fees and expenses incurred, in
connection with enforcing the indemnification rights of Parent or either of the
Acquiring Subs or the Surviving Companies pursuant to this Section 8.3) by
reason of: (i) any untrue representation of or breach of warranty set forth in
Article 2; and (ii) any and all loss, liability or damage suffered or incurred
by Parent or either of the Acquiring Subs or the Surviving Companies by reason
of any nonfulfillment of any covenant, agreement or undertaking of either of the
Companies or any Shareholder in this Agreement.
8.4. Escrow of Parent Common Stock.
At Closing, certificates representing 272,727 shares of Parent common
stock (the "Escrow Shares") shall be delivered by the Shareholders to NBD Bank,
as escrow agent (the "Escrow Agent") under an Escrow Agreement substantially in
the form attached hereto as Exhibit 8.4. The Escrow Shares shall be held in
escrow as security for any claims Parent may have pursuant to Section 8.3 for a
period of two (2) years after the Closing (the "Escrow Termination Date"), under
the terms of the Escrow Agreement. In the event that shares of Parent common
stock are issued in respect of the Additional Consideration at a time when the
Escrow Shares are still subject to the Escrow Agreement, such shares will also
be placed in escrow and will be subject to the terms of the Escrow Agreement as
part of the Escrow Shares, as if such shares had been placed in escrow at the
Closing. If at the Escrow Termination Date, no unresolved claims filed by Parent
remain outstanding, the Escrow Shares shall be released to the Shareholders. If
at the Escrow Termination Date, indemnification claims are outstanding which
equal or exceed the fair market value of the Escrow Shares, the Escrow Shares
shall remain in escrow until the resolution of the claim or claims. If at the
Escrow Termination Date, indemnification claims are outstanding and the value of
the Escrow Shares exceeds such indemnification claims, upon request by the
Shareholders, Escrow Agent may release an amount of Escrow Shares (the "Release
Shares"), provided that the Escrow Agent shall retain in escrow sufficient
shares of Parent common stock the fair market value of which is at least two (2)
times the amount of the indemnification claim or claims outstanding (the
"Reserve Shares") and provided however, that notwithstanding Section 8.6(b), if
the Reserve Shares are insufficient to cover the indemnification claims as
finally determined, the Shareholders will be jointly and severally liable for
any such deficiency up to an amount equal to what the fair market value of the
Release Shares was on the Escrow Termination Date.
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Notwithstanding any other provision of this Agreement, Parent may enforce this
liability or obligation by any action or proceeding seeking a money judgment
against any one or more of the Shareholders.
8.5 Disclosure of Known Breaches
(a) If prior to Closing, Parent has actual knowledge of any
material (either individually or cumulatively) breach of the
representations or warranties contained in Article 2 by the Companies
or the Shareholders, and fails to disclose such breach, Parent may not
proceed to Closing and claim indemnification from the Shareholders
pursuant to Section 8.3.
(b) If prior to Closing, the Shareholders have knowledge of
any material (either individually or cumulatively) breach of the
representations or warranties contained in Article 3 by Parent, and
fail to disclose such breach, the Shareholders may not proceed to
Closing and claim indemnification from Parent pursuant to Section 8.4.
(c) If a breach of the representations or warranties contained
in Article 2 or 3 is discovered by any party prior to closing (the
"Discovering Party"), the Discovering Party shall provide the breaching
party with notice of the breach and a fifteen (15) day period to cure
or resolve the breach in good faith. If the breaching party is unable
to cure or resolve the breach, the Discovering Party must either waive
the breach or terminate the Agreement pursuant to Section 7.1(b) or
(d).
8.6. Limitation on Indemnification.
The following provisions shall control all indemnity obligations and
rights under this Agreement, notwithstanding any other provision of this
Agreement to the contrary.
(a) Except as provided in Section 8.7(b), and except with
respect to indemnification obligations arising by reason of a breach of
a representation or warranty under Section 2.12 of this Agreement, the
Shareholders' aggregate indemnification obligations under this Article
8 will be limited to the shares of Parent common stock issued in
respect of the Initial Consideration and the Additional Consideration.
Except as provided in Section 8.7(b), Parent's aggregate
indemnification obligations under this Article 8 will be limited to
$3,500,000.
(b) Except with respect to indemnification obligations arising
by reason of a breach of a representation or warranty under Section
2.12 of this Agreement, and the application of the provisions of
Section 8.4 and 8.7(b), no party or person who may at any time seek
indemnification from any Shareholder under or pursuant to Section 8.3
of this Agreement (each an Indemnified Party, as defined) shall enforce
that liability or obligation by any action or proceeding wherein a
money judgment is sought against any one or more of the Shareholders,
except that an Indemnified Party may bring an appropriate action or
proceeding to enable that Indemnified Party to enforce and realize upon
its interest under the Escrow Agreement with respect to the Escrow
Shares. However, and subject to the two foregoing exceptions: (i) any
judgment in any such action or proceeding shall be enforceable against
any Shareholder only to the extent of each Shareholder's interest in
the Escrow Shares (and shall be enforced ratably against the interest
of all such Shareholders in accordance with their respective
interests); and (ii) no Indemnified Party shall xxx for, seek or demand
any deficiency judgment against any Shareholder in any such action or
proceeding, under or by reason of or under or in connection
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with this Agreement or the Escrow Agreement. The provisions of this
Section 8.6 shall not, however, (i) constitute a waiver, release or
impairment of any obligation evidenced by this Article 8 or the Escrow
Agreement; (ii) impair the right of an Indemnified Party to name any
Shareholder as a party defendant in any arbitration, action or suit
seeking to enforce the Escrow Agreement; or (iii) affect the validity
or enforceability of the indemnification obligations under this Article
8.
(c) Notwithstanding the qualification of "knowledge" of those
representations and warranties under Section 2.7, but subject to all
other express limitations imposed under the provisions of this Article
8, a breach of Section 2.7 or an inaccuracy in those representations
and warranties will entitle Parent to full indemnification and will not
in any way limit the indemnification obligations of the Shareholders
under this Article 8, even if the Shareholders did not have knowledge
of the liability or obligation.
(d) Notwithstanding the disclosure of potential liabilities in
the Disclosure Letter with respect to those representations and
warranties under Section 2.7 and 2.8 of this Agreement, if any such
potential liabilities accrue, Parent is entitled to full
indemnification by the Shareholders, subject only to the express
limitations imposed under the provisions of this Article 8.
8.7. Indemnification De Minimis Threshold.
(a) Except with respect to indemnification obligations arising
by reason of a breach of a representation or warranty under Section
2.12 of this Agreement and except as expressly provided otherwise
herein, and subject to the provisions of Section 8.7(b), neither the
Shareholders nor the Parent, as the case may be, will be entitled to
indemnification under this Agreement unless the aggregate of all claims
with respect to matters arising hereunder is more than One Hundred
Thousand Dollars ($100,000) (the "Threshold Amount"). When the
aggregate amount of all such indemnification claims hereunder equals or
exceeds the Threshold Amount, the Parent or the Shareholders, as the
case may be, will be entitled to full indemnification of all claims,
including the One Hundred Thousand Dollars ($100,000) that amounted to
the Threshold Amount. The parties hereto agree that the Threshold
Amount is not a deductible amount, nor will the Threshold Amount be
deemed to be a definition of "material" for any purpose in this
Agreement.
(b) Notwithstanding the foregoing, in the case of any untrue
representation under Section 2 or 3 with respect to which any party
hereunder making that representation had actual knowledge, or had
actual knowledge of the potential or probable loss, liability or damage
without disclosing such to the other party on or prior to the Closing
Date (and as a result such other party has no knowledge thereof), such
non-disclosing party will promptly pay the other party the full
indemnification claim without regard to the Threshold Amount set forth
in this Section, or the overall limitation on amount or recourse as set
forth in Section 8.6, and the time limitations set forth in Section 8.1
shall be extended an additional three (3) years. For the purpose of
this Section 8.6(b), actual knowledge of one or more Shareholders shall
not be imputed to any other Shareholders who do not have that actual
knowledge. Nevertheless, this limitation upon the imputation of
knowledge shall not limit the rights of Parent, the Acquiring
Subsidiaries and the Surviving Companies to obtain full indemnification
against the Escrow Shares of all Shareholders, as provided under
Section 8.4 and the Escrow Agreement.
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8.8. Claims for Indemnification.
The parties intend that all indemnification claims hereunder be made as
promptly as practicable by the party seeking indemnification (the "Indemnified
Party"). Whenever any claim arises for indemnification hereunder the Indemnified
Party will promptly notify the party from whom indemnification is sought (the
"Indemnifying Party") of the claim and, when known, the facts constituting the
basis for such claim. In the case of any such claim for indemnification
hereunder resulting from or in connection with any claim or legal proceedings of
a third party (a "Third Party Claim"), the notice to the Indemnifying Party will
specify, if known, the amount or an estimate of the amount of the liability
arising therefrom. The Indemnifying Party shall have the right to dispute and
defend all Third Party Claims and thereafter so defend and pay any adverse final
judgment or award or settlement amount in regard thereto. Such defense shall be
controlled by the Indemnifying Party, and the cost of such defense shall be
borne by the Indemnifying Party, except that the Indemnified Party shall have
the right to participate in such defense at its own expense; and provided,
however, that the Indemnifying Party must first acknowledge that the claim is a
bona fide indemnification claim under this Agreement in order for the
Indemnifying party to control the defense. The Indemnified Party shall cooperate
in all reasonable respects in the defense of any such claim, including making
personnel, books, and records relevant to the claim available to the
Indemnifying Party, without charge, except for reasonable out-of-pocket
expenses. If the Indemnifying Party fails to take action within thirty (30) days
as set forth above, then the Indemnified Party shall have the right to pay,
compromise or defend any Third Party Claim and to assert the amount of any
payment on the Third Party Claim plus the reasonable expenses of defense or
settlement of the claim. The Indemnified Party shall also have the right,
exercisable in good faith, to take such action as may be necessary to avoid a
default prior to the assumption of the defense of the Third Party Claim by the
Indemnifying Party, and any reasonable expenses incurred by Indemnified Party so
acting shall be paid by the Indemnifying Party. Except as otherwise provided
herein, the Indemnified Party will not settle or compromise any Third Party
Claim for which it is entitled to indemnification hereunder without the prior
written consent of the Indemnifying Party, which will not be unreasonably
withheld. If the Indemnifying Party is of the opinion that the Indemnified Party
is not entitled to indemnification, or is not entitled to indemnification in the
amount claimed in such notice, it will deliver, within ten (10) business days
after the receipt of such notice, a written objection to such claim and written
specifications in reasonable detail of the aspects or details objected to, and
the grounds for such objection. If the Indemnifying Party filed timely written
notice of objection to any claim for indemnification, the validity and amount of
such claim will be determined by arbitration pursuant to Section 9.12 hereof.
Subject to the limitations of Sections 8.6 and 8.7, if timely notice of
objection is not delivered or if a claim by an Indemnified Party is admitted in
writing by an Indemnifying Party or if an arbitration award is made in favor of
an Indemnified Party, the Indemnified Party, as a non-exclusive remedy, will
have the right to set-off the amount of such claim or award against any amount
yet owed, whether due or to become due, by the Indemnified Party or any
subsidiary thereof to any Indemnifying Party by reason of this Agreement or any
agreement or arrangement or contract to be entered into at the Closing.
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8.9 Netting of Claims
All indemnification claims shall be net of any insurance proceeds or
payments from any other responsible parties (in both cases net of recovery
costs), as well as of the corresponding actual realizable tax benefit.
8.10 Claims Period
Notwithstanding anything in this Agreement to the contrary, Parent and
the Shareholders shall not be entitled to any recovery under this Article 8
unless a claim for indemnification is made within sixty (60) days after the
first two audit cycles are completed; provided however, that claims involving
Environmental matters will be allowed if made within two (2) years after the
Effective Time and claims based on the representations and warranties made in
Section 2.12 will be allowed if made within the applicable statute of
limitations.
8.11 Rejected Settlement of Claims
If an Indemnified Party refuses to agree to a proposed
settlement by the Indemnifying party that would fully indemnify the Indemnified
Party, the Indemnifying Party's exposure is limited to the settlement offer,
provided however, that the indemnity will not be so limited if the proposed
settlement would expose the Indemnified Party to criminal or regulatory
liability or would in any material way impugn the reputation of the Indemnified
Party and its affiliates, officers and directors.
8.12 Limitation of Indemnification Obligations
The indemnification obligations of L.B. shall be limited to (i) pro
rata several liability only; and (ii) claims arising under Section 2.20.
ARTICLE 9.
MISCELLANEOUS PROVISIONS
9.1. Expenses.
Other than as expressly provided for in this Agreement, each of the
parties hereto will bear its own costs, fees and expenses in connection with the
negotiation, preparation, execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby, including without
limitation fees, commissions and expenses payable to brokers, finders,
investment bankers, consultants, exchange or transfer agents, attorneys,
accountants and other professionals, whether or not the Transactions is
consummated.
9.2. Amendment and Modification.
Subject to applicable law, this Agreement may be amended or modified by
the parties hereto at any time prior to the Closing with respect to any of the
terms contained herein; provided, however, that all such amendments and
modifications must be in writing duly executed by all of the parties hereto.
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9.3. Waiver of Compliance; Consents.
Any failure of a party to comply with any obligation, covenant,
agreement or condition herein may be expressly waived in writing by the party
entitled hereby to such compliance, but such waiver or failure to insist upon
strict compliance with such obligation, covenant, agreement or condition will
not operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. No single or partial exercise of a right or remedy will preclude any
other or further exercise thereof or of any other right or remedy hereunder.
Whenever this Agreement requires or permits the consent by or on behalf of a
party, such consent will be given in writing in the same manner as for waivers
of compliance.
9.4. No Third Party Beneficiaries.
Nothing in this Agreement will entitle any person or entity (other than
a party hereto and his, her or its respective successors and assigns permitted
hereby) to any claim, cause of action, remedy or right of any kind.
9.5. Notices.
All notices, requests, demands and other communications required or
permitted hereunder will be made in writing and will be deemed to have been duly
given and effective: (i) on the date of delivery, if delivered personally; (ii)
on the earlier of the fourth (4th) day after mailing or the date of the return
receipt acknowledgment, if mailed, postage prepaid, by certified or registered
mail, return receipt requested; or (iii) on the date of transmission, if sent by
facsimile, telecopy, telegraph, telex, overnight courier or other similar means
of communication:
If to either of the Companies or the Shareholders:
To: Bloomfield Acceptance Company, L.L.C.
Bloomfield Servicing Company, L.L.C.
000 Xxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx
Fax: (000) 000-0000
With a copy to:
Xxxxxxx Zelenock, P.C.
000 X. Xxxxx Xxxxxx Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxxx
Fax: (000) 000-0000
or to such other person or address as either the Companies or the Shareholders
will furnish to the other parties hereto in writing in accordance with this
Section.
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If to Parent or the Acquiring Subs:
To: Xxxxxxx Financial Services Corporation
00000 Xxxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx Xxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
Fax: (000) 000-0000
With a copy to:
Jaffe, Raitt, Heuer & Xxxxx,
Professional Corporation
Xxx Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xxxxx Sugar
Fax: (000) 000-0000
or to such other person or address as either Parent or Acquiring Subs will
furnish to the other parties hereto in writing in accordance with this Section.
9.6. Assignment.
This Agreement and all of the provisions hereof will be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns, but neither this Agreement nor any of the rights,
interests or obligations hereunder may be assigned (whether voluntarily,
involuntarily, by operation of law or otherwise) by any of the parties hereto
without the prior written consent of the other parties, provided, however, that
upon the Companies' consent, which will not be unreasonably withheld, Parent may
assign this Agreement upon notice to the Companies and each of the Shareholders,
in whole or in any part, and from time to time, to a wholly-owned, direct or
indirect, subsidiary of Parent, if Parent remains bound hereby.
9.7. Governing Law.
This Agreement and all legal relations among the parties hereto will be
governed by and construed in accordance with the internal substantive laws of
the State of Michigan (without regard to principles of conflict of laws that
might otherwise apply) as to all matters, including without limitation matters
of validity, construction, effect, performance and remedies.
9.8. Counterparts.
This Agreement may be executed simultaneously in one or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
9.9. Headings.
The table of contents and the headings of the sections and Sections of
this Agreement are inserted for convenience only and will not constitute a part
hereof.
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9.10. Entire Agreement.
The Schedules, the Exhibits, the Disclosure Letters and other writings
referred to in this Agreement, together with this Agreement embody the entire
agreement and understanding of the parties hereto in respect of the transactions
contemplated by this Agreement and together they are referred to as "this
Agreement" or the "Agreement". This Agreement supersedes all prior and
contemporaneous oral and written agreements and understandings between the
parties with respect to the transaction or transactions contemplated by this
Agreement (including without limitation the letter of intent dated January 7,
1998 between Parent, the Companies, and Shareholders and all amendments and
extensions thereof, but not including the Confidentiality Agreement).
9.11. Injunctive Relief.
It is expressly agreed among the parties hereto that monetary damages
would be inadequate to compensate a party hereto for any breach by any other
party of its covenants in Section 4.3. Accordingly, the parties agree and
acknowledge that any such violation or threatened violation of Section 4.3 will
cause irreparable injury to the other and that, in addition to any other
remedies which may be available, such party will be entitled to injunctive
relief against the threatened breach of Section 4.3 hereof or the continuation
of any such breach without the necessity of proving actual damages and may seek
specific enforcement of the terms thereof.
9.12. Arbitration.
In the event of any dispute relating to or arising out of any provision
of the Agreement, each party shall promptly designate one or more
representatives, and such representatives shall meet promptly in an effort to
resolve the dispute extrajudicially. If the attempts to resolve the dispute
stated in the preceding sentence are unsuccessful after a maximum period of
thirty (30) days, the parties shall submit such dispute to arbitration, as
provided below. With the sole exception of the injunctive relief contemplated by
Section 9.11 hereof, any controversy or claim arising out of or relating to this
Agreement, or the making, performance or interpretation hereof, including
without limitation alleged fraudulent inducement hereof, will be settled by
binding arbitration in Southfield, Michigan by a panel of three arbitrators in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. Judgment upon any arbitration award may be entered in any court
having jurisdiction thereof and the parties consent to the jurisdiction of the
courts of the State of Michigan for this purpose. Notwithstanding anything to
the contrary within this Agreement, this Section 9.12 will not apply to
interpleader claims under the Escrow Agreement and Special Consideration Escrow
Agreement.
9.13. Attorneys Fees.
If any arbitration, litigation or similar proceedings are brought by
any party to enforce any obligation or to pursue any remedy under this
Agreement, the party prevailing in any such arbitration, litigation or similar
proceedings will be entitled to costs of collection, if any, and reasonable
attorneys fees incurred in connection with such proceedings and in collecting or
enforcing any award granted therein.
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9.14. Venue and Jurisdiction.
The parties agree that all actions or proceedings arising in connection
with this Agreement and the instruments, agreements and documents executed
pursuant to the terms of this Agreement shall be tried, litigated and arbitrated
only in the courts of the United States located in the Eastern District of
Michigan, the Oakland County, Michigan Circuit Court, or the office of the
American Arbitration Association located nearest Southfield, Michigan. Each of
the Companies, the Shareholders and Parent irrevocably accept for itself or
himself and in respect of its or his property, generally and unconditionally,
the jurisdiction of such courts. Each of the Companies, Shareholders and Parent
irrevocably consent to the service of process out of any such courts in any such
action or proceeding by the mailing of copies thereof by registered or certified
mail, postage prepaid, to such party, at its address as set forth in this
Agreement, or in the records of the Surviving Company, such service to become
effective ten (10) days after such mailing. Nothing in this Section 9.14 shall
affect the right of any party to serve process in any other manner permitted by
law. Each of the Companies, the Shareholders and Parent irrevocably waive any
right it or he may have to assert the doctrine of forum non conveniens or to
object to venue to the extent any proceeding is brought in accordance with this
Section 9.14.
9.15 Time of the Essence.
"Time is of the essence" with respect to all dates and time periods
under this Agreement.
[The remainder of this page intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
PARENT: BAC:
XXXXXXX FINANCIAL SERVICES CORPORATION, BLOOMFIELD ACCEPTANCE COMPANY, L.L.C.,
a Michigan corporation a Michigan limited liability company
By: /s/ Xxxxxxx X. Xxxxxxxx By: /s/ Xxxxxx X. Xxxxx
------------------------------------ -----------------------------------
Xxxxxxx X. Xxxxxxxx, President, Xxxxxx X. Xxxxx, President
Chief Executive Officer and Chief
Financial Officer
ACQUIRING SUBS: BSC:
BAC ACQUIRING CORP., a Michigan corporation BLOOMFIELD SERVICING COMPANY, L.L.C.,
a Michigan limited liability company
By: /s/ Xxxxxxx X. Xxxxxxxx By: /s/ Xxxxxx X. Xxxxx
------------------------------------ -----------------------------------
Xxxxxxx X. Xxxxxxxx, President Xxxxxx X. Xxxxx, President
BSC ACQUIRING CORP., a Michigan corporation SHAREHOLDERS:
By: /s/ Xxxxxxx X. Xxxxxxxx
------------------------------------ /s/ Xxxxxx X. Xxxxx
Xxxxxxx X. Xxxxxxxx, President --------------------------------------
Xxxxxx X. Xxxxx
/s/ Xxxxxxxxx X. Xxxxx
--------------------------------------
Xxxxxxxxx X. Xxxxx
/s/ Xxxxx Xxxxxxx
--------------------------------------
Xxxxx Xxxxxxx
/s/ Xxxxxx Xxxxxxxxxx
--------------------------------------
Xxxxxx Xxxxxxxxxx
/s/ Xxxxxxxx Xxxxxxxxx
--------------------------------------
Xxxxxxxx Xxxxxxxxx
/s/ Xxxxxxx Xxxxxxx
--------------------------------------
Xxxxxxx Xxxxxxx
[signatures continued on the next page]
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Signatures continued, Agreement and Plan of
Merger dated February 17, 1998 /s/ Xxxxx Xxxxxxxx
--------------------------------------
Xxxxx Xxxxxxxx
/s/ Xxxxx X. Xxxxxxx
--------------------------------------
Xxxxx X. Xxxxxxx
/s/ Xxxxxxxxx X. Xxxxxxxx
--------------------------------------
Xxxxxxxxx X. Xxxxxxxx
/s/ Xxxxxxx X. Xxxxx
--------------------------------------
Xxxxxxx X. Xxxxx
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EXHIBITS and SCHEDULES
Exhibit 1.1A Certificates of Merger - BAC into BAC Acquiring Sub
Exhibit 1.1B Certificates of Merger - BSC into BSC Acquiring Sub
Exhibit 1.3(b) Special Consideration Escrow Agreement
Exhibit 1.6 Shareholders Agreement
Exhibit 1.6(ii) Consent to Transfer
Exhibit 1.6(vii) Assignment of Membership Interests in BAC and BSC
Exhibit 1.8A Second Amended and Restated Operating Agreement of
BAC
Exhibit 1.8B Amended and Restated Operating Agreement of BSC
Exhibit 1.11 Form of Option Agreement
Exhibit 2.4 Companies' Disclosure Letter
Exhibit 2.20 Investor Questionnaire
Exhibit 3.5 Parent's Disclosure Letter
Exhibit 5(g) Opinion of Xxxxxxx Zelenock, P.C.
Exhibit 5(h) Employment Agreements of Key Employees
Exhibit 6(d) Opinion of Jaffe, Raitt, Heuer & Xxxxx, Professional
Corporation
Exhibit 8.4 Escrow Agreement
