DRAFT OF 01/30/97
ASSET PURCHASE AGREEMENT
BETWEEN
IMC MORTGAGE COMPANY
AND
AMERICAN MORTGAGE REDUCTION, INC.
AND
THE SHAREHOLDERS OF
AMERICAN MORTGAGE REDUCTION, INC.
JANUARY 31, 1997
TABLE OF CONTENTS
ARTICLE 1
CERTAIN DEFINITIONS
ARTICLE 2
PURCHASE AND SALE OF ASSETS
ARTICLE 3
PURCHASE PRICE - PAYMENT
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDERS
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
ARTICLE 6
COVENANTS
ARTICLE 7
FURTHER COVENANTS
ARTICLE 8
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
ARTICLE 9
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
ARTICLE 10
CLOSING
ARTICLE 11
TERMINATION
ARTICLE 12
INDEMNIFICATION
ARTICLE 13
POST-CLOSING COVENANTS
ARTICLE 14
AMENDMENTS
ARTICLE 15
MISCELLANEOUS
DRAFT OF 02/06/97
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (the "Agreement"), dated as of January 31,
1997, is made by and between IMC MORTGAGE COMPANY, a Florida corporation
("Buyer"), and AMERICAN MORTGAGE REDUCTION, INC., a Maryland corporation
("Seller") and XXXXX XXXXXXX and XXXX XXXXXX (the "Shareholders").
FACTUAL BACKGROUND
A. Seller is engaged in the mortgage banking and brokerage business (the
"Business").
B. Buyer desires to purchase all of the Business and substantially all
of the assets of Seller (the "Acquisition").
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, agreements, representations and warranties herein contained, and
intending to be legally bound, the parties hereto do hereby agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
For the purpose of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires, (i) the terms defined in this
Article have the meanings assigned to them in this Article and include the
plural as well as the singular and (ii) all accounting terms not otherwise
defined herein have the meanings assigned under GAAP.
Acquisition -- As defined in the Introduction.
Affiliate -- With respect to any Person, any Person directly or
indirectly controlling, controlled by, or under common control with such other
Person. For purposes of this definition, "control" (including with correlative
meaning, the terms "controlled by" and "under common control with,") as used
with respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through ownership of voting securities, by contract or
otherwise.
Affiliated Group -- Any affiliated group within the meaning of Code
Section 1504 or any similar group defined under a similar provision of state,
local or foreign law, including any consolidated, unitary or combined group of
companies.
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Agency -- FHA, VA, GNMA, FNMA, FHLMC or a State Agency, as applicable.
Agreement -- As defined in the Introduction.
AMR Division -- As defined in Section 3.3
Audited Financial Statements -- As defined in Section 4.7.
Balance Sheet -- The statement of financial condition forming a part of
the Interim Financial Statements.
Base Calculation Period -- The twelve (12) month period ending December
31, 1996.
Base Payment Adjustment -- The Base Payment plus any increase in or less
any decrease in Tangible Net Worth from 12/31/96 through 1/31/97.
Business -- As defined in the Introduction, and includes Seller's
Conforming Business and Non-Conforming Business.
Business Days -- Any day on which the New York Stock Exchange is open
for trading.
Business Pipeline -- The sum of all Conforming Mortgage Loans and
Non-Conforming Mortgage Loans of Seller in the process of being closed by Seller
for which credit approval has already been obtained which have arisen in the
ordinary course of Seller's business, consistent with . Seller's past practices,
as shown on Seller's regularly prepared reports.
Buyer -- As defined in the Introduction.
Closing -- The closing with respect to the Acquisition as defined in
preamble to Article 10.
Closing Balance Sheet -- The balance sheet of Seller as of December 31,
1996.
Closing Date -- The date and time of Closing as defined in the preamble
to Article 10.
Code -- The Internal Revenue Code of 1986, as amended.
Conforming Business -- The Conforming Mortgage Loan origination and
brokerage business conducted by Seller.
Conforming Mortgage Loan -- A Mortgage Loan which is an FHA Loan, a VA
Loan or a loan eligible to be sold to FNMA or FHLMC.
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Conventional Loan -- Any Mortgage Loan which (a) is a first lien on a
"single family" residence, (b) is neither insured by FHA nor guaranteed by VA,
(c) has a loan-to-value ratio of 95% or less at the time of origination, (d)
matures in 30 years or less, (e) bears a market yield at the time of
origination, and (f) satisfies all requirements for sale to FNMA and FHLMC.
Direct Originations -- Mortgage Loans closed in the name of Seller (or
the AMR Division post-closing) or "table funded" by Seller or brokered by Seller
(or the AMR Division post-closing)
Effective Time -- February 1, 1997 at 12:01 a.m.
Employment Agreements -- As defined in Section 6.3.
Encumbrance -- Any lien, pledge, security interest, claim, charge,
easement, limitation, commitment, restriction or encumbrance of any kind or
nature whatsoever.
ERISA -- As defined in Section 4.13(b).
Environmental Claim -- Civil, criminal, administrative action, claim or
other proceeding relating to Environmental Laws.
Environmental Laws -- As defined in Section 4.15.
Excluded Assets -- As defined in Section 2.2.
Executives -- Xxxxx Xxxxxxx and Xxxx Xxxxxx.
FHA -- Federal Housing Administration.
FHA Loans -- Mortgage Loans which satisfy all applicable rules and
requirements to be insured by FHA and which are insured by FHA.
FHLMC -- Federal Home Loan Mortgage Corporation.
Financial Statements -- As defined in Section 4.7.
FNMA -- Federal National Mortgage Association.
GAAP - - Generally accepted accounting principles as used in the United
States of America.
GNMA -- Government National Mortgage Association.
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GNMA Securities -- GNMA mortgage-backed certificates.
HUD -- United States Department of Housing and Urban Development.
Independent Accounting Firm -- Any "Big Six" accounting firm or its
successor.
Inquiry -- As defined in Section 4.29.
Interim Financial Statements -- As defined in Section 4.7.
Investor -- Any Person who owns or holds Mortgage Loans, or servicing
rights to Mortgage Loans, pursuant to Mortgage Servicing Agreements or who is a
party to an Investor Commitment.
Investor Commitment -- The commitment of a Person to purchase a Mortgage
Loan.
Investor Programs -- Mortgage participation, whole-loan sales, pooling
and servicing programs.
IRS -- Internal Revenue Service.
Liability -- As defined in Section 2.3(a).
Licenses -- As defined in Section 4.18.
Loan Property -- Any property in which Seller holds a mortgage lien or
security interest.
Loss -- Any claim, liability, loss, cost, clean up cost or
reimbursement, damage, penalty, fine, obligation, deficiency or expense of any
kind whatsoever (including, without limitation, reasonable attorneys',
accountants', consultants' or experts' fees, and disbursements including but not
limited to court costs and reasonable costs of investigation incurred in
defending against or settling any such claim, liability, loss, cost, damage or
expense, or any amounts paid in connection with the investigation, defense or
settlement thereof, whether or not arising out of third party claims and
including costs and expenses incurred on appeal or in connection with any
bankruptcy or insolvency proceeding).
Material Adverse Effect -- Material Adverse effect on the business,
condition (financial or otherwise), results of operations, properties, assets or
prospects of a Person with an economic effect of $50,000 or more.
Mortgage Loan -- Any closed mortgage loan (exclusive of Warehouse Loans)
whether or not such mortgage is included in a securitized portfolio, as
evidenced by notes or other evidences of indebtedness duly secured by mortgages
or deeds of trust.
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Non-Conforming Business -- The Non-Conforming Mortgage Loan origination
and brokerage business conducted by Seller.
Non-Conforming Mortgage Loan -- A Mortgage Loan which does not satisfy
the requirements for being an FHA Loan, VA Loan or Conventional Loan.
Operating Property -- As defined in Section 4.15.
Person -- Any individual, corporation, company, partnership (limited or
general), joint venture, association, trust or other entity, including
governmental and quasi-governmental bodies.
Plans -- As defined in Section 4.13(a).
Pooling -- Aggregation of two or more Mortgage Loans that have been
pledged or granted to secure mortgage-backed securities or participation
certificates.
Purchased Assets -- As defined in Section 2.1.
Purchase Price -- As defined in Section 3.1.
Regulations -- (i) Federal, state and local laws, rules and regulations,
(ii) the responsibilities and obligations set forth in any agreement between
Seller and an Investor or private mortgage insurer and (iii) the laws, rules,
regulations, guidelines, handbooks and other requirements of an Investor,
Agency, private mortgage insurer, Public Housing Programs or Investor Programs,
with respect to the origination, insuring, purchase, sale, or filing of claims
in connection with a Mortgage Loan.
Schedule -- The disclosure schedules delivered by Sellers to Buyer in
connection with the Acquisition.
Seller(s) -- As defined in the Introduction.
Servicing Released Loans -- As defined in Section 4.22.
Single Employer Plan -- Any employee pension benefit plan (as that term
is defined in Section 3(2) of ERISA) maintained or contributed to by any entity
which would be deemed a "single employer" with Seller under Section 4001 of
ERISA.
State Agency -- Any state agency with authority to regulate the business
of Seller, determine the investment requirements with regard to loans originated
or purchased by Seller, or originate or purchase mortgage loans, or otherwise
participate in or promote mortgage lending.
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Subsidiary -- A company is a Subsidiary of another company if 50% or
more of its outstanding voting securities is owned by such other company.
Tangible Net Worth -- As set forth on Schedule 2.1(a)(i)(B).
Tax Affiliate -- A Person is a Tax Affiliate of another Person if they
are both members of the same Affiliated Group.
Taxes -- As defined in Section 4.12(d).
Tax Return -- As defined in Section 4.12(e).
VA -- Veterans Administration.
VA Loans -- Mortgage Loans which satisfy all applicable rules and
regulations to be guaranteed by VA and which are guaranteed by VA.
Warehouse Loans -- Mortgage Loans held by Seller for sale and pledged to
secure borrowings by Seller.
ARTICLE 2
PURCHASE AND SALE OF ASSETS
2.1 Assets to be Transferred
Subject to the terms and conditions of this Agreement, on the Closing
Date (as hereinafter defined) Seller shall sell, transfer, convey, assign and
deliver to Buyer (or upon Buyer's request, to one or more wholly-owned
subsidiaries of Buyer as designated by Buyer), and Buyer shall purchase and
accept all of the business, rights, claims and assets (of every kind, nature,
character and description, whether real, personal or mixed, whether tangible or
intangible, whether accrued, contingent or otherwise, and wherever situated) of
Seller, as determined on the Closing Date, together with all rights and
privileges associated with such assets and with the business of Seller, other
than the Excluded Assets (as hereinafter defined) (collectively, the "Purchased
Assets"). The Purchased Assets shall include, but not be limited to, the
following:
(a) Leased Real Property. All of the leases of real property with
respect to real property leased by Seller, including the leases (the "Real
Property Leases") described in Schedule 2.1(a) with respect to the real property
described thereon (the "Leased Real Property").
(b) Personal Property. All machinery, equipment, tools, supplies,
spare parts, furniture and all other personal property (other than personal
property leased pursuant to Personal
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Property Leases as hereinafter defined) owned, utilized or held for use by
Seller on the Closing Date, including, without limitation, the personal property
described on Schedule 2.1(b).
(c) Mortgage Loan Inventory. All of Seller's Mortgage Loans and
Warehouse Loans described in Schedule 2.1(c).
(d) Personal Property Leases. All of Seller's rights and
interests as lessee under all leases of machinery, equipment, vehicles,
furniture and other personal property leased by Seller, including all such
leases (the "Personal Property Leases") described in Schedule 2.1(d).
(e) Trade Rights. All of Seller's interest in any Trade Rights.
As used herein, the term "Trade Rights" shall mean and include all intellectual
property including, without limitation: (i) all trademark rights, business
identifiers, trade dress, service marks, trade names, and brand names, all
registrations thereof and applications therefor and all goodwill associated with
the foregoing, including all trade names used in or associated with the
Business; (ii) all copyrights, copyright registrations and copyright
applications, and all other rights associated with the foregoing and the
underlying works of ownership; (iii) all patents and patent applications and all
international proprietary rights associated therewith; (iv) all contracts or
agreements granting any right, title, license or privilege under the
intellectual property rights of any third party; (v) all inventions, know-how,
discoveries, improvements, designs, trade secrets, shop and royalty rights,
employee covenants and agreements respecting intellectual property and
non-competition and all other types of intellectual property; and (vi) all
claims for infringement or breach of any of the foregoing.
(f) Contracts. All of Seller's rights in, to and under all
contracts, Mortgage Commitments, Investor Commitments, Investor Programs and
pending mortgage applications (hereinafter "Contracts") of Seller. To the extent
that any Contract for which assignment to Buyer is provided herein is not
assignable without the consent of another party, this Agreement shall not
constitute an assignment or an attempted assignment thereof if such assignment
or attempted assignment would constitute a breach thereof.
(g) Computer Software. All computer source codes, programs and
other software of Seller, including all machine readable code, printed listings
of code, documentation and related property and information of Seller.
(h) Literature. All sales literature, promotional literature,
catalogs and similar materials of Seller.
(i) Records and Files. All records, files, invoices, customer
lists, blueprints, specifications, designs, drawings, accounting records,
business records, operating data and other data of Seller, provided that Buyer
shall maintain such records for six years and Seller shall have reasonable
access, and the right to copy, such records for tax and other bona fide
purposes.
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(j) Notes and Accounts Receivable. All notes, drafts and accounts
receivable of Seller relating to the Mortgage Loans and Warehouse Loans,
including, without limitation, those described in Section 2.1(j) of the
Schedule.
(k) Licenses; Permits. All licenses, permits and approvals of
Seller, to the extent transferable, including, without limitation, the licenses
set forth on Schedule 2.1(k).
(l) Corporate Name. The name "American Mortgage Reduction" and
the name "All Credit Funding" and all rights to use or allow others to use each
such name and the related goodwill.
(m) General Intangibles. All prepaid items, all causes of action
arising out of occurrences before or after the Closing, and other intangible
rights and assets.
(n) Trade Secrets. All know-how, research data, business methods
and trade secrets.
(o) Prepaids. All prepaid expenses and rent and lease deposits on
Schedule 2.1(o).
2.2 Excluded Assets
The Excluded Assets are as listed on Schedule 2.2. All Mortgage Loans
that have closed but have not funded by the Effective Time are Excluded Assets.
All loans that close on or after the Effective Time are the property of the
Buyer.
2.3 Assumption of Liabilities
(a) Liabilities to be Assumed. As used in this Agreement, the
term "Liability" shall mean and include any direct or indirect indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost, expense,
obligation or responsibility, fixed or unfixed, known or unknown, asserted or
unasserted, liquidated or unliquidated, secured or unsecured. Subject to the
terms and conditions of this Agreement on the Closing Date, Buyer shall assume
and agree to perform and discharge the following, and only the following
Liabilities of Seller (collectively the "Assumed Liabilities"):
(i) The accounts payable and accrued liabilities relating
to Buyer's operation of the Purchased Assets which are listed on
Schedule 2.1(a)(i)(A) provided however, that in no event shall such
Liabilities, when added to all other Liabilities of Seller, exceed
Tangible Net Worth as of the Effective Time. A sample of the calculation
of Tangible Net as of 12/31/96 is as set forth on Schedule 2.1(a)(i)(B).
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(ii) Seller's Liabilities arising under and pursuant to
the contracts listed in Schedule 2.1(a) and Schedule 2.1(d). The
Contracts described in subsection 2.3(a)(ii) above are hereinafter
collectively described as the "Assumed Contracts."
(iii) Liability in respect of Maryland's Bulk Sale Tax
(the "Transfer Tax").
(b) Liabilities Not to be Assumed. Except as and to the extent
specifically set forth in Section 2.3(a), Buyer is not assuming any Liabilities
of Seller and all such Liabilities shall be and remain the responsibility of
Seller. Notwithstanding the provisions of Section 2.3(a), Buyer is not agreeing
to perform and discharge and Seller shall not be deemed to have transferred to
Buyer the following Liabilities of Seller (which list of specific liabilities
shall not be deemed to suggest that liabilities not listed are being assumed):
(i) Certain Contracts. The Liabilities of Seller under and
pursuant to any contracts with Investors for refunds or guarantees
related to Mortgage Loans, including prepayment refund obligations and
refunds to Investors upon default by borrower or prepayment.
(ii) Taxes Arising from Transaction. Any taxes applicable
to, imposed upon or arising out of the sale or transfer of the Purchased
Assets to Buyer and the other transactions contemplated by this
Agreement, including but not limited to any income, transfer, sales,
use, gross receipts or documentary stamp taxes (other than the Transfer
Tax).
(iii) Income and Franchise Taxes. Any Liability of Seller
for Federal income taxes and any state or local income, profit or
franchise taxes (and any penalties or interest due on account therefor).
(iv) Insured Claims. Any Liability of Seller insured
against, to the extent such Liability is or will be paid by an insurer.
(v) Litigation Matters. Any Liability with respect to any
action, suit, proceeding, arbitration, investigation or inquiry, whether
civil, criminal or administrative ("Litigation"), whether or not
described in Schedule 4.10.
(vi) Infringements. Any Liability to a third party for
infringement of such third party's Trade Rights.
(vii) Transaction Expenses. All Liabilities incurred by
Seller in connection with this Agreement and the transactions
contemplated therein.
(viii) Liability for Breach. Liabilities of Seller for any
breach or failure to perform any of Seller's covenants and agreements
contained in, or made pursuant to, this
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Agreement, or, prior to the Closing, any other contract, whether or not
assumed hereunder, including breach arising from assignment of contracts
hereunder without consent of third parties.
(ix) Liabilities of Affiliates. Liabilities of Seller to
its present or former Affiliates.
(x) Pre-Closing Operating Expenses. Seller's operating
expenses (including, without limitation, payroll, rent and utilities)
incurred before, or relating to the period prior to, the Closing Date.
(xi) Excluded Assets. Any Liabilities of Seller relating
to the Excluded Assets.
ARTICLE 3
PURCHASE PRICE
3.1 Purchase Price
The purchase price (the "Purchase Price") for the Purchased Assets shall
be equal to the sum of: (i) the "Base Payment" to be made at the "Initial
Closing" and (ii) the "Contingent Payment" to be made at the "Final Closing".
The Base Payment will be 7 times the Seller's Adjusted After-Tax Net Income
(Calculated as though the Seller were a "C" Corporation) for calender year 1996.
(For example, Seller's view of the calculation as of 12/31/96 is as set forth on
Schedule 3.1). All calculations will be made in accordance with generally
accepted accounting principles consistently applied ("GAAP").
(a) Adjusted After-Tax Net Income. Adjusted After-Tax Net Income
shall be after tax net earnings, subject to the following adjustments:
(i) an imputed expense shall be added in an amount equal
to the amount, if any, by which (x) the estimated average annual
retirement expense that should be reflected on Seller's financial
statements in accordance with GAAP, exceeds (y) the retirement expense
actually reflected on Seller's financial statements.
(ii) Income from extraordinary events and from sources
outside the mortgage banking and brokerage business shall be excluded;
(iii) Aggregate salaries, bonus compensation and other
fees paid to the Executives in excess of three hundred thousand dollars
($300,000), shall be included as income;
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(iv) Any ordinary income or capital gains from investment
assets shall be excluded;
(v) Any income arising from any other Excluded Assets
shall be excluded; and
3.2 Payment of Base Payment
The Base Payment shall be paid by Buyer to Seller as follows:
(a) Assumption of Liabilities. At the Initial Closing, Buyer
shall assume the Assumed Liabilities.
(b) Base Payment. At the Initial Closing, Buyer shall deliver by
wire transfer in immediately available funds an amount equal to the amount of
the Adjusted Estimated Base Payment. The Adjusted Estimated Base Payment shall
equal the Estimated Base Payment less a 15% holdback (the "Holdback").
(c) Determination of Estimated Base Payment. For the purposes of
determining the Estimated Base Payment, Seller, not less than 5 days before
Closing, shall prepare and submit to Buyer estimated financial statements as of
December 31, 1996, including estimated Profit and Loss Statement for the Base
Calculation Period, list of Estimated Assumed Liabilities and Estimated
Calculation of Base Purchase price, which shall represent the present reasonable
estimate of Seller's financial performance for the Base Calculation Period,
Mortgage Production for the Base Calculation Period and Seller's reasonable
estimate of the Purchase Price. In the event Seller and Buyer cannot agree on
the foregoing estimated financial statements and schedule, the Estimated Base
Payment for the Initial Closing shall be the average of the amount determined by
Seller and the amount determined by Buyer.
(d) Final Determination of Base Payment.
(i) Within 45 days after the Closing Date, Seller shall
deliver to Buyer a balance sheet and profit and loss statement of
Seller as of December 31, 1996, and as of January 31, 1997,
prepared from the books and record of Seller, on a basis
consistent with the GAAP theretofore followed by Seller in
accordance with this Section 3.2, and fairly presenting the
financial position of Seller as of December 31, 1996, and as of
January 31, 1997, and Seller's financial performance for the Base
Calculation Period and for the period from 1/1/97 through 1/31/97
(the "Stock Period"). The balance sheet shall be accompanied by
detailed schedules of the Purchased Assets and Assumed
Liabilities, Tangible Net Worth and Seller's Business Pipeline
and by a report of Seller's Accountants (1) setting forth the
amount of the Base Payment Amount (as defined above) reflected in
the financial statements, (2)
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stating that (a) the examination of the balance sheet and
financial statements has been made in accordance with generally
accepted auditing standards and (b) the balance sheets and
financial statements has been prepared in accordance with
generally accepted accounting principles, on a basis consistent
with the accounting principles theretofore followed by Seller,
and (3) setting forth such accountants determination of the Base
Payment and the Base Payment Adjustment. Sellers shall also
certify to Buyer that the financial statements and schedules are
accurate and correct and prepared in accordance with GAAP.
(ii) Within 30 days following the delivery of the
financial statements and schedules, Buyer or its independent
accountants ("Buyer's Accountants") may object to any of the
information contained in said financial statements or
accompanying schedules which could affect the necessity or amount
of any payment by Buyer pursuant to Section 3.2 hereof. Any such
objection shall be made in writing and shall state Buyer's
determination of the amount of the Base Payment and the Base
Payment Adjustment.
(iii) In the event of a dispute or disagreement relating
to the financial statements or schedules which Buyer and Seller
are unable to resolve, either party may elect to have all such
disputes or disagreements resolved by an Independent Accounting
Firm (the "Third Accounting Firm") to be mutually selected by
Seller and Buyer or, if no agreement is reached, by Seller's
Accountants and Buyer's Accountants. The Third Accounting Firm
shall make a resolution of the financial statements of Seller as
of 12/31/96 and as of 1/31/97 and the calculation of the Base
Payment and the Base Payment Adjustment, which shall be final and
binding for purposes of this Article 3. The Third Accounting Firm
shall be instructed to use every reasonable effort to perform its
services within 15 days of submission of the financial statement
and schedules to it and, in any case, as soon as practicable
after such admission. The fees and expenses for the services of
the Third Accounting Firm shall be shared equally by Buyer and
Seller.
(iv) Seller agrees to permit Buyer, Buyer's Accountants,
and their respective representatives, during normal business
hours, to have reasonable access to, and to examine and make
copies of, all books and records of Seller, including but not
limited to the books, records, schedules, work papers and audit
programs of Seller and Seller's Accountants and access to
representatives of Seller's Accountants, which documents and
access are necessary to review the financial statement and
schedules delivered by Buyer in accordance with Section 3.2. In
addition, Buyer's Accountants shall have the opportunity to
observe the taking of the inventory in connection with the
preparation of such balance sheet and schedule of loans in
process. Seller similarly agrees to permit Buyer's Accountants
and their respective representatives, during normal business
hours, to have reasonable access to any books and records of
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Seller which do not constitute Purchased Assets, in order to
enable them to prepare such balance sheet.
(e) Final Base Payment Adjustment. Once the Base Payment and the
Base Payment Adjustment are finally determined appropriate adjustments shall be
made in payment of the Base Payment, as finally determined and additional funds
paid by Buyer to Seller or funds returned by Seller to Buyer, as applicable
plus, in each case, interest from the Closing Date to the date of payment at a
rate equal to 8 1/4% per annum.
3.3 Contingent Payment
(a) Calculation. The Contingent Payment shall equal the excess of
(i) the "Final Value" (as defined below) over (ii) the Base Payment. The Final
Value of the Seller at the Final Closing will be calculated at 7 times the
average after-tax earnings of the division of Buyer constituting the
continuation of the business of the Seller (the "AMR Division") for the 2 years
ending on December 31, 1999. The Final Value will not be less than $0.00 but is
not limited on the upside.
(b) Adverse Change. In the event of an "Adverse Change" (as
defined below) prior to the Final Closing, then in such event, the Final Value
shall be calculated based on the AMR Division's having achieved its adjusted
"Agreed Plan" for the 2 years ending on December 31, 1999 and not based on the
actual results of that period. The term "Agreed Plan" shall mean the business
plan for the AMR Division proposed by Xxxxx Xxxxxxx and Xxxx Xxxxxx ("AMR
Management") and approved by Buyer and attached hereto as Schedule 3.3(b). The
Agreed Plan may be modified thereafter by mutual consent of Buyer and AMR
Management.
The term "Adjusted Agreed Plan" shall mean the after-tax net income of
the Post-Closing AMR Division as shown on the Agreed Plan multiplied by the
percentage (which may be more than 100%) obtained by dividing (x) by (y) where:
(x) is the total volume of retail and broker loan originations
(loans closed in the name of the AMR Division) which have been actually
completed from the Effective Time to the end of the calender month
preceding the month during which occurs a declaration of an Adverse
Change by the Shareholders, and
(y) is the total volume of retail and broker loan originations
(loans closed in the name of the AMR Division) which were projected to
have been completed in the Agreed Plan from the Effective Time to the
end of the calender month preceding the month during which occurs a
declaration of an Adverse Change by the Shareholders.
The declaration of an Adverse Change must be made by written notice to
the Buyer executed by Shareholders and delivered to Buyer not later than thirty
(30) days following the occurrence of the Adverse Change.
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An Adverse Change is any change in the following which is (w) not a
response to any breach by AMR Management of its employment agreements with
Buyer, (x) a result of an action or inaction of Buyer, (y) not cured within a
reasonable time following notice thereof (describing the nature thereof), and
(z) material and adverse to the AMR transaction as to: (i) the ability of AMR
Management to control or offer its product lines and product mix in a manner
which is consistent with other products in the sub-prime mortgage industry from
time to time, or in its authority to operate or control the AMR Division; (ii) a
change in the funding by Buyer of the Agreed Plan; or (iii) a failure of Buyer
to use commercially reasonably efforts to obtain and maintain all licenses as
provided in the Agreed Plan.
In the event that AMR Management is terminated for cause by Buyer, Buyer
shall still be obligated to pay the Contingent Payment, but the Initial Final
Value shall be calculated on the AMR Division's results up to to the date of
said termination.
(c) Payment. At Buyer's election, the Contingent Payment will be
made either in immediately available funds or in common shares of Buyer (the
"Exchange Shares") to be delivered at the Final Closing.
If the Contingent Payment is to be made in Exchange Shares, then the
number of Exchange Shares to be delivered to Seller for such Payment shall be
calculated by dividing the Contingent Payment by the "Closing Value" of the
Exchange Shares. The Closing Value shall be the average closing price of Buyer's
common shares on the NASDAQ for the five trading days ending 3 business days
before the Final Closing.
The Final Closing will occur on or before February 28, 2000, with the
Contingent Payment calculated as of the close of business on December 31, 1999.
The Final Closing will be based on the parties best estimate of the final income
and will be retroactively adjusted when final audited numbers are available.
If Buyer elects to pay the Contingent Payment in Exchange Shares, such
shares will be registered at Buyer's expense pursuant to the Securities Act of
1933 no later than 180 days following the Final Closing.
(d) Accounting Matters. Sub-prime mortgage loans ("Loans")
generated after the Closing in AMR Division will be treated for the purposes of
calculating the Contingent Purchase Price as though they had been sold
(servicing released) to Buyer by a separate entity at a purchase price and
premium equal to the purchase price and premium being paid during the same time
period by Buyer for similiar loans purchased from unrelated third parties
selling in a similar volume to Buyer.
In addition, for purposes of mortgage warehouse loan interest spreads,
late payment fees, prepayment rebates and similar income and expenses, Loans
will be treated as having been held by the AMR Division for one month following
origination.
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The expenses of the AMR Division after the Initial Closing will be the
sum of (i) the actual expenses which are controlled by the direct management of
the AMR Division, and (ii) other expenses which are not controlled by the direct
management of the AMR Division (such as corporate G & A) only to the extent such
amounts, including imputed interest, are not higher in the aggregate than the
AMR Division could acquire such services on its own and are of a type and nature
set forth in the Agreed Plan. Buyer will charge the AMR Division warehouse loan
interest for a revelant period at a rate equal to the lower of (i) the rate
which the Seller could obtain from unrelated third parties if the AMR Division
were a stand-alone company or (ii) LIBOR plus 225 basis points.
Ninety-five percent (95%) of all revenues of the AMR Division for the 2
years ending December 31, 1999 must arise from Direct Organizations.
(e) Post-Closing AMR Division. For the purpose of the foregoing
calculation, "AMR Division" shall mean the separate business unit of the Buyer
comprised of the Purchased Assets and identifiable business operations and
personnel acquired by Buyer from Seller pursuant to this Acquisition. The Buyer
intends for the AMR Division to be a separate division or other separate
business unit of Buyer (of its Affiliate) following the Closing. At Closing,
Buyer shall enter into employment agreements with certain officers and managers
of Seller, pursuant to Section 6.3 hereof, providing for them to manage the AMR
Division, subject to normal oversight of responsibilities of the Buyer's Board
of Directors and senior executives. The former Seller executives shall direct
the day-to-day operations of the AMR Division, subject to an annual budget and
business plan approved by the Buyer's Board of Directors and senior executives.
Buyer shall separately track the performance of, and account for, the AMR
Division as a separate profit and expense center and shall provide copies of
such performance reports to Seller. The AMR Division shall bear an interest
expense on the capital used to finance its warehouse mortgage loans at the rate
set forth in clause (d) above. Therefore, the business operation of the AMR
Division will include future growth and development of the Business being
acquired in this Acquisition, but not Buyer's other existing operations or
future acquisitions by Buyer. Parties acknowledges that Buyer's other business
units will compete with the AMR Division. The Seller's view of management
controlled expenses is as set forth on Schedule 3.3(e).
3.4 Prorations.
The following prorations will be made as of the close of business on
1/31/97 and with Seller liable to the extent such items relate to any time
period up to and including the Effective Time if not already taken into account
on the Closing financial statements and Buyer liable to the extent such items
relate to periods subsequent to the Effective Time.
(a) Personal property taxes, real estate taxes and assessments,
and other taxes, if any, on or with respect to the Purchased Assets; provided
that special assessments for work actually
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commenced or levied prior to the date of this Agreement shall be paid by Seller
and not from the Purchased Assets.
(b) Rents, additional rents, taxes and other items payable by
Seller under any lease, license, permit, contract or other agreement or
arrangement to be assigned or assumed by Buyer.
(c) The amount of rents, taxes and charges for sewer, water,
fuel, telephone, electricity and other utilities; provided that if practicable,
meter readings shall be taken at the Effective Time and the respective
obligations of the parties determined in accordance with such readings.
(d) All other items normally adjusted in connection with similar
transactions.
If the actual expense of any of the above items for the billing period
within which the Effective Time falls is not known on the Closing Date, the
proration shall be made based on the expense incurred in the previous billing
period, for expenses billed less often than quarterly, and on the average
expense incurred in the preceding three billing periods, for expenses billed
quarterly or more often. Seller agrees to furnish Buyer with such documents and
other records as shall be reasonably requested in order to confirm all proration
calculations.
The amount of all such items accrued but unpaid as of 1/31/97 shall
remain a liability of and be paid by the Seller.
3.5 Other Payments and Adjustments.
The amount of wages and other renumeration due in respect of the periods
to and including 1/31/97 to employees of Seller, the amount of bonuses due and
unused vacation pay and any other employee benefits to such employees for all
such periods shall remian a liability of, and be paid by Seller directly.
3.6 Allocation of Purchase Price. The allocation of the Purchase Price
shall be jointly approved by Buyer and Seller.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDERS
Seller and Shareholders, jointly and severally, make the following
representations and warranties to Buyer, each of which is true and correct on
the date hereof, shall be unaffected by any investigations heretofore or
hereafter made by Buyer, or any knowledge of Buyer other than as specifically
disclosed in the Disclosure Schedule delivered to Buyer at the time of execution
of this Agreement, and shall survive the Closing of the transactions provided
for herein:
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4.1 Organization
(a) Seller is a corporation duly organized, validly existing and
in good standing under the laws of the State of Maryland with full corporate
power and authority to carry on its business as now conducted, to own the
properties and assets that it now owns, and to lease the properties and assets
that it now leases, and is duly licensed and qualified to do business and is in
good standing in each state or jurisdiction where its ownership or leasing of
property or assets or the conduct of its business requires such licensing or
qualification.
(b) Seller has heretofore delivered to Buyer accurate and
complete copies of the articles of incorporation and by-laws of Seller, as in
effect on the date thereof. Such articles and by-laws are in full force and
effect, and have not been subsequently amended, and Seller is not in violation
of any of the provisions thereof.
4.2 Intentionally Omitted.
4.3 Subsidiaries of the Seller; Nature of Business
Seller does not own any equity interest, directly or indirectly, in any
Subsidiary, except as set forth in Section 4.3 of the Schedule.
4.4 Authority; No Violation
(a) Seller and Shareholders have full power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed by Seller
and all Shareholders and, assuming this Agreement constitutes a valid and
binding obligation of Buyer, constitutes a valid and binding obligation of
Seller and Shareholders enforceable against Seller and Shareholders in
accordance with its terms.
(b) Neither the execution and delivery of this Agreement by
Seller and Shareholders nor the consummation by Seller and Shareholders of the
transactions contemplated hereby, nor compliance by Seller and Shareholders with
any of the terms or provisions hereof, will, to the best knowledge of Seller,
(i) conflict with or result in a breach of any provision of the articles of
incorporation or by-laws of Seller, (ii) violate any statute, code, ordinance,
rule, Regulation, judgment, order, writ, decree or injunction applicable to
Shareholders or Seller or any of their respective properties or assets, or (iii)
violate, conflict with, result in a breach of any provisions of, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of, accelerate the
performance required by, or result in a right of termination or acceleration or
the creation of any Encumbrance upon any of the respective properties or assets
of Shareholders or Seller under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed or trust, license, lease, agreement or
other instrument, or obligation to which Shareholders or Seller is a party, or
by which Shareholders, Seller or any of their
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respective properties or assets may be bound or affected except for such
violations, conflicts, breaches and defaults which either individually or in the
aggregate would not have a Material Adverse Effect on Seller.
4.5 Consents and Approvals
Except as set forth in Section 4.5 of the Schedule, no consents,
permits, authorizations or approvals of, or filings or registrations with, any
governmental or regulatory authorities, government sponsored agencies or
corporations or other third parties are necessary to be obtained or made by
Shareholders or Seller in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
4.6 Title to Purchased Assets
Seller has good and marketable title to the Purchased Assets, free and
clear of all Encumbrances, contracts, rights, options and assignments whatsoever
(except pursuant to this Agreement). The documents selling, assigning, conveying
and otherwise transferring from Seller to Buyer the Purchased Assets will grant
and transfer to Buyer good and marketable title to the Purchased Assets, free
and clear of all Encumbrances, contracts, rights, options and assignments
whatsoever, except those created by Buyer and Encumbrances securing the Assumed
Liabilities.
4.7 Financial Statements
Seller has previously delivered to Buyer copies of (i) the audited
financial statements of Seller for each of the years in the three-year period
ended December 31, 1995 (the "Audited Financial Statements", other than fiscal
year 1994 which is unaudited), together with reports on all such audited
financial statements by Seller's independent accountants, and (ii) the unaudited
interim financial statements of Seller dated December 31, 1996 (the "Interim
Financial Statements") (the Audited Financial Statements and the Interim
Financial Statements are collectively referred to herein as the "Financial
Statements"), copies of which are attached hereto as part of Schedule 4.7. The
Audited Financial Statements have been prepared in accordance with GAAP applied
on a consistent basis throughout the periods covered by such statements and
fairly present the financial position of Seller as of the respective dates
thereof, the results of its operations and the changes in its financial position
for the respective periods covered thereby. The Interim Financial Statements
have been prepared from the books and records of Seller in accordance with the
requirements of GAAP.
4.8 Undisclosed Liabilities
As of the date of this Agreement, and except as shown on Schedule 4.8,
Seller does not have any liabilities or obligations of any nature, whether
accrued, absolute, contingent or otherwise, asserted or unasserted, known or
unknown, whether or not required to be shown on a balance sheet prepared in
accordance with GAAP (collectively, "Liabilities"), except for (i) liabilities
and obligations
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stated or adequately reserved against on the Balance Sheet dated December 31,
1996, and (ii) obligations to close Non-Conforming Mortgage Loans and Conforming
Mortgage Loans for which commitments already have been made.
4.9 No Material Adverse Change
Since December 31, 1996, Seller has not suffered any Material Adverse
Effect nor taken any of the actions specified in Section 4.37(a) - (r).
4.10 Legal Proceedings
Except as described in Schedule 4.10, neither Sellers, Seller nor any of
Seller's directors or officers is party to any and there are no legal,
administrative, arbitral or other proceedings, claims, actions or governmental
investigations of any nature pending, nor to the best knowledge of Seller or
Shareholders, threatened, against or affecting Seller or any of its respective
assets or business or challenging the validity or propriety of the transactions
contemplated by this Agreement. Seller is not subject to any order, judgment,
injunction, rule or decree.
4.11 Material Contracts
Section 4.11 of the Schedule is a complete and accurate list of the
following contracts, agreements, and other written or oral arrangements (or
group of related written or oral arrangements) (hereinafter collectively
referred to as "arrangements"), to which Seller is a party on the date hereof:
(a) any arrangement with any employee, agent or independent
contractors involved in the origination of mortgage loans for Seller;
(b) any arrangement (including the lease of real or personal
property from or to third parties) providing for lease payments in excess of
$5,000 per annum or in excess of $10,000 for the remaining term of the
arrangement;
(c) any arrangement in which Seller is participating as a general
partner or joint venturer;
(d) any arrangement which shall survive the Closing under which
Seller has creat ed, incurred, assumed, or guaranteed (or may create, incur,
assume, or guarantee) indebtedness for borrowed money (including capitalized
lease obligations) involving more than $5,000;
(e) any arrangement concerning confidentiality or noncompetition;
(f) any arrangement between any Shareholder and Seller or any of
the Affiliates;
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(g) any arrangement pursuant to which Seller or any Shareholder
has promised to pay, or loan any amount to, or sold, transferred or leased any
property or assets to or from, any Person in their capacity as an officer,
director or other employee of Seller;
(h) any arrangement requiring Seller to pay severance or similar
payments as a result of the transactions contemplated hereby;
(i) any other arrangement which will survive the Closing not
entered into in the ordinary course of business; or
(j) any power of attorney or similar arrangement.
Seller has delivered to Buyer a correct and complete copy of each
written arrangement listed in Section 4.11 of the Schedule. With respect to each
arrangement so listed, to the best of Seller's knowledge: (A) the arrangement is
in full force and effect; (B) neither Shareholders nor Seller is in breach or
default, and no event has occurred which with notice or lapse of time or both
would constitute a breach or default by Shareholders or Seller, or permit
termination, modification, or acceleration against Shareholders or Seller under
the arrangement applicable to it; (C) neither Shareholders nor Seller has
repudiated or waived any material provision of any such arrangement; and (D) no
other party to any such arrangement is in default in any respect thereunder.
With respect to any lease disclosed pursuant to this Section 4.11, all rents and
other amounts currently due thereunder have been paid; no waiver or indulgence
or postponement of any obligation thereunder has been granted by any lessor or
sublessor; and Seller has not received any notice that it has breached any term,
condition or covenant.
4.12 Taxes
(a) Seller or its shareholders has (i) duly filed (or there has
been duly filed on its behalf) with the appropriate federal, state, local and
foreign taxing authorities all Tax Returns required to be filed by or with
respect to Seller, and such Tax Returns are true, correct and complete in all
respects, and (ii) paid in full on a timely basis (or there has been paid on its
behalf) all Taxes shown to be due on such Tax Returns. The provision for current
Taxes on each of the Financial Statements and the Closing Balance Sheet is or
will be adequate for the payment of all accrued but unpaid Taxes of the Seller
through the date thereof.
(b) Neither Seller nor any Affiliate thereof has received any
notice of a deficiency or assessment with respect to taxes of Seller from any
federal, state, local or foreign taxing authority which has not been fully paid
or finally settled; there are no ongoing audits or examinations of any Tax
Return which includes Seller and no notice of audit or examination of any such
Tax Return has been received; Seller has not given and there has not been given
on its behalf a waiver or extension of any statute of limitations relating to
the payment of Taxes; and no issue has been raised in writing on audit or in any
other proceeding with respect to Taxes of Seller by any federal, state, local or
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foreign taxing authority which, if resolved against Seller, would have a
Material Adverse Effect on Seller.
(c) Seller has not filed a consent under Section 341(f) of the
Code concerning collapsible corporations. Seller has not made any payments, is
not obligated to make any payments, and is not a party to any contract,
agreement or other arrangement that could obligate it to make any payments that
would not be deductible under Section 280G of the Code. Seller has disclosed on
its federal income Tax Returns all positions taken therein that could give rise
to a substantial understatement of federal income tax within the meaning of
Section 6661 (or its successor, Section 6662) of the Code.
(d) For purposes of this Agreement "Taxes" shall mean all taxes,
charges, fees, levies, penalties or other assessments imposed by any United
States federal, state, local or foreign taxing authority, including, but not
limited to, income, excise, property, sales, transfer, franchise, payroll,
gains, withholding, ad valorem, social security or other taxes, including any
interest, penalties or additions attributable to Taxes.
(e) For purposes of this Agreement, "Tax Return" shall mean any
return, report or information return required to be filed with any taxing
authority with respect to Taxes.
(f) After the Closing, Shareholders shall bear responsibility for
and pay the reasonable costs and expenses relating to the preparation of any Tax
Return relating to any period before the Closing Date and shall pay, or
reimburse Seller for the payment of, any Taxes relating to any period before the
Closing Date.
4.13 ERISA
(a) Section 4.13(a) of the Schedule contains a true and complete
list of each employee benefit, compensation or welfare benefit plan, program or
agreement maintained or contributed to or required to be contributed to by
Seller (the "Plans"). Seller has no formal plan or commitment, whether legally
binding or not, to create any additional Plan or modify or change any existing
Plan that would affect any employee or terminated employee of Seller.
(b) With respect to each of the Plans, Seller has heretofore
delivered to Buyer true and complete copies of each of the following documents:
(i) each Plan and related trust, if any, (including all amendments thereto);
(ii) annual report and actuarial report, if required to be filed under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), for the
last two (2) years and the latest financial statement, if any, for each such
Plan; (iii) the most recent summary plan description, together with each summary
of material modifications, required under ERISA; and (iv) the most recent
determination letter received from the IRS with respect to each Plan that is
intended to be qualified under Section 401 of the Code.
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(c) All required contributions have been, or will be, made with
respect to each Plan on or prior to the Closing Date or will be properly
recorded on the Closing Balance Sheet.
(d) Each of the Plans has been operated and administered in all
material respects in accordance with applicable laws, including, but not limited
to, ERISA and the Code and each of the Plans that is intended to be "qualified"
within the meaning of Section 401(a) of the Code is so qualified.
(e) Except as set forth in Section 4.13(e) of the Schedule, no
Plan provides benefits, including, without limitation, death or medical benefits
(whether or not insured), with respect to current or former employees beyond
their retirement or other termination of service (other than (A) coverage
mandated by applicable law, (B) death benefits or retirement benefits under any
"employee pension plan," as that term is defined in Section 3(2) of ERISA, (C)
deferred compensation benefits accrued as liabilities on the books of Seller or
(D) benefits the full cost of which is borne by the current or former employee
(or his beneficiary)).
(f) There are no pending, threatened or anticipated claims (other
than routine claims for benefits) by, on behalf of or against any of the Plans
or any trusts related thereto.
(g) The consummation of the transactions contemplated by this
Agreement will not (either alone or upon the occurrence of any additional acts
or events) (A) entitle any current or former employee of Seller to severance
pay, employment compensation or any other payment, benefit or award or (B)
accelerate or modify the time of payment or vesting, or increase the amount of
any benefit, award or compensation due any such employee.
4.14 Ownership of Property
Seller has good and valid title to all Purchased Assets and properties,
whether real or personal, tangible or intangible, and all other assets and
properties reflected in its balance sheet as of December 31, 1996, or acquired
subsequent thereto, subject to no Encumbrances, except (i) those items that
secure liabilities that are reflected in said balance sheet or the notes thereto
or incurred in the ordinary course of business after the date of such balance
sheet, (ii) statutory liens for amounts not yet delinquent or which are being
contested in good faith, (iii) liens and encumbrances on, and rights of
redemptions with respect to, foreclosed real estate, and (iv) such Encumbrances
that do not in the aggregate materially detract from the value or interfere with
the use or operations of the assets and properties subject thereto. Seller as
lessee has the right under valid and subsisting leases to occupy, use, possess
and control all property leased by Seller, as presently occupied, used,
possessed and controlled by Seller. The properties and assets owned or leased by
Seller are adequate for the conduct of the current business of Seller. Giving
effect to the transactions contemplated by this Agreement, Buyer shall have all
assets, personnel and property necessary and proper to conduct Seller's business
consistent with historical practice, subject to Buyer securing appropriate
licenses and regulatory approvals to the extent necessary.
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4.15 Environmental Protection
Seller has not received from any source with respect to any property
("Operating Property") that it owns (including as a trustee), leases, or
actively participates in the management of, any Environmental Claim to the
effect that Seller, or any Operating Property or Loan Property, or any
predecessor is not in compliance with all environmental or health laws, rules,
Regulations, standards and requirements relating to pollution (including the
discharge of materials into the environment or indoors) or protection of the
environment, including common law ("Environmental Laws"), nor any requests for
information which could result in or help provide a basis for any Environmental
Claim, nor are there any facts which could reasonably be expected to form the
basis of an Environmental Claim against Seller. All environmental audits,
analyses, or surveys of any Operating Property or Loan Property which have been
submitted to or by Seller are identified in Section 4.15 of the Schedule, and
copies of such audits, analyses, surveys or other documents have been made
available to Buyer. Seller has not owned, managed, supervised or participated in
the management of any com mercial real property.
4.16 Brokers and Finders
Neither Shareholders nor Seller, nor any of Seller's officers,
directors, employees or agents has employed any broker, finder or financial
advisor or incurred any liability for any fees or commissions in connection with
the transactions contemplated hereby, except for legal, accounting and other
professional fees payable by Seller or Shareholders in connection with the
Acquisition. Shareholders shall cause all legal, accounting and other
professional fees and expenses of Seller related to this transaction to be paid
by Seller prior to Closing.
4.17 Insurance
Seller is insured with reputable insurers against such risks and in such
amounts normally in sured against by companies of the same type and in the same
line of business. All of the insurance policies, binders or bonds maintained by
Seller are in full force and effect; Seller is not in default thereunder; all
claims thereunder have been filed in due and timely fashion; and all such
policies, binders and bonds will remain in full force and effect after the
Closing Date unless affected by the transactions contemplated hereby until their
respective expiration dates, as set forth on Schedule 4.17.
4.18 Intentionally Omitted.
4.19 Intentionally Omitted.
4.20 Intentionally Omitted.
4.21 Intentionally Omitted.
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4.22 No Recourse.
Except as set forth in Section 4.22 of the Schedule, Seller is
not a party to (A) any agreement or arrangement with (or otherwise obligated to)
any Person, including an Investor or insurer, to repurchase from any such Person
any Mortgage Loan and mortgaged property serviced for others or any mortgage
loan sold by Seller with servicing released ("Servicing Released Loans"), or (B)
any agreement, arrangement or understanding to reimburse, indemnify or hold
harmless any Person or otherwise assume any liability with respect to any Loss
suffered or incurred as a result of any default under or the foreclosure or sale
of any such Mortgage Loan or mortgage property or Servicing Released Loans,
except insofar as (i) such recourse is based upon breach by Seller of a
customary representation, warranty or undertaking, or (ii) Seller incurs
expenses such as legal fees in excess of the reimbursement limits, if any, set
forth in the applicable Mortgage Servicing Agreement.
4.23 Intentionally Omitted.
4.24 Intentionally Omitted.
4.25 Investment Commitments.
Set forth in Section 4.25 of the Schedule is a complete and correct list
of each Investor Commitment of to which Seller was a party on December 31. 1996.
Shareholders have made available to Buyer complete and correct copies of all
Investor Commitments in effect on such date. Each Investor Commitment
constitutes valid and binding obligations of the parties thereto, enforceable in
accordance with its terms, subject to bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors' rights generally and by general
principles of equity (whether applied in a proceeding in equity or at law).
Seller shall retain all Investor Commitments as of the Closing Date.
4.26 Intentionally Omitted.
4.27 Intentionally Omitted.
4.28 Data Processing
To the best of Seller's knowledge, Seller has good and valid title or
valid license to the data processing software (including documentation, user
manuals, upgrades and current releases, etc.), currently used by it, and the
data processing system (software and hardware), used to support Seller's
business is operating in the intended manner.
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4.29 Inquiries
Section 4.29 of the Schedule contains a true and correct list of all of
the audits, investigations, complaints and inquiries of Seller by an Agency,
HUD, an Investor, or a private mortgage insurer since June 30, 1995, the result
of which audits and investigations claimed a material failure to comply with
applicable Regulations, resulted in a repurchase of Mortgage Loans by Seller,
resulted in indemnification by Seller in connection with the Mortgage Loans,
resulted in rescission of an insurance or guaranty contract or agreement, or
resulted in payment of a penalty to a Agency, HUD, an Investor or a private
mortgage insurer, and like adverse findings. Except for customary ongoing
quality control reviews, no such audit or investigation (each an "Inquiry") is
pending or threatened. Sellers have made available to Buyer copies of all
written reports and materials received in connection with such audits,
investigations, complaints and inquiries.
4.30 Representations
No breach or violation of any representation, warranty or covenant
exists which individually, or collectively, would have a Material Adverse Effect
on Seller or any Purchased Assets with respect to any Mortgage Loans, the
ownership of which has been transferred by Seller to any Person.
4.31 Advances
Except as set forth in Section 4.31 of the Schedule, there are no
pooling, participation, servicing or other agreements to which Seller is a party
which obligate it to make servicing advances with respect to defaulted or
delinquent Mortgage Loans other than as provided in GNMA pooling and servicing
agreements.
4.32 Pools
Except as set forth in Section 4.32 of the Schedule, all Pools serviced
by Seller have been certified and, if required, re-certified. With respect to
any Pools serviced by Seller which have not been fully certified, Seller has
notified the custodian with respect thereto of all deficiencies, and such
custodian has so notified the applicable Investor or Investor Program.
4.33 Commercial Mortgages
Seller has never taken title to any commercial mortgage loan. Seller has
never foreclosed on any commercial property securing any commercial mortgage
loan in its own name, is not required under any Mortgage Servicing Agreement to
foreclose on any commercial property securing any commercial mortgage loans in
default in its own name and has never taken title to any commercial property
securing any commercial mortgage loan.
4.34 No Tax-Sharing Agreements
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Seller is not a party to any tax sharing agreement or similar
arrangement.
4.35 No Intercompany Accounts
Seller has no intercompany accounts.
4.36 Seller Employees
To the best of Sellers' knowledge, each employee of Seller will accept
Buyer's offer of employment after the Closing Date. Seller has no agreements,
policies, practices or understandings (written or oral) concerning Seller
employee bonus programs, employee incentive plans or employee benefit plans
except as set forth in Section 4.13(a) of the Schedule. A complete list of
Seller's employees is set forth in Section 4.36 of the Schedule.
4.37 Conduct Prior to Closing
Within the one (1) month prior to the Closing Date or on the Closing
Date, except as set forth in Section 4.37 of the Schedule, Seller has conducted
its business only in the ordinary course, and Seller has not:
(a) issued, sold or delivered any shares of its capital stock or
issue or sell any securities convertible into, or options with respect to, or
warrants to purchase or rights to subscribe to, any shares of its capital stock;
(b) effected any recapitalization, reclassification, stock
dividend, stock split or like change in capitalization;
(c) amended its articles of incorporation or by-laws;
(d) merged or consolidated with, or, except as a result of
foreclosure or repossession in the ordinary course of its mortgage banking
business, acquired substantially all of the assets of, any other entity;
(e) sold, transferred, leased or encumbered a material amount of
assets (other than Excluded Assets) except in the ordinary course of business;
(f) materially altered or varied its methods or policies of (i)
underwriting, pricing, originating, warehousing, selling and servicing, or
buying or selling rights to service, its Mortgage Loans, (ii) hedged (which term
includes both buying futures and forward commitments from financial
institutions) its mortgage loan positions or commitments, and (iii) obtained
financing and credit;
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(g) granted to any director, officer, employee or consultant any
material increase in compensation or benefits (other than as may be required
under the terms of written agreements in effect on the date hereof and other
than normal increases made in the ordinary course of business to officers or
employees in accordance with customary past practices and policies);
(h) granted any severance or termination pay (other than as may
be required under the terms of written agreements in effect on the date hereof)
to, or entered into or amended any employment or severance agreement with, any
person, other than termination pay paid in the ordinary course of business to
officers or employees in accordance with customary past practices and policies;
(i) adopted any new or amended any existing director, officer or
employee benefit plans (including, without limitation, profit sharing, bonus,
director and officer incentive compensation, retirement, medical,
hospitalization, life or other insurance plans, arrangements and commitments) or
any trust agreement relating thereto;
(j) incurred any debt other than in the ordinary course of
business in amounts consistent with past practice;
(k) made any change in accounting principles or methods from
those currently employed, except as required by GAAP or by applicable regulatory
requirements;
(l) granted any mortgage or security interest in, or made any
pledge of, or permitted any lien or encumbrance to be placed on, any of its
assets or properties other than in the ordinary course of business consistent
with past practice;
(m) canceled, waived, released or compromised any material debt
or claim, other than upon payment in full;
(n) failed to maintain in full force and effect all existing
insurance policies and fidelity bonds;
(o) taken any action, or failed to take any action, that would
result in a breach or violation of the representations and warranties of Sellers
contained in this Agreement or caused any condition to the transactions
contemplated hereby not to be satisfied;
(p) accelerated, terminated, modified or canceled any material
contract, lease, or license to which Seller is a party;
(q) entered into any employment or collective bargaining
agreement, or modified any existing employment or collective bargaining
agreement; and
(r) agreed to do any of the foregoing included in (a) through
(q).
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer makes the following representations and warranties to Seller and
Shareholders, each of which is true and correct on the date hereof, shall remain
true and correct to and including the Closing Date, shall be unaffected by any
investigation heretofore or hereafter made by Seller or any notice to Seller,
and shall survive the closing of the transactions provided for herein.
5.1 Organization
Buyer is a corporation duly organized and in good standing under the
laws of the State of Florida. Buyer has the corporate power and authority to own
or lease all of its properties and to carry on its business as it is now being
conducted.
5.2 Authority; No Violation
(a) Buyer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action in respect thereof and no other corporate proceedings
on the part of Buyer are necessary to consummate the transactions so
contemplated. This Agreement has been duly and validly executed and delivered by
Buyer and, assuming this Agreement constitutes a valid and binding agreement of
Seller, constitutes a valid and binding obligation of Buyer, enforceable against
Buyer in accordance with its terms (subject to applicable bankruptcy, insolvency
and similar laws affecting creditors' rights generally and subject, as to
enforceability, to general principles of equity.)
(b) Neither the execution and delivery of this Agreement nor the
consummation by Buyer of the transactions contemplated hereby, nor compliance by
Buyer with any of the terms or provisions hereof, will (i) conflict with or
result in a breach of any provision of the articles of incorporation or by-laws
of Buyer, (ii) violate any statute, code, ordinance, rule, regulation, judgment,
order, writ, decree or injunction applicable to Buyer or any of its properties
or assets, or (iii) subject to obtaining or making the consents, permits,
authorizations, approvals, filings and registrations set forth in Section 5.2 of
the Buyer Schedule, violate, conflict with, result in a breach of any provisions
of, constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of,
accelerate the performance required by, or result in a right of termination or
acceleration or the creation of any Encumbrance upon any of the properties or
assets of Buyer under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Buyer is a party, or by which its properties
or assets may be bound or affected except for such violations, conflicts,
breaches or defaults which either individually or in the aggregate would not
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have a Material Adverse Effect on Buyer. Notwithstanding the foregoing, the
representations and warranties in this subsection (b) shall not relate to or
cover any consents, approvals, filings or registrations, if any, arising from
the regulated nature of Seller or made applicable to Buyer by virtue of Seller
or Buyer's acquisition of the Purchased Assets and business of Seller or such
regulations governing Seller and the mortgage banking industry as a result of
Buyer's purchase of the Purchased Assets.
5.3 Brokers and Finders
Neither Buyer nor any of its officers, directors, employees or agents
has employed any broker, finder or financial advisor or incurred any liability
for any fees or commissions in connection with the transactions contemplated
hereby, except for legal, accounting and other professional fees payable in
connection with the Acquisition.
5.4 Buyer's Review of Seller's Schedules
Buyer acknowledges that it has reviewed the Seller's schedules attached
to this Agreement. The Buyer is satisfied with the form and format of such
schedules and accepts the matters accurately disclosed therein; provided that
this representation shall not constitute a release or waiver of Buyer's claims
and causes of action arising from misstatements, errors and omissions contained
in Buyer's schedules.
ARTICLE 6
COVENANTS
6.1 Filings and Consent
The parties hereto agree that they will consult with each other with
respect to the obtaining of all necessary permits, consents, approvals and
authorizations of all third parties and governmental bodies necessary or
advisable to consummate the transactions contemplated by this Agreement, and
each party will keep the others apprised of the status of matters relating to
completion of the transactions contemplated herein.
(a) Sellers and Buyer shall promptly furnish each other with
copies of written communications received by Shareholders, Seller or Buyer, as
the case may be, or delivered by any of them, of any governmental body, Agency,
Investor or private mortgage insurer in respect of the transactions contemplated
hereby.
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6.2 Press Releases
Seller and Buyer shall cooperate with each other in the development and
distribution of all news releases and other public information disclosures with
respect to the Agreement or the transactions contemplated hereby; provided,
however, prior to the consummation of the Acquisition, no party hereto shall
make any public announcement or disclosure with respect to the transactions
contemplated hereby without the prior approval of the other parties, except
where disclosure is required by law. The parties anticipate issuing a press
release relating to the acquisition upon execution of this Agreement.
6.3 Employment Agreements
Buyer shall enter into Employment Agreements with the Executives to
serve as executive officers of the Post-Closing Seller Business Unit, or of
Buyer or an affiliate of Buyer, in the form attached hereto as Exhibit 6.3.
6.4 Marketing of Competing Products
Shareholders and Seller acknowledge that Buyer markets products that
directly compete with Seller's products, and after closing Seller's other
business units will market products which directly compete with the AMR
Division.
6.5 Intentionally Omitted.
ARTICLE 7
FURTHER COVENANTS OF SELLER AND SHAREHOLDERS
Seller and Shareholders covenant and agree as follows:
7.1 Access to Information and Records. During the period prior to the
Closing:
(a) Seller shall, and shall cause its officers, employees,
agents, independent accountants and advisors to, furnish to Buyer, its
officers, employees, agents, independent accountants and advisors, at
reasonable times and places, all information in their possession
concerning Seller as may be requested, and give such persons access to
all of the properties, books, records, contracts and other documents of
or pertaining to Seller that Seller or its officers, employees, agents,
independent accountants or advisors shall have in their custody.
(b) With the prior consent of Seller in each instance (which
consent shall not be unreasonably withheld), Buyer and its officers,
employees, agents, independent accountants
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and advisors, shall have access to vendors, customers, and others having
business dealings with Seller for the purpose of performing Buyer's due
diligence investigation.
7.2 Bank Accounts. Not less than ten (10) days prior to the Closing,
Seller shall provide to Buyer a list of each bank in which Seller has an account
or safe deposit box, the name and number of each such account or box and the
names of all persons authorized to draw thereon or who have access thereto, with
the amounts they are authorized to draw.
7.3 Conduct of Business Pending the Closing. From the date hereof until
the Closing, except as otherwise approved in writing in advance by the Buyer
(which approval shall not be unreasonably withheld):
(a) No Changes. Seller will carry on its business diligently and
in the same manner as heretofore and will not make or institute any
changes in its methods of purchase, sale, management, accounting or
operation.
(b) Maintain Organization. Seller will take such action as may be
necessary to maintain, preserve, renew and keep in favor and effect the
existence, rights and franchises of Seller and will use its best efforts
to preserve the business organization of Seller intact, to keep
available to Buyer the present officers and employees, and to preserve
for Buyer its present relationships with suppliers and customers and
others having business relationships with Seller.
(c) No Breach. Seller and Shareholders will not do or omit any
act, or permit any omission to act, which may cause a breach of any
material contract, commitment or obligation, or any breach of any
representation, warranty, covenant or agreement made by Seller and/or
the Shareholders herein, or which would have required disclosure on
Schedule 4.37 had it occurred after December 31, 1996 and prior to the
date of this Agreement.
(d) No Material Contracts. No contract or commitment will be
entered into, and no purchase of raw materials or supplies and no sale
of goods or services (real, personal, or mixed, tangible or intangible)
will be made, by or on behalf of Seller, except contracts, commitments,
purchases or sales which are in the ordinary course of business and
consistent with past practice, are not material to the Seller
(individually or in the aggregate) and would not have been required to
be disclosed in the Disclosure Schedule had they been in existence on
the date of this Agreement.
(e) No Corporate Changes. Seller shall not amend its Articles of
Incorporation or By-laws or make any changes in authorized or issued
capital stock.
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(f) Maintenance of Insurance. Seller shall maintain all of the
insurance in effect as of the date hereof and shall procure such
additional insurance as shall be reasonably requested by Buyer.
(g) Maintenance of Property. Seller shall use, operate, maintain
and repair all property of Seller in a normal business manner.
(h) Interim Financials. Seller will provide Buyer with interim
monthly financial statements and other management reports as and when
they are available.
(i) No Negotiations. Neither Seller nor any Shareholder will
directly or indirectly (through a representative or otherwise) solicit
or furnish any information to any prospective buyer, commence, or
conduct presently ongoing, negotiations with any other party or enter
into any agreement with any other party concerning the sale of Seller,
Seller's assets or business or any part thereof or any equity securities
of Seller (an "acquisition proposal"), and Seller and Shareholders shall
immediately advise Buyer of the receipt of any acquisition proposal.
7.4 Change of Corporate Name. Upon request by Buyer after the Closing,
Seller shall change its corporate name to a new name bearing no resemblance to
its present name so as to permit the use of its present name by Buyer.
7.5 Consents. Seller and Shareholders will use all reasonable efforts
prior to Closing to obtain all consents necessary for the consummation of the
transactions contemplated hereby.
7.6 Other Action. Seller and Shareholders shall use their best efforts
to cause the fulfillment at the earliest practicable date of all of the
conditions to the parties' obligations to consummate the transactions
contemplated in this Agreement.
7.7 Disclosure. Seller and Shareholders shall have a continuing
obligation to promptly notify Buyer in writing with respect to any matter
hereafter arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in the
Disclosure Schedule, but no such disclosure shall cure any breach of any
representation or warranty which is inaccurate.
7.8 Retirement Plan. Seller and Shareholders shall take all actions that
are necessary to terminate Seller's retirement plan as soon as possible after
Closing and Seller and Shareholders shall indemnify and hold Buyer harmless from
any liabilities in respect thereof.
ARTICLE 8
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CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
Each and every obligation of Buyer to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of each of the
following conditions:
8.1 Representations and Warranties True on the Closing Date. Each of the
representations and warranties made by Seller and Shareholders in this
Agreement, and the statements contained in the Disclosure Schedule or in any
instrument, list, certificate or writing delivered by Seller pursuant to this
Agreement, shall be true and correct in all material respects when made and
shall be true and correct in all material respects at and as of the Closing Date
as though such representations and warranties were made or given on and as of
the Closing Date, except for any changes permitted by the terms of this
Agreement or consented to in writing by Buyer.
8.2 Compliance With Agreement. Seller and Shareholders shall have in all
material respects performed and complied with all of their agreements and
obligations under this Agreement which are to be performed or complied with by
them prior to or on the Closing Date, including the delivery of the closing
documents specified in Section 10.1.
8.3 Absence of Litigation. No Litigation shall have been commenced or
threatened, and no investigation by any Government Entity shall have been
commenced, against Buyer, Seller or any of the affiliates, officers or directors
of any of them, with respect to the transactions contemplated hereby.
8.4 Consents and Approvals. All approvals, consents and waivers that
Buyer and Seller anticipate are required to effect the transactions contemplated
hereby shall have been received.
ARTICLE 9
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
Each and every obligation of Seller and Shareholders to be performed on
the Closing Date shall be subject to the satisfaction prior to or at the Closing
of the following conditions:
9.1 Representations and Warranties True on the Closing Date. Each of the
representations and warranties made by Buyer in this Agreement shall be true and
correct in all material respects when made and shall be true and correct in all
material respects at and as of the Closing Date as though such representations
and warranties were made or given on and as of the Closing Date.
9.2 Compliance With Agreement. Buyer shall have in all material respects
performed and complied with all of Buyer's agreements and obligations under this
Agreement which are to be
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performed or complied with by Buyer prior to or on the Closing Date, including
the delivery of the closing documents specified in Section 10.1.
9.3 Absence of Litigation. No Litigation shall have been commenced or
threatened, and no investigation by any Government Entity shall have been
commenced, against Buyer, Seller or any of the affiliates, officers or directors
of any of them, with respect to the transactions contemplated hereby; provided
that the obligations of Seller shall not be affected unless there is a
reasonable likelihood that as a result of such action, suit, proceeding or
investigation Seller will be unable to retain substantially all the
consideration to which it is entitled under this Agreement.
ARTICLE 10
CLOSING
The closing of this transaction ("xxx Xxxxxxx") shall take place at the
offices of Buyer's attorneys in Jacksonville, Florida at such time and place as
the parties hereto shall agree upon after the satisfaction of the conditions to
closing. Such date is referred to in this Agreement as the "Closing Date".
Regardless of the Closing Date, the transaction shall be deemed to have occurred
for all purposes as of the Effective Time and the parties shall cooperate to
treat the transaction as having occurred as of the Effective Time.
10.1 Documents to be Delivered by Seller and Shareholders. At the
Closing, Seller and Shareholders shall deliver to Buyer the following documents,
in each case duly executed or otherwise in proper form:
(a) Bills of Sale. Bills of sale and such other instruments of
assignment, transfer, conveyance and endorsement as will be sufficient
in the opinion of Buyer and its counsel to transfer, assign, convey and
deliver to Buyer the Purchased Assets as contemplated hereby.
(b) Compliance Certificate. A certificate signed on behalf of
Seller that each of the representations and warranties made by Seller
and Shareholders in this Agreement is true and correct in all material
respects on and as of the Closing Date with the same effect as though
such representations and warranties had been made or given on and as of
the Closing Date (except for any changes permitted by the terms of this
Agreement or consented to in writing by Buyer), and that Seller and
Shareholders have performed and complied with all of Seller's and
Shareholders' obligations under this Agreement which are to be performed
or complied with on or prior to the Closing Date.
(c) Opinion of Counsel. A written opinion of counsel to Seller
and Shareholders, dated as of the Closing Date, addressed to Buyer,
substantially in the form of Exhibit 10.1(c).
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(d) Employment Agreements. The Employment Agreements with the
Executives, duly executed by the Executives.
(e) Intentionally Omitted.
(f) Intentionally Omitted.
(g) Leases. The Lease Assignment and Assumption Agreements duly
executed by Seller.
(h) Intentionally Omitted.
(i) Other Documents. All other documents, instruments or writings
required to be delivered to Buyer at or prior to the Closing pursuant to
this Agreement and such other certificates of authority and documents as
Buyer may reasonably request.
10.2 Documents to be Delivered by Buyer. At the Closing, Buyer shall
deliver to Seller the following documents, in each case duly executed or
otherwise in proper form:
(a) Assumption of Liabilities. Such undertakings and instruments
of assumption as will be reasonably sufficient in the opinion of Seller
and its counsel to evidence the assumption of Assumed Liabilities as
provided for in Article 2.
(b) Compliance Certificate. A certificate signed on behalf of
Buyer that the representations and warranties made by Buyer in this
Agreement are true and correct on and as of the Closing Date with the
same effect as though such representations and warranties had been made
or given on and as of the Closing Date (except for any changes permitted
by the terms of this Agreement or consented to in writing by Seller),
and that Buyer has performed and complied with all of Buyer's
obligations under this Agreement which are to be performed or complied
with on or prior to the Closing Date.
(c) Employment Agreements. The Employment Agreements referred to
in Section 6.3 duly executed by the persons referred to in such Section.
(d) Leases. Assignment and Assumption Agreements in respect of
the Leases for Seller's offices and personal property, duly executed by
Buyer.
(e) Other Documents. All other documents, instruments or writings
required to be delivered to Seller at or prior to the Closing pursuant
to this Agreement and such other certificates of authority and documents
as Seller may reasonably request.
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ARTICLE 11
TERMINATION
11.1 Right of Termination. This Agreement may be terminated without
further liability of any party at any time prior to the Closing:
(a) by mutual written agreement of Buyer and Seller, or
(b) by either Buyer or Seller if the Closing shall not have
occurred on or before February 10, 1997.
ARTICLE 12
INDEMNIFICATION
12.1 Indemnification
(a) From and after the Closing Date, Shareholders and Sellers
shall indemnify and hold harmless, Buyer and each of its Affiliates from and
against any and all Losses which any of them may suffer, incur or sustain
arising out of or attributable to (whether or not arising out of third party
claims) (i) any breach of any covenant, representation or warranty made by
Shareholders and/or Sellers pursuant to this Agreement, and (ii) any claim or
liability (other than payment of benefits in the ordinary course), tax, penalty
asserted, legal action or administrative proceeding resulting from or arising in
connection with any Plan or Single Employer Plan that was accrued or incurred
prior to the Closing Date.
(b) From and after the Closing Date, Buyer shall indemnify and
hold harmless Seller from and against any and all Losses which it may suffer,
incur or sustain arising out of any breach of any representation, warranty or
covenant to be performed by Buyer pursuant to this Agreement.
(c) From and after the Closing Date, Seller and Shareholders
shall indemnify and hold Buyer and its affiliates harmless against, and agree to
pay, any and all expenses, costs or losses relating to the operation of Seller
prior to Closing.
(c) If any third party makes a claim for which an indemnifying
party under this Section 12.1 ("Indemnified Party") seeks indemnity from the
indemnifying party ("Indemnitor"), the Indemnified Party shall as soon as
practicable notify Indemnitor of the details of the claim ("Claim Notice").
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After receiving a Claim Notice, Indemnitor may elect, by written
notice to the Indemnified Party, to assume the defense of such claim by using
counsel selected by Indemnitor, acting reasonably. If Indemnitor assumes such
defense and admits that the claim is subject to the Indemnitor's indemnity
obligations, then (i) the claim shall be deemed to be a claim indemnified by the
Indemnitor; (ii) the Indemnified Party may, at its election, participate in the
defense of the claim, but Indemnitor will have no obligation to pay for any
defense costs including attorneys' fees of the Indemnified Party after
Indemnitor assumes the defense of the claim; and (iii) Indemnitor will have the
right, without cost to Indemnified Party, to compromise and settle the claim on
any basis believed reasonable, in good faith, by Indemnitor, and Indemnified
Party shall be bound thereby, provided that Indemnitor can reasonably
demonstrate the financial resources to perform under the terms of the proposed
Settlement.
After receiving a Claim Notice, if Indemnitor either does not
assume the defense thereof, or does so under a reservation of rights without
admitting that the claim is subject to the Indemnitor's indemnity obligations,
then: (i) the claim shall not be deemed to be a claim indemnified by the
Indemnitor and neither party shall have waived any rights to assert that the
claim is or is not properly a claim subject to the Indemnitor's indemnity
obligations; (ii) both Indemnitor and Indemnified Party may, at their individual
election, participate in the defense of such claim but Indemnitor will remain
responsible for the costs of defense, including reasonable attorneys' fees of
the Indemnified Party should the claim ultimately be determine to be subject to
Indemnitor's indemnity obligation; and (iii) the Indemnified Party shall have
the right to compromise and settle the claim on any basis believed reasonable,
in good faith, by the Indemnified Party, and the Indemnitor will be bound
thereby should the claim ultimately be determined to be subject to Indemnitor's
indemnity obligation.
(d) Notwithstanding anything to the contrary anywhere in this
Agreement, (i) Seller and Shareholders' maximum aggregate liability arising out
of this Agreement and the Acquisition shall be the Purchase Price except for
claims based on intentional fraud of Seller and/or the Shareholders; (ii) Seller
and Shareholders shall have no liability for any claim which is not presented to
them in writing within three years following the date of this Agreement; (iii)
Seller and Shareholders shall be jointly and severally liable for all
indemnification relating to claims presented in writing.
ARTICLE 13
POST-CLOSING COVENANTS
13.1 Personnel Matters
After the Closing Date, except for the Executives, each employee of
Seller will continue to be employed by Buyer on terms that are comparable to the
employment terms, compensation and benefits provided by Seller immediately prior
to the Closing.
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13.2 Shareholder Cooperation
Shareholders shall encourage Seller employees to accept employment with
Buyer.
ARTICLE 14
AMENDMENTS
14.1 Amendment, Extension and Waiver
Subject to applicable law, at any time prior to the consummation of the
transactions contemplated by this Agreement, Sellers and Buyer may (a) amend
this Agreement, (b) extend the time for the performance of any of the
obligations or other acts of any other party hereto, (c) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto, or (d) waive compliance with any of the agreements or
conditions contained in this Agreement. This Agreement may not be amended except
by an instrument in writing signed on behalf of each of the parties hereto. Any
agreement on the part of a party hereto to any extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party, but such waiver or failure to insist on strict compliance with such
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
ARTICLE 15
MISCELLANEOUS
15.1 Survival
The representations and warranties set forth herein shall survive the
Closing.
15.2 Expenses
Each party hereto shall bear and pay all costs and expenses incurred by
it in connection with the transactions contemplated hereby, including fees and
expenses of its own financial consultants, accountants and counsel.
15.3 Entire Agreement
This Agreement, including the documents, schedules and other writings
referred to herein or delivered pursuant hereto, contains the entire agreement
and understanding of the parties with respect to its subject matter. This
Agreement supersedes all prior arrangements and understandings between the
parties, both written or oral with respect to its subject matter.
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15.4 Parties in Interest
The Agreement shall be binding upon and shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
assigns; provided, however, that nothing in this Agreement, expressed or
implied, is intended to confer upon any other person or entity, any rights,
remedies, obligations or liabilities of any nature whatsoever under or by reason
of this Agreement.
15.5 Assignment
No party hereto may assign any of its rights or obligations hereunder to
any other person, without the prior written consent of the other parties
provided, however, Buyer may assign its rights and obligations hereunder to any
one or more of its Affiliates (whether existing on the date hereof or hereafter
created).
15.6 Setoff
The Buyer shall have the right to setoff against the Purchase Price
(including the Contingent Payment) and the Exchange Shares (including Exchange
Shares after they have been transferred by Seller to Shareholders as part of
Seller's liquidation) for any damages for any breach of Shareholders' or
Seller's representations, warranties or covenants. This shall not limit any of
Buyer's other remedies under this Agreement, at law or in equity.
15.7 Notices
All notices or other communications hereunder shall be in writing and
shall be deemed given if delivered personally or mailed by prepaid registered or
certified mail (return receipt requested), or by overnight courier, cable,
telegram or telex addressed as follows:
(a) If to Seller to:
______________________
______________________
______________________
______________________
cc:
______________________
______________________
______________________
______________________
(b) If to Buyer to:
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Xx. Xxxxxx Xxxxxxxx
Industry Mortgage Company
0000 Xxxxxxxxx Xxxx Xx., Xxxxx 000
Xxxxx, XX 00000
Facsimile: (000) 000-0000
cc:
Xxxxxxxx X. Xxxxxx, P.A.
0 Xxxxxxxxxxx Xxxxx
Xxxxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
15.8 Captions
The table of contents and captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
15.9 Counterparts
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one Agreement. Executed counterparts
which are transmitted by facsimile are intended to be binding and enforceable.
15.10 Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the State of Florida, without giving effect to the principles of
conflict of laws thereof.
15.11 No Third Party Beneficiaries
There are no third party beneficiaries and no third party shall have any
rights or remedies under this Agreement.
IN WITNESS WHEREOF, Seller and Buyer have executed this Agreement as of
the day and year first above written.
IMC MORTGAGE COMPANY
By:_________________________________________
Title: _____________________________________
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AMERICAN MORTGAGE REDUCTION, INC.
By:_________________________________________
Title: _____________________________________
____________________________________________
XXXXX XXXXXXX
____________________________________________
XXXX XXXXXX
41
