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EXHIBIT 10.45
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made as of December 6, 1996,
by and among WASHINGTON MORTGAGE FINANCIAL GROUP, LTD., a Delaware corporation
("Purchaser"), XXXXXXX & ASSOCIATES OF MICHIGAN, INC., a Michigan corporation
(the "Company"), and each of the following natural persons, all of whom are
resident in the State of Michigan: XXXXX X. XXXXXXX, XXXXXXX X. XXXXXXXXX,
XXXXXX XXXXXXXX AND XXXXXXX X. XXXXX. (Messieurs Sibbold, Halverson, Greemann
and Pyett are individually a "Seller" and collectively, the "Sellers".)
RECITALS
The Company is wholly owned by the Sellers and is engaged in the commercial
mortgage banking business.
Sellers desire to sell, and Purchaser desires to purchase, all of the issued and
outstanding shares of voting and common capital stock of the Company, i.e., 800
shares of common stock (the "Shares"), for the consideration and on the terms
set forth in this Agreement.
Each of the Sellers own the following percentage of Shares: (i) Xx. Xxxxxxx:
25%; (ii) Xx. Xxxxxxxxx: 25%; (iii) Xx. Xxxxxxxx: 25%; and (iv) Xx. Xxxxx: 25%.
At the Closing (as hereinafter defined) each of the Sellers shall receive
payment in full for his respective interest in the Company, as more specifically
described hereinbelow.
The parties hereto believe that the purchase and sale of the Shares will provide
mutual benefits to the Purchaser and to the Sellers.
NOW, THEREFORE, in consideration of the premises, the representations,
warranties, covenants and agreements herein contained, and for other good and
valuable consideration, the sufficiency and receipt of which are hereby
acknowledged by the parties, the parties, intending to be legally bound, agree
as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings specified
or referred to in this Section 1:
"ACQUIRED COMPANIES"--the Company and its Subsidiaries, collectively.
"ADJUSTMENT AMOUNT"--as defined in Section 2.5.
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"APPLICABLE CONTRACT"--any Contract (a) under which any Acquired Company has or
may acquire any rights, (b) under which any Acquired Company has or may become
subject to any obligation or liability, or (c) by which any Acquired Company or
any of the assets owned or used by it is or may become bound.
"BALANCE SHEET"--as defined in Section 3.4.
"BEST EFFORTS"--the efforts that a prudent Person desirous of achieving a result
would use in similar circumstances to ensure that such result is achieved as
expeditiously as possible PROVIDED, HOWEVER, that an obligation to use Best
Efforts under this Agreement does not (i) require the Person subject to that
obligation to take actions that would result in a materially adverse change in
the benefits to such Person of this Agreement and the Contemplated Transactions
or (ii) require such Person to perform an act that is not reasonable within the
commercial mortgage banking industry.
"BREACH"--a "Breach" of a representation, warranty, covenant, obligation, or
other provision of this Agreement or any instrument delivered pursuant to this
Agreement will be deemed to have occurred if there is or has been (a) any
inaccuracy in or breach of, or any failure to perform or comply with, such
representation, warranty, covenant, obligation, or other provision, or (b) any
occurrence or circumstance that is or was inconsistent with such representation,
warranty, covenant, obligation, or other provision, and the term "Breach" means
any such inaccuracy, breach, failure, occurrence, or circumstance.
"PURCHASER"--as defined in the first paragraph of this Agreement.
"CLOSING"--as defined in Section 2.3.
"CLOSING DATE"--the date and time as of which the Closing actually takes place.
"COLLATERAL"--the real and personal property securing a Mortgage Loan or a bond,
mortgage-backed security or other obligation relating to a Mortgage Loan.
"COMPANY"--the Company as defined in the Recitals of this Agreement and, unless
the context otherwise provides, each of its subsidiaries.
"CONSENT"--any approval, consent, ratification, waiver, or other authorization
(including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS"--all of the transactions contemplated by this
Agreement, including:
(a) the sale of the Shares to Purchaser;
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(b) the execution, delivery, and performance of the Employment Agreements
and the Sellers' Releases;
(c) the performance by Purchaser and Sellers of their respective covenants
and obligations under this Agreement; and
(d) Purchaser's acquisition and ownership of the Shares and exercise of
control over the Acquired Companies.
"CONTRACT"--any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally
binding.
"DAMAGES"--as defined in Section 10.2.
"DISCLOSURE LETTER"--the disclosure letter delivered by Sellers to Purchaser
concurrently with the execution and delivery of this Agreement.
"EMPLOYMENT AGREEMENTS"--as defined in Section 2.4(a)(iii).
"ENCUMBRANCE"--any charge, claim, community property interest, condition,
equitable interest, lien, option, pledge, security interest, right of first
refusal, or restriction of any kind, including any restriction on use, voting,
transfer, receipt of income, or exercise of any other attribute of ownership.
"ENVIRONMENT"--soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES"--any cost, damages, expense,
liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or conditions (including
on-site or off- site contamination, occupational safety and health, and
regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
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(c) financial responsibility under Environmental Law or Occupational Safety
and Health Law for cleanup costs or corrective action, including any
investigation, cleanup, removal, containment, or other remediation or response
actions ("Cleanup") required by applicable Environmental Law or Occupational
Safety and Health Law (whether or not such Cleanup has been required or
requested by any Governmental Body or any other Person) and for any natural
resource damages; or
(d) any other compliance, corrective, investigative, or remedial measures
required under Environmental Law or Occupational Safety and Health Law.
The terms "removal," "remedial," and "response action," include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., as amended
("CERCLA").
"ENVIRONMENTAL LAW"--any Legal Requirement that requires or relates to:
(a) advising appropriate authorities, employees, and the public of intended
or actual releases of pollutants or hazardous substances or materials,
violations of discharge limits, or other prohibitions and of the commencements
of activities, such as resource extraction or construction, that could have
significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of pollutants
or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or minimizing the
hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged, and used so
that they do not present unreasonable risks to human health or the Environment
when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the transportation
of hazardous substances, pollutants, oil, or other potentially harmful
substances;
(g) cleaning up pollutants that have been released, preventing the threat
of release, or paying the costs of such clean up or prevention; or
(h) making responsible parties pay private parties, or groups of them, for
damages done to their health or the Environment, or permitting self-appointed
representatives of the public interest to recover for injuries done to public
assets.
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"ERISA"--the Employee Retirement Income Security Act of 1974 or any successor
law, and regulations and rules issued pursuant to that Act or any successor law.
"FACILITIES"--any real property, leaseholds, or other interests currently or
formerly owned or operated by any Acquired Company and any buildings, plants,
structures, or equipment (including motor vehicles, tank cars, and rolling
stock) currently or formerly owned or operated by any Acquired Company.
"XXXXXX XXX"--Xxxxxx Xxx or any successor organization.
"FHA"--the Federal Housing Administration, an agency within HUD, or any
successor thereto and including the Federal Housing Commissioner and the
Secretary of HUD where appropriate under the FHA regulations.
"FHA LOAN"--a Mortgage Loan insured in whole or in part by the FHA.
"FLOW SERVICING AGREEMENT"--an agreement between the Company and a Mortgage
originator setting forth the terms and conditions under which the Company agrees
to buy loan servicing rights from the Mortgage originator.
"GAAP"--generally accepted United States accounting principles, applied on a
basis consistent with the basis on which the Balance Sheet and the other
financial statements referred to in Section 3.4(b) were prepared.
"GOVERNMENTAL AUTHORIZATION"--any approval, consent, license, permit, waiver, or
other authorization issued, granted, given, or otherwise made available by or
under the authority of any Governmental Body or pursuant to any Legal
Requirement.
"GOVERNMENTAL BODY"--any:
(a) nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other government;
(c) governmental or quasi-governmental authority of any nature (including
any governmental agency, branch, department, official, or entity and any court
or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature.
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"HAZARDOUS ACTIVITY"--the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release, storage,
transfer, transportation, treatment, or use (including any withdrawal or other
use of groundwater) of Hazardous Materials in, on, under, about, or from the
Facilities or any part thereof into the Environment, and any other act,
business, operation, or thing that increases the danger, or risk of danger, or
poses an unreasonable risk of harm to persons or property on or off the
Facilities, or that may affect the value of the Facilities or the Acquired
Companies.
"HAZARDOUS MATERIALS"--any waste or other substance that is listed, defined,
designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials.
"HSR ACT"--the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"INTELLECTUAL PROPERTY ASSETS" --as defined in Section 3.22.
"INTERIM BALANCE SHEET"--as defined in Section 3.4.
"INVESTOR"--FHA, GNMA, Xxxxxx Xxx and Xxxxxxx Mac or any private or public
investor or credit enhancer for which the Company or any of its Subsidiaries is
originating and/or servicing (or to the extent of any continuing obligation, has
in the past originated or serviced) Mortgage Loans pursuant to a Mortgage
Servicing Agreement.
"IRC"--the Internal Revenue Code of 1986 or any successor law, and regulations
issued by the IRS pursuant to the Internal Revenue Code or any successor law.
"IRS"--the United States Internal Revenue Service or any successor agency, and,
to the extent relevant, the United States Department of the Treasury.
"KNOWLEDGE"--an individual will be deemed to have "Knowledge" or "knowledge" of
a particular fact or other matter if:
(a) such individual is actually aware of such fact or other matter; or
(b) a prudent individual could reasonably be expected to be aware of such
fact or other matter in the course of serving as an officer or director of the
Company.
A Person (other than an individual) will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving, or who has at
any time served, as a director,
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officer, partner, executor, or trustee of such Person (or in any similar
capacity) has, or at any time had, Knowledge of such fact or other matter.
"LEGAL REQUIREMENT"--any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"LIEN"--all liens (including judgment and mechanics' liens, regardless of
whether liquidated), mortgages, assessments, security interests, easements,
claims, pledges, trusts (constructive or other), deeds of trust, options or
other charges, encumbrances or restrictions.
"LOAN DOCUMENTS"--any Mortgage Note or Mortgage or similar instrument, and all
amendments thereto, evidencing or securing a Mortgage Loan, including hard
copies where available, and all machine-readable copies on any media.
"MORTGAGE"--a mortgage, deed of trust, security deed or other security
instrument on real property securing a Mortgage Note.
"MORTGAGE LOAN"--a mortgage loan evidenced by a Mortgage Note and secured by a
Mortgage which is either an Owned Mortgage Loan or a Mortgage Loan in the
Mortgage Servicing Portfolio.
"MORTGAGE LOAN FILE"--the credit and closing packages, custodial documents,
escrow documents, and all other documents in the possession of the Company
pertaining to a Mortgage Loan or reasonably necessary for prudent servicing of a
Mortgage Loan, in each case as required by any Investor.
"MORTGAGE NOTE"--a written promise to pay a sum of money at a fixed or variable
interest rate during a specified term evidencing a Mortgage Loan.
"MORTGAGE SERVICING AGREEMENT"--an agreement between the Company and an Investor
or a servicer or other party setting forth the terms and conditions under which
Mortgage Loans or other obligations relating to Mortgage Loans have been and are
to be serviced or subserviced and which may be incorporated in general
guidelines and issuances of an Investor.
"MORTGAGE SERVICING PORTFOLIO"--as of the date of this Agreement, all the
Mortgage Loans which have been, are and, subject to existing Mortgage Servicing
Agreements, are to be serviced or subserviced by the Company, other than the
Owned Mortgage Loans, as more particularly identified on Schedule 3.24, and,
from time to time after the date of this Agreement, as and when Owned Mortgage
Loans are delivered to Investors, such previously Owned Mortgage Loans as well.
"NATIONAL HOUSING ACT"--the National Housing Act of 1934, as amended.
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"NON-ORIGINATED MORTGAGE LOANS"--all Mortgage Loans which were not originated by
the Company.
"OCCUPATIONAL SAFETY AND HEALTH LAW"--any Legal Requirement designed to provide
safe and healthful working conditions and to reduce occupational safety and
health hazards, and any program, whether governmental or private (including
those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions.
"ORDER"--any award, decision, injunction, judgment, order, ruling, subpoena, or
verdict entered, issued, made, or rendered by any court, administrative agency,
or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS"--an action taken by a Person will be deemed to
have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such Person and is
taken in the ordinary course of the normal day-to-day operations of such Person;
(b) such action is not required to be authorized by the board of directors
of such Person (or by any Person or group of Persons exercising similar
authority) [and is not required to be specifically authorized by the parent
company (if any) of such Person]; and
(c) such action is similar in nature and magnitude to actions customarily
taken, without any authorization by the board of directors (or by any Person or
group of Persons exercising similar authority), in the ordinary course of the
normal day-to-day operations of other Persons that are in the same line of
business as such Person.
"ORGANIZATIONAL DOCUMENTS"--(a) the articles or certificate of incorporation and
the bylaws of a corporation;
(b) the partnership agreement and any statement of partnership of a general
partnership;
(c) the limited partnership agreement and the certificate of limited
partnership of a limited partnership;
(d) any charter or similar document adopted or filed in connection with the
creation, formation, or organization of a Person; and
(e) any amendment to any of the foregoing.
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"ORIGINATED MORTGAGE LOANS"--all Mortgage Loans other than Non-Originated
Mortgage Loans.
"OWNED MORTGAGE LOANS"--all the Mortgage Loans the legal and/or beneficial
ownership interests in which are vested in the Company (or any of its
Subsidiaries) as of the date of this Agreement. For the purpose of this
Agreement, Owned Mortgage Loans shall not include Mortgage Loans backed by
mortgage pass-through certificates guaranteed by GNMA (since such Mortgage Loans
are transferred in trust to the owner of the related GNMA guaranteed
mortgagebacked securities.)
"PERSON"--any individual, corporation (including any non-profit corporation),
general or limited partnership, limited liability company, joint venture,
estate, trust, association, organization, labor union, or other entity or
Governmental Body.
"PLAN"--as defined in Section 3.13.
"PROCEEDING"--any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"RELATED PERSON"--with respect to a particular individual:
(a) each other member of such individual's immediate Family;
(b) any Person that is directly or indirectly controlled by such individual
or one or more members of such individual's immediate Family;
(c) any Person in which such individual or members of such individual's
immediate Family hold (individually or in the aggregate) a Material Interest;
and
(d) any Person with respect to which such individual or one or more members
of such individual's Family serves as a director, officer, partner, executor, or
trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control with
such specified Person;
(b) any Person that holds a Material Interest in such specified Person;
(c) each Person that serves as a director, officer, partner, executor, or
trustee of such specified Person (or in a similar capacity);
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(d) any Person in which such specified Person holds a Material Interest;
(e) any Person with respect to which such specified Person serves as a
general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b) or (c).
For purposes of this definition, (a) the "Family" of an individual includes (i)
the individual, (ii) the individual's spouse [and former spouses], (iii) any
other natural person who is related to the individual or the individual's spouse
within the second degree, and (iv) any other natural person who resides with
such individual, and (b) "Material Interest" means direct or indirect beneficial
ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934)
of voting securities or other voting interests representing at least 20% of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 20% of the outstanding equity securities or
equity interests in a Person.
"RELEASE"--any spilling, leaking, emitting, discharging, depositing, escaping,
leaching, dumping, or other releasing into the Environment, whether intentional
or unintentional.
"REO"--real estate obtained by the Company in its name (or in the name of its
Subsidiaries) or on behalf of Investors in connection with foreclosure
proceedings or deed in lieu of foreclosure proceedings on Mortgage Loans.
"REPRESENTATIVE"--with respect to a particular Person, any director, officer,
employee, agent, consultant, advisor, or other representative of such Person,
including legal counsel, accountants, and financial advisors.
"SECURITIES ACT"--the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"SELLERS"--as defined in the first paragraph of this Agreement.
"SELLERS' RELEASES"--as defined in Section 2.4.
"SERVICING RIGHTS"--the right to receive the servicing fee income and any other
income arising from or connected to the Mortgage Servicing Agreements or the
servicing of the Mortgage Loans in the Mortgage Servicing Portfolio.
"SHARES"--as defined in the Recitals of this Agreement.
"SUBSIDIARY"--(i) each corporation in which a Person owns or controls, directly
or indirectly, capital stock representing more than 10% of the outstanding
voting stock and (ii) each other
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partnership, joint venture, limited liability company or partnership or other
business entity in which a Person owns or controls, directly or indirectly, an
equity, ownership or equivalent interest representing more than 10% of the
voting rights or interests therein.
"TAX" or "TAXES"--any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Section 59A),
customs, duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever imposed on the Company or for
which the Company is liable, including any interest, penalty, or addition
thereto, whether disputed or not.
"TAX RETURN"--any return (including any information return), report, statement,
schedule, notice, form, or other document or information filed with or submitted
to, or required to be filed with or submitted to, any Governmental Body in
connection with the determination, assessment, collection, or payment of any
Tax or in connection with the administration, implementation, or enforcement of
or compliance with any Legal Requirement relating to any Tax.
"THREAT OF RELEASE"--a substantial likelihood of a Release that may require
action in order to prevent or mitigate damage to the Environment that may result
from such Release.
"THREATENED"--a claim, Proceeding, dispute, action, or other matter will be
deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing), or
if any other event has occurred or any other circumstances exist, that would
lead a prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter is likely to be asserted, commenced, taken, or otherwise
pursued in the future.
2. SALE AND TRANSFER OF SHARES; CLOSING
2.1 SHARES
Subject to the terms and conditions of this Agreement, at the Closing each of
the Sellers will sell, assign, transfer and deliver his respective Shares to
Purchaser, and Purchaser will purchase the Shares from the respective Seller.
2.2 PURCHASE PRICE
The purchase price (the "Purchase Price") for the Shares will be FOUR MILLION
AND NO/100 DOLLARS ($4,000,000.00), subject to adjustment pursuant to Sections
2.5 and 2.6
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of this Agreement, and shall be payable to the Sellers in immediately available
funds at the Closing pursuant to the collective written instructions of the
Sellers.
2.3 CLOSING
The purchase and sale (the "Closing") provided for in this Agreement will take
place at the offices of Krooth & Xxxxxx in Washington, D.C. at 10:00 a.m. (local
time) on the later of (i) December 31, 1996 or (ii) at such other time and place
as the parties may agree in writing. Subject to the provisions of Section 9,
failure to consummate the purchase and sale provided for in this Agreement on
the date and time and at the place determined pursuant to this Section 2.3 will
not result in the termination of this Agreement and will not relieve any party
of any obligation under this Agreement.
2.4 CLOSING OBLIGATIONS
(a) At the Closing, Sellers or the Company, as appropriate, will deliver to
Purchaser:
(i) certificates representing the Shares, duly signed and endorsed by
each of the Sellers for sale, transfer and assignment to Purchaser;
(ii) releases substantially in the form of Exhibit 2.4(a)(ii) executed
by Sellers (collectively, "Sellers' Releases");
(iii) employment agreements, containing noncompetition covenants,
substantially in the form of Exhibit 2.4(a)(iii), executed by Sellers
(collectively, "Employment Agreements");
(iv) a certificate executed by Sellers and by the Company representing
and warranting to Purchaser that each of Sellers' and the Company's
representations and warranties in this Agreement was accurate in all material
respects as of the date of this Agreement and is accurate in all material
respects as of the Closing Date as if made on the Closing Date (giving full
effect to any supplements to the Disclosure Letter that were delivered by
Sellers to Purchaser prior to the Closing Date in accordance with Section 5.5);
(v) the written Consents of each of the Company's Investors listed in
Schedule 3.27(c) of the Disclosure Letter, and of each agency or instrumentality
listed in Part 3.14 of the Disclosure Letter, consenting to the purchase and
sale contemplated by this Agreement;
(vi) evidence satisfactory to the Purchaser and its counsel that as of
the Closing and payment of the Purchase Price by the Purchaser to the Company,
the Purchaser shall own 100% of the outstanding and issued capital stock of the
Company, and that each of the Sellers' interests in the Company shall be
liquidated and terminated by payment by the Purchaser to each Seller at the
Closing of an amount equivalent to twenty-five percent (25%) of the
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Purchase Price (or such other allocations among themselves as the Sellers shall
mutually approve); and
(vii) evidence satisfactory to the Purchaser that all monies owed by
the Company to Xxxxx Xxxxxx & Co. and to Xx Xxxxxxx, Xx., have been paid and
that the Company is fully released without recourse from the aforesaid
obligations. Said monies may be paid by the Sellers in full (i) from their own
resources, and not from those of the Company, or (ii) from the Company's
resources in an amount not to exceed $600,000, in which latter event the amount
of the Purchase Price delivered to the Sellers pursuant to Section 2.4(b)(i)
shall be reduced by the amount paid by the Sellers to Xxxxx Xxxxxx & Co. and to
Xx Xxxxxxx, Xx. from the Company's resources.
(b) Purchaser will deliver to Sellers :
(i) on January 2, 1997, the following amount by wire transfer to
account(s) specified collectively by the Sellers in writing: $4,000,000.00,
which amount may be reduced subject to the provisions of Section 2.4(a)(vii) of
this Agreement;
(ii) at the Closing, a certificate executed by Purchaser to the effect
that, except as otherwise stated in such certificate, each of Purchaser's
representations and warranties in this Agreement was accurate in all respects as
of the date of this Agreement and is accurate in all respects as of the Closing
Date as if made on the Closing Date; and
(iii) at the Closing, the Employment Agreements, executed by
Purchaser.
In the event that the Purchaser shall fail to make the payment as required
in (b)(i) hereinabove, the Sellers shall have the right to rescind the
Contemplated Transaction.
2.5 ADJUSTMENT AMOUNT
The Adjustment Amount (which may be a positive or negative number) is the amount
of money by which the Purchase Price may be adjusted after the Closing Date, in
accordance with the procedure set forth in Section 2.6 of this Agreement, and
will be equal to that amount determined in accordance with said procedure.
2.6 ADJUSTMENT PROCEDURE
(a) The Purchaser shall cause an audit of the Company to be performed as
of the Closing Date. Within sixty (60) days of such audit, any positive or
negative variance (which shall include, but not be limited to, a review of the
acceptability for net realizable value of items listed as "assets" and
"liabilities") between the results of such audit and the financial statements of
the Company, dated as of May 31, 1996 (a copy of which is attached hereto as
Exhibit 2.6) (the "Adjustment Amount"), shall decrease or increase the Purchase
Price by the
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amount of such variance, as the case may be. The audit referred to in this
Section 2.6 shall be performed on the same basis as the statement dated as of
May 31, 1996, and shall be done substantially in accordance with that
methodology described in Exhibit 2.6(a) which is attached to this Agreement.
(b) On the tenth (10th) business day following the final determination of
the Adjustment Amount, if the Purchase Price is greater than the aggregate of
the payments made pursuant to Sections 2.4(b)(i), Purchaser will pay the
difference to Sellers, and if the Purchase Price is less than such aggregate
amount, Sellers will pay the difference to Purchaser. All payments will be made
together with interest at six percent (6%) compounded daily beginning on the
Closing Date and ending on the date of payment. Payments must be made in
immediately available funds. Payments to Sellers must be made in the manner and
will be allocated in the proportions set forth in written instructions from the
Sellers to the Purchaser. Payments to Purchaser must be made by wire transfer
to such bank account as Purchaser will specify in writing.
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers and the Company jointly and severally represent and warrant to Purchaser
as follows, subject to the understanding that the Disclosure Letter, or any
supplement thereto, delivered prior to Closing, whether or not an exception to
the applicable representation and warranty is specifically invited by the
representation and warranty, will, nonetheless, constitute an exception to the
representation or warranty and will not constitute a breach by the Sellers or by
the Company:
3.1 ORGANIZATION AND GOOD STANDING
(a) Part 3.1 of the Disclosure Letter contains a complete and accurate list
for each Acquired Company of its name, its jurisdiction of incorporation, other
jurisdictions in which it is authorized to do business, and its capitalization
(including the identity of each stockholder and the number of shares held by
each). Each Acquired Company is a corporation duly organized, validly existing,
and in good standing under the laws of its jurisdiction of incorporation, with
full corporate power and authority to conduct its business as it is now being
conducted, to own or use the properties and assets that it purports to own or
use, and to perform all its obligations under Applicable Contracts. Each
Acquired Company is duly qualified to do business as a foreign corporation and
is in good standing under the laws of each state or other jurisdiction in which
the nature of the activities conducted by it requires such qualification.
(b) Sellers have delivered to Purchaser copies of the Organizational
Documents of each Acquired Company, as currently in effect.
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3.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding obligation of
Sellers and the Company, enforceable against Sellers and the Company in
accordance with its terms. Upon the execution and delivery by Sellers of the
Employment Agreements and the other documents and materials listed in Section
2.4 (a) of this Agreement (collectively, the "Sellers' Closing Documents"), the
Sellers' Closing Documents will constitute the legal, valid, and binding
obligations of Sellers or the Company as applicable, enforceable against Sellers
or the Company, as applicable, in accordance with their respective terms.
Sellers and the Company have the absolute and unrestricted right, power,
authority, and capacity to execute and deliver this Agreement and, as
appropriate, the Sellers' Closing Documents and to perform their obligations
under this Agreement and the Sellers' Closing Documents.
(b) Except as set forth in Part 3.2 of the Disclosure Letter, neither the
execution and delivery of this Agreement nor the consummation or performance of
any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of (A) any
provision of the Organizational Documents of the Acquired Companies, or (B) any
resolution adopted by the board of directors or the stockholders of any Acquired
Company;
(ii) to the Knowledge of the Sellers, after diligent inquiry,
contravene, conflict with, or result in a violation of, or give any Governmental
Body or other Person the right to challenge any of the Contemplated Transactions
or to exercise any remedy or obtain any relief under, any Legal Requirement or
any Order to which any Acquired Company or Sellers, or any of the assets owned
or used by any Acquired Company, may be subject;
(iii) to the Knowledge of the Sellers, after diligent inquiry,
contravene, conflict with, or result in a violation of any of the terms or
requirements of, or give any Governmental Body the right to revoke, withdraw,
suspend, cancel, terminate, or modify, any Governmental Authorization that is
held by any Acquired Company or that otherwise relates to the business of, or
any of the assets owned or used by, any Acquired Company;
(iv) to the Knowledge of the Sellers, cause Purchaser or any Acquired
Company to become subject to, or to become liable for the payment of, any Tax,
provided, however, that the Sellers make no representations or warranties
regarding any such claims that may arise under the laws of the Commonwealth of
Virginia or of its political subdivisions;
(v) to the Knowledge of the Sellers, cause any of the assets owned by
any Acquired Company to be reassessed or revalued by any taxing authority or
other Governmental Body, provided, however, that the Sellers make no
representations or warranties regarding any such claims that may arise under the
laws of the Commonwealth of Virginia or of its political subdivisions;
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(vi) contravene, conflict with, or result in a violation or breach of
any provision of, or give any Person the right to declare a default or exercise
any remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Applicable Contract; or
(vii) result in the imposition or creation of any Encumbrance upon or
with respect to any of the assets owned or used by any Acquired Company.
Except as set forth in Part 3.2 of the Disclosure Letter, no Seller or Acquired
Company is or will be required to give any notice to or obtain any Consent from
any Person other than each of the Sellers in connection with the execution and
delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions.
3.3 CAPITALIZATION
The authorized equity securities of the Company consist of fifty thousand
(50,000) shares of common stock, par value of one dollar ($1.00) per share, of
which eight hundred (800) shares are issued and outstanding and constitute the
Shares. Sellers will be on the Closing Date the record and beneficial owners
and holders of the Shares, free and clear of all Encumbrances. The Shares are
owned by the following Sellers in the following amounts: Xx. Xxxxxxx, 200
Shares; Xx. Xxxxxxxxx, 200 Shares; Xx. Xxxxxxxx, 200 Shares; and Xx. Xxxxx, 200
Shares. As of the Closing Date, with the exception of the Shares which are
owned by Sellers, all of the outstanding equity securities and other securities
of each Acquired Company are owned of record and beneficially by one or more of
the Acquired Companies, free and clear of all Encumbrances. As of the Closing
Date, no enforceable legend or other reference to any purported Encumbrance
appears upon any certificate representing equity securities of any Acquired
Company. All of the outstanding equity securities of each Acquired Company have
been duly authorized and validly issued and are fully paid and nonassessable.
As of the Closing Date, there are no Contracts relating to the issuance, sale,
or transfer of any equity securities or other securities of any Acquired
Company. None of the outstanding equity securities or other securities of any
Acquired Company was issued in violation of the Securities Act or any other
Legal Requirement. As of the Closing Date, no Acquired Company owns, or has any
Contract to acquire, any equity securities or other securities of any Person
(other than Acquired Companies) or any direct or indirect equity or ownership
interest in any other business.
3.4 FINANCIAL STATEMENTS
Sellers have delivered to Purchaser: (a) audited consolidated balance sheets of
the Acquired Companies as at December 31 in each of the years 1993 through 1995
(including the notes thereto, the "Balance Sheet"), and the related audited
consolidated statements of income, changes in stockholders' equity, and cash
flow for each of the calendar years then ended,
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together with the report thereon of Cairns & Xxxxxxx, P.C., CPAs, and (b) an
unaudited consolidated balance sheet of the Acquired Companies as at May 31,
1996 (the "Interim Balance Sheet") and the related unaudited consolidated
statements of income, changes in stockholders' equity, and cash flow for the
five (5) months then ended, including in each case the notes thereto. Such
financial statements and notes fairly present the financial condition and the
results of operations, changes in stockholders' equity, and cash flow of the
Acquired Companies as at the respective dates of and for the periods referred to
in such financial statements, all in accordance with GAAP, subject, in the case
of interim financial statements, to normal recurring year-end adjustments (the
effect of which will not, individually or in the aggregate, be materially
adverse) and the absence of notes (that, if presented, would not differ
materially from those included in the Balance Sheet); the financial statements
referred to in this Section 3.4 reflect the consistent application of such
accounting principles throughout the periods involved, except as disclosed in
the notes to such financial statements. No financial statements of any Person
other than the Acquired Companies are required by GAAP to be included in the
consolidated financial statements of the Company.
3.5 BOOKS AND RECORDS
The books of account, minute books, stock record books, and other records of the
Acquired Companies, all of which have been made available to Purchaser, are
complete and correct and have been maintained in accordance with sound business
practices and as required by GAAP, including the maintenance of an adequate
system of internal controls. The minute books of the Acquired Companies contain
accurate and complete records of all meetings held of, and corporate action
taken by, the stockholders, the Boards of Directors, and committees of the
Boards of Directors of the Acquired Companies, and no meeting of any such
stockholders, Board of Directors, or committee has been held for which minutes
have not been prepared and are not contained in such minute books. At the
Closing, all of those books and records will be in the possession of the
Acquired Companies.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
Part 3.6 of the Disclosure Letter contains a complete and accurate list of all
real property, leaseholds, or other interests therein owned by any Acquired
Company. Sellers have delivered or made available to Purchaser copies of all
Leases and copies of the deeds and other instruments (as recorded) by which the
Acquired Companies acquired such real property and interests, and copies of all
title insurance policies, opinions, abstracts, and surveys in the possession of
Sellers or the Acquired Companies and relating to such property or interests.
The Acquired Companies own (with good and marketable title in the case of real
property, subject only to the matters permitted by the following sentence) all
the properties and assets (whether real, personal, or mixed and whether tangible
or intangible) that they purport to own located in the facilities owned or
operated by the Acquired Companies or reflected as owned in the books and
records of the Acquired Companies, including all of the properties and assets
reflected in the Balance Sheet and the Interim Balance Sheet (except for assets
held under
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capitalized leases disclosed or not required to be disclosed in Part 3.6 of the
Disclosure Letter and personal property sold since the date of the Balance Sheet
and the Interim Balance Sheet, as the case may be, in the Ordinary Course of
Business), and all of the properties and assets purchased or otherwise acquired
by the Acquired Companies since the date of the Balance Sheet (except for
personal property acquired and sold since the date of the Balance Sheet in the
Ordinary Course of Business and consistent with past practice), which
subsequently purchased or acquired properties and assets (other than inventory
and short-term investments) are listed in Part 3.6 of the Disclosure Letter.
All material properties and assets reflected in the Balance Sheet and the
Interim Balance Sheet are free and clear of all Encumbrances and are not, in the
case of real property, subject to any rights of way, building use restrictions,
exceptions, variances, reservations, or limitations of any nature except, with
respect to all such properties and assets, (a) mortgages or security interests
shown on the Balance Sheet or the Interim Balance Sheet as securing specified
liabilities or obligations, with respect to which no default (or event that,
with notice or lapse of time or both, would constitute a default) exists, (b)
mortgages or security interests incurred in connection with the purchase of
property or assets after the date of the Interim Balance Sheet (such mortgages
and security interests being limited to the property or assets so acquired),
with respect to which no default (or event that, with notice or lapse of time or
both, would constitute a default) exists, (c) liens for current taxes not yet
due, and (d) with respect to real property, (i) minor imperfections of title, if
any, none of which is substantial in amount, materially detracts from the value
or impairs the use of the property subject thereto, or impairs the operations of
any Acquired Company, and (ii) zoning laws and other land use restrictions that
do not impair the present or anticipated use of the property subject thereto.
All buildings, plants, and structures owned by the Acquired Companies lie wholly
within the boundaries of the real property owned by the Acquired Companies and
do not encroach upon the property of, or otherwise conflict with the property
rights of, any other Person.
3.7 CONDITION AND SUFFICIENCY OF ASSETS
The buildings, plants, structures, and equipment owned by the Acquired Companies
are structurally sound, are in good operating condition and repair, and are
adequate for the uses to which they are being put, and none of such buildings,
plants, structures, or equipment is in need of maintenance or repairs except for
ordinary, routine maintenance and repairs that are not material in nature or
cost. The building, plants, structures, and equipment owned by the Acquired
Companies are sufficient for the continued conduct of the Acquired Companies'
businesses after the Closing in substantially the same manner as conducted prior
to the Closing.
3.8 ACCOUNTS RECEIVABLE
All accounts receivable of the Acquired Companies that are reflected on the
Balance Sheet or the Interim Balance Sheet or on the accounting records of the
Acquired Companies as of the Closing Date (collectively, the "Accounts
Receivable") represent or will represent valid
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obligations arising from sales actually made or services actually performed in
the Ordinary Course of Business. Unless paid prior to the Closing Date, the
Accounts Receivable are or will be as of the Closing Date current and
collectible net of the respective reserves shown on the Balance Sheet or the
Interim Balance Sheet or on the accounting records of the Acquired Companies as
of the Closing Date (which reserves are adequate and calculated consistent with
past practice and, in the case of the reserve as of the Closing Date, will not
represent a greater percentage of the Accounts Receivable as of the Closing Date
than the reserve reflected in the Interim Balance Sheet represented of the
Accounts Receivable reflected therein and will not represent a material adverse
change in the composition of such Accounts Receivable in terms of aging).
Subject to such reserves, each of the Accounts Receivable either has been or
will be collected in full, without any set-off, within ninety days after the day
on which it first becomes due and payable. There is no contest, claim, or right
of set-off, other than returns in the Ordinary Course of Business, under any
Contract with any obligor of an Accounts Receivable relating to the amount or
validity of such Accounts Receivable. Part 3.8 of the Disclosure Letter contains
a complete and accurate list of all Accounts Receivable as of the date of the
Interim Balance Sheet, which list sets forth the aging of such Accounts
Receivable.
3.9 INVENTORY
All inventory of the Acquired Companies, whether or not reflected in the Balance
Sheet or the Interim Balance Sheet, consists of a quality and quantity usable
and salable in the Ordinary Course of Business, except for obsolete items and
items of below-standard quality, all of which have been written off or written
down to net realizable value in the Balance Sheet or the Interim Balance Sheet
or on the accounting records of the Acquired Companies as of the Closing Date,
as the case may be. The quantities of each item of inventory (whether raw
materials, work-in-process, or finished goods) are not excessive, but are
reasonable in the present circumstances of the Acquired Companies.
3.10 NO UNDISCLOSED LIABILITIES
Except as set forth in Part 3.10 of the Disclosure Letter, the Acquired
Companies have no liabilities or obligations of any nature (whether known or
unknown and whether absolute, accrued, contingent, or otherwise) except for
liabilities or obligations reflected or reserved against in the Balance Sheet or
the Interim Balance Sheet and current liabilities incurred in the Ordinary
Course of Business since the respective dates thereof.
3.11 TAXES
(a) The Acquired Companies have filed or caused to be filed all Tax Returns
that are or were required to be filed by or with respect to any of them, either
separately or as a member of a group of corporations, pursuant to applicable
Legal Requirements. Sellers have delivered to Purchaser copies of, and Part 3.11
of the Disclosure Letter contains a complete and accurate list of, all such Tax
Returns filed since 1990. The Acquired Companies have paid, or made
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provision for the payment of, all Taxes that have or may have become due
pursuant to those Tax Returns or otherwise, or pursuant to any assessment
received by Sellers or any Acquired Company, except such Taxes, if any, as are
listed in Part 3.11 of the Disclosure Letter and are being contested in good
faith and as to which adequate reserves (determined in accordance with GAAP)
have been provided in the Balance Sheet and the Interim Balance Sheet.
(b) Part 3.11 of the Disclosure Letter contains a complete and accurate
list of all audits of all Tax Returns, including a reasonably detailed
description of the nature and outcome of each audit. All deficiencies proposed
as a result of such audits have been paid, reserved against, settled, or, as
described in Part 3.11 of the Disclosure Letter, are being contested in good
faith by appropriate proceedings. Part 3.11 of the Disclosure Letter describes
all adjustments to the United States federal income Tax Returns filed by any
Acquired Company or any group of corporations including any Acquired Company for
all taxable years, and the resulting deficiencies proposed by the IRS. Except as
described in Part 3.11 of the Disclosure Letter, no Seller or Acquired Company
has given or been requested to give waivers or extensions (or is or would be
subject to a waiver or extension given by any other Person) of any statute of
limitations relating to the payment of Taxes of any Acquired Company or for
which any Acquired Company may be liable.
(c) The charges, accruals, and reserves with respect to Taxes on the
respective books of each Acquired Company are adequate (determined in accordance
with GAAP) in all material respects for payment of all accrued and unpaid
federal, state, county, local, and foreign taxes for the period then ended and
for all prior periods. Federal income Tax Returns of the Sellers have not been
audited by the Internal Revenue Service, and no controversy with respect to
taxes of any type is pending or, to the best knowledge of the Sellers,
threatened. The Sellers have filed or has obtained presently effective
extensions with respect to all Federal, state, county, local, and foreign tax
returns that are required to be filed by it, such returns are true and correct
and all taxes shown thereon to be due have been timely paid with exceptions not
material to the Sellers. The Sellers' net operating losses for federal income
tax purposes, as set forth in the Financial Statements, are not subject to any
limitations imposed by Section 382 of the Code, and consummation of the
transactions contemplated by this Agreement or by any other agreement,
understanding or commitment, contingent or otherwise, to which the Sellers are a
party or by which it is otherwise bound will not have the effect of limiting the
Sellers' ability to use such net operating losses in full to offset such taxable
income and are at least equal to that Acquired Company's liability for Taxes.
There exists no proposed tax assessment against any Acquired Company except as
disclosed in the Balance Sheet or in the Interim Balance Sheet or in Part 3.11
of the Disclosure Letter. No consent to the application of Section 341(f)(2) of
the IRC has been filed with respect to any property or assets held, acquired, or
to be acquired by any Acquired Company. All Taxes that any Acquired Company is
or was required by Legal Requirements to withhold or collect have been duly
withheld or collected and, to the extent required, have been paid to the proper
Governmental Body or other Person.
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(d) All Tax Returns filed by (or that include on a consolidated basis) any
Acquired Company are true, correct, and complete. There is no tax sharing
agreement that will require any payment by any Acquired Company after the date
of this Agreement. No Acquired Company is, or within the five-year period
preceding the Closing Date has been, an "S" corporation. During the consistency
period (as defined in Section 338(h)(4) of the IRC with respect to the sale of
the Shares to Purchaser), no Acquired Company or target affiliate (as defined in
Section 338(h)(6) of the IRC with respect to the sale of the Shares to
Purchaser) has sold or will sell any property or assets to Purchaser or to any
member of the affiliated group (as defined in Section 338(h)(5) of the IRC) that
includes Purchaser. Part 3.11 of the Disclosure Letter lists all such target
affiliates.
3.12 NO MATERIAL ADVERSE CHANGE
Since the date of the Interim Balance Sheet, there has not been any material
adverse change in the business, operations, properties, prospects, assets, or
condition of any Acquired Company, and no event has occurred or circumstance
exists that may result in such a material adverse change.
3.13 ERISA AND EMPLOYEE BENEFITS
(a) Part 3.13 of the Disclosure Letter contains a true and complete
list of each "employee benefit plan," as defined in Section 3(3) of ERISA, and
of all other employee compensation plans, programs, agreements or arrangements,
currently maintained by the Company or any trade or business, whether or not
incorporated, which is part of a controlled group within the meaning of Section
414(b), (c) or (m) of the Code with the Company (collectively, the "Company
Group"), or under which any member of the Company Group has any liability in
respect of current or former employees (collectively, the "Company Plans"). All
the Company Plans which constitute employee "pension plans" as defined in
Section 3(2) of ERISA are referred to herein as the "the Company Pension Plans."
Each of the Company Plans is in compliance in all material respects with the
terms thereof and the applicable provisions of ERISA and the Code, including any
applicable qualification requirements of the Code. The Company Group has
fulfilled its obligations under the minimum funding standards of ERISA and the
Code with respect to each Company Pension Plan, and the Company Group has not
incurred, and the Company Group does not have any knowledge of any event or
condition which would cause the Company Group to incur, any liability to the
Pension Benefit Guaranty Corporation, any trustee under Section 4049 of ERISA,
or any Company Pension Plan in connection with the termination of any Company
Pension Plan under Title IV of ERISA. No Company Pension Plan has an
accumulated or waived funding deficiency, or has applied for an extension of any
amortization period within the meaning of Section 412 of the Code and no event
or condition exists which could be deemed a reportable event within the meaning
of section 4043 of ERISA. Each Company Pension Plan which is intended to be a
qualified plan under Section 401 (a) of the Code is so qualified and has
received a favorable determination letter from the Internal Revenue Service.
The Company has previously
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delivered to the Purchaser with respect to each Company Plan, true and correct
copies of (A) each Company Plan (or, in the case of an oral or informal Company
Plan, a written description thereof); (B) the most recent annual report (Form
5500 series); (C) the most recent actuarial valuation report; and (iv) the most
recent Summary Plan Description, as described in Section 102(a)(1) of ERISA.
(b) The actuarial present value of accrued benefits (both vested and
unvested) of Company Pension Plans subject to Title IV of ERISA does not exceed
the assets of such Company Pension Plans based upon the actuarial assumptions
used in funding such plan for the 1996 valuation, which assumptions are
reasonable in light of the experience of such plan.
(c) Except as set forth on Schedule 3.13 of the Disclosure Letter,
there are no pending claims or lawsuits which have been asserted or instituted
(other than in respect of benefits due in the ordinary course which, in the
aggregate, are not material) against the assets of any of the Company Plans or
against the Company Group or any fiduciary of the Company Plans with respect to
the Company Plans.
(d) As of the date hereof, there are no benefits to be provided to
current or future retirees under any "welfare benefit plans" within the meaning
of Section 3(1) of ERISA which are maintained by the Company Group.
(e) The Company Group has not maintained or contributed to, or been
obligated or required to contribute to, a "multiemployer plan," as such term is
defined in Section 3(37) of ERISA, and no withdrawal liability has been incurred
by or asserted against any of the Company Group with respect to a withdrawal
from any multiemployer pension plan, and the Company Group does not have any
knowledge of any event of condition which would cause any of the Company Group
to incur any such withdrawal liability.
(f) Except as set forth in Schedule 3.13 of the Disclosure Letter, no
Company Plan exists which would result in the payment to any individual of any
money or other property or rights or accelerate or provide any other rights or
benefits to any individual as a result of the transactions contemplated by this
Agreement.
(g) With respect to the 401K/profit sharing plans of the Acquired
Companies which are disclosed and described in Schedule 3.13 of the Disclosure
Letter, the Sellers, who are the trustees of such plan, and the Purchaser agree
to cooperate to terminate the plan as soon a practicable and in a manner in
compliance with all applicable laws. Notwithstanding anything in this Agreement
to the contrary, in the event that any Damages are incurred by the Purchaser or
by the Company with respect to the operation, administration, maintenance or
termination of such plan, the Sellers shall indemnify and hold the Purchaser and
the Company harmless against such Damages, and the liability of the Sellers for
such Damages shall be joint and several for the amount of the Damages and such
liability shall not be subject to any of the
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limitations as to time and amount which are otherwise provided to the Sellers
under this Agreement.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS
(a) Except as set forth in Part 3.14 of the Disclosure Letter:
(i) each Acquired Company is, and at all times has been, in full
compliance with each Legal Requirement that is or was applicable to it or to the
conduct or operation of its business or the ownership or use of any of its
assets;
(ii) no event has occurred or circumstance exists that (with or
without notice or lapse of time) (A) may constitute or result in a violation by
any Acquired Company of, or a failure on the part of any Acquired Company to
comply with, any Legal Requirement, or (B) may give rise to any obligation on
the part of any Acquired Company to undertake, or to bear all or any portion of
the cost of, any remedial action of any nature; and
(iii) no Acquired Company has received any notice or other
communication (whether oral or written) from any Governmental Body or any other
Person regarding (A) any actual, alleged, possible, or potential violation of,
or failure to comply with, any Legal Requirement, or (B) any actual, alleged,
possible, or potential obligation on the part of any Acquired Company to
undertake, or to bear all or any portion of the cost of, any remedial action of
any nature.
(b) Part 3.14 of the Disclosure Letter contains a complete and accurate
list of each Governmental Authorization that is held by any Acquired Company or
that otherwise relates to the business of, or to any of the assets owned or used
by, any Acquired Company. Each Governmental Authorization listed or required to
be listed in Part 3.14 of the Disclosure Letter is valid and in full force and
effect. Except as set forth in Part 3.14 of the Disclosure Letter:
(i) each Acquired Company is, and at all times has been, in full
compliance with all of the terms and requirements of each Governmental
Authorization identified or required to be identified in Part 3.14 of the
Disclosure Letter;
(ii) no event has occurred or circumstance exists that may (with or
without notice or lapse of time) (A) constitute or result directly or indirectly
in a violation of or a failure to comply with any term or requirement of any
Governmental Authorization listed or required to be listed in Part 3.14 of the
Disclosure Letter, or (B) result directly or indirectly in the revocation,
withdrawal, suspension, cancellation, or termination of, or any modification to,
any Governmental Authorization listed or required to be listed in Part 3.14 of
the Disclosure Letter;
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(iii) no Acquired Company has received any notice or other
communication (whether oral or written) from any Governmental Body or any other
Person regarding (A) any actual, alleged, possible, or potential violation of or
failure to comply with any term or requirement of any Governmental
Authorization, or (B) any actual, proposed, possible, or potential revocation,
withdrawal, suspension, cancellation, termination of, or modification to any
Governmental Authorization; and
(iv) all applications required to have been filed for the renewal of
the Governmental Authorizations listed or required to be listed in Part 3.14 of
the Disclosure Letter have been duly filed on a timely basis with the
appropriate Governmental Bodies, and all other filings required to have been
made with respect to such Governmental Authorizations have been duly made on a
timely basis with the appropriate Governmental Bodies.
The Governmental Authorizations listed in Part 3.14 of the Disclosure Letter
collectively constitute all of the Governmental Authorizations necessary to
permit the Acquired Companies to lawfully conduct and operate their businesses
in the manner they currently conduct and operate such businesses and to permit
the Acquired Companies to own and use their assets in the manner in which they
currently own and use such assets.
3.15 LEGAL PROCEEDINGS; ORDERS
(a) Except as set forth in Part 3.15 of the Disclosure Letter, there is no
pending Proceeding against either any Acquired Company or any of the Sellers:
(i) that has been commenced by or against any Acquired Company or that
otherwise relates to or may affect the business of, or any of the assets owned
or used by, any Acquired Company; or
(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the Contemplated
Transactions; or
(iii) that challenges the right of any of the Sellers to enter into or
perform its obligations under this Agreement; or
(iv) relating to any matters arising by reason of the past employment
relationships of any of the Sellers or of any of the Company's employees.
To the Knowledge of Sellers and the Acquired Companies, (1) no such Proceeding
has been Threatened, and (2) no event has occurred or circumstance exists that
may give rise to or serve as a basis for the commencement of any such
Proceeding. Sellers have delivered to Purchaser copies of all pleadings,
correspondence, and other documents relating to each Proceeding listed in Part
3.15 of the Disclosure Letter. The Proceedings listed in Part 3.15 of the
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Disclosure Letter will not have a material adverse effect on the business,
operations, assets, condition, or prospects of any Acquired Company.
(b) Except as set forth in Part 3.15 of the Disclosure Letter:
(i) there is no Order to which any of the Acquired Companies, or any
of the assets owned or used by any Acquired Company, is subject;
(ii) No Seller is subject to any Order that relates to the business
of, or any of the assets owned or used by, any Acquired Company; and
(iii) to the Knowledge of Sellers and the Acquired Companies, no
officer, director, agent, or employee of any Acquired Company is subject to any
Order that prohibits such officer, director, agent, or employee from engaging in
or continuing any conduct, activity, or practice relating to the business of any
Acquired Company.
(c) Except as set forth in Part 3.15 of the Disclosure Letter:
(i) each Acquired Company and each of the Sellers are in full
compliance with all of the terms and requirements of each Order to which it, or
any of the assets owned or used by it, is or has been subject;
(ii) no event has occurred or circumstance exists that may constitute
or result in (with or without notice or lapse of time) a violation of or failure
to comply with any term or requirement of any Order to which any Acquired
Company, or any of the assets owned or used by any Acquired Company, or any of
the Sellers are subject; and
(iii) no Acquired Company or any of the Sellers have received any
notice or other communication (whether oral or written) from any Governmental
Body or any other Person regarding any actual, alleged, possible, or potential
violation of, or failure to comply with, any term or requirement of any Order to
which any Acquired Company, or any of the assets owned or used by any Acquired
Company, is or has been subject.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Part 3.16 of the Disclosure Letter, since the date of the
Interim Balance Sheet, the Acquired Companies have conducted their businesses
only in the Ordinary Course of Business and there has not been any:
(a) change in any Acquired Company's authorized or issued capital stock;
grant of any stock option or right to purchase shares of capital stock of any
Acquired Company; issuance of any security convertible into such capital stock;
grant of any registration rights; purchase, redemption, retirement, or other
acquisition by any Acquired Company of any shares of any
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such capital stock; or declaration or payment of any dividend or other
distribution or payment in respect of shares of capital stock;
(b) amendment to the Organizational Documents of any Acquired Company;
(c) payment or increase by any Acquired Company of any bonuses, salaries,
or other compensation to any stockholder, director, officer, or (except in the
Ordinary Course of Business) employee or entry into any employment, severance,
or similar Contract with any director, officer, or employee, provided, however,
that each of the Sellers and certain employees of the Acquired Companies may
receive prior to Closing year-end bonuses and profit sharing contributions in
accordance with the Acquired Companies' current policy, so long as the payment
of any or all such bonuses and profit sharing contributions does not result in a
material adverse change in violation of Section 3.12 of this Agreement;
(d) except as provided in (c) immediately above, adoption of, or increase
in the payments to or benefits under, any profit sharing, bonus, deferred
compensation, savings, insurance, pension, retirement, or other employee benefit
plan for or with any employees of any Acquired Company;
(e) damage to or destruction or loss of any asset or property of any
Acquired Company, whether or not covered by insurance, materially and adversely
affecting the properties, assets, business, financial condition, or prospects of
the Acquired Companies, taken as a whole;
(f) entry into, termination of, or receipt of notice of termination of (i)
any license, distributorship, dealer, sales representative, joint venture,
credit, or similar agreement, or (ii) any Contract or transaction involving a
total remaining commitment by or to any Acquired Company of at least $10,000.00
(g) sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any asset or property of any Acquired
Company or mortgage, pledge, or imposition of any lien or other encumbrance on
any material asset or property of any Acquired Company, including the sale,
lease, or other disposition of any of the Intellectual Property Assets;
(h) cancellation or waiver of any claims or rights with a value to any
Acquired Company in excess of $10,000.00.
(i) material change in the accounting methods used by any Acquired Company;
or
(j) agreement, whether oral or written, by any Acquired Company to do any
of the foregoing.
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3.17 CONTRACTS; NO DEFAULTS
(a) Part 3.17(a) of the Disclosure Letter contains a complete and accurate
list, and Sellers have delivered to Purchaser true and complete copies, of:
(i) each Applicable Contract that involves performance of services or
delivery of goods or materials by one or more Acquired Companies of an amount or
value in excess of $10,000.00;
(ii) each Applicable Contract that involves performance of services or
delivery of goods or materials to one or more Acquired Companies of an amount or
value in excess of $10,000.00;
(iii) each Applicable Contract that was not entered into in the
Ordinary Course of Business and that involves expenditures or receipts of one or
more Acquired Companies in excess of $10,000.00;
(iv) each lease, rental or occupancy agreement, license, installment
and conditional sale agreement, and other Applicable Contract affecting the
ownership of, leasing of, title to, use of, or any leasehold or other interest
in, any real or personal property (except personal property leases and
installment and conditional sales agreements having a value per item or
aggregate payments of less than $10,000.00 and with terms of less than one
year);
(v) each licensing agreement or other Applicable Contract with respect
to patents, trademarks, copyrights, or other intellectual property, including
agreements with current or former employees, consultants, or contractors
regarding the appropriation or the non-disclosure of any of the Intellectual
Property Assets;
(vi) each collective bargaining agreement and other Applicable
Contract to or with any labor union or other employee representative of a group
of employees;
(vii) each joint venture, partnership, and other Applicable Contract
(however named) involving a sharing of profits, losses, costs, or liabilities by
any Acquired Company with any other Person;
(viii) each Applicable Contract containing covenants that in any way
purport to restrict the business activity of any Acquired Company or any
Affiliate of an Acquired Company or limit the freedom of any Acquired Company or
any Affiliate of an Acquired Company to engage in any line of business or to
compete with any Person;
(ix) each Applicable Contract providing for payments to or by any
Person based on sales, purchases, or profits, other than direct payments for
goods;
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(x) each power of attorney that is currently effective and
outstanding;
(xi) each Applicable Contract entered into other than in the Ordinary
Course of Business that contains or provides for an express undertaking by any
Acquired Company to be responsible for consequential damages;
(xii) each Applicable Contract for capital expenditures in excess of
$10,000.00;
(xiii) each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance extended by any Acquired
Company other than in the Ordinary Course of Business;
(xiv) each Owned Mortgage Loan and any Servicing Agreements and escrow
agreement relating thereto;
(xv) each Applicable Contract with each of the Company's Investors,
and
(xvi) each amendment, supplement, and modification (whether oral or
written) in respect of any of the foregoing;
Part 3.17(a) of the Disclosure Letter sets forth reasonably complete details
concerning such Contracts, including the parties to the Contracts, the amount of
the remaining commitment of the Acquired Companies under the Contracts, and the
Acquired Companies' office where details relating to the Contracts are located.
(b) Except as set forth in Part 3.17(b) of the Disclosure Letter:
(i) no Seller (and no Related Person of Sellers) has or may acquire
any rights under, and no Seller has or may become subject to any obligation or
liability under, any Contract that relates to the business of, or any of the
assets owned or used by, any Acquired Company; and
(ii) no officer, director, agent, employee, consultant, or contractor
of any Acquired Company is bound by any Contract that purports to limit the
ability of such officer, director, agent, employee, consultant, or contractor to
(A) engage in or continue any conduct, activity, or practice relating to the
business of any Acquired Company, or (B) assign to any Acquired Company or to
any other Person any rights to any invention, improvement, or discovery.
(c) Except as set forth in Part 3.17(c) of the Disclosure Letter, each
Contract identified or required to be identified in Part 3.17(a) of the
Disclosure Letter is in full force and effect and is valid and enforceable in
accordance with its terms.
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(d) Except as set forth in Part 3.17(d) of the Disclosure Letter:
(i) each Acquired Company is and at all times has been in full
compliance with all applicable terms and requirements of each Contract under
which such Acquired Company has or had any obligation or liability or by which
such Acquired Company or any of the assets owned or used by such Acquired
Company is or was bound;
(ii) each other Person that has or had any obligation or liability
under any Contract under which an Acquired Company has or had any rights is and
at all times has been, in full compliance with all applicable terms and
requirements of such Contract;
(iii) no event has occurred or circumstance exists that (with or
without notice or lapse of time) may contravene, conflict with, or result in a
violation or breach of, or give any Acquired Company or other Person the right
to declare a default or exercise any remedy under, or to accelerate the maturity
or performance of, or to cancel, terminate, or modify, any Applicable Contract;
and
(iv) no Acquired Company has given to or received from any other
Person at any time any notice or other communication (whether oral or written)
regarding any actual, alleged, possible, or potential violation or breach of, or
default under, any Contract.
(e) There are no renegotiations of, attempts to renegotiate, or outstanding
rights to renegotiate any material amounts paid or payable to any Acquired
Company under current or completed Contracts with any Person and no such Person
has made written demand for such renegotiation.
(f) The Contracts relating to the sale, design, manufacture, or provision
of products or services by the Acquired Companies have been entered into in the
Ordinary Course of Business and have been entered into without the commission of
any act alone or in concert with any other Person, or any consideration having
been paid or promised, that is or would be in violation of any Legal
Requirement.
3.18 INSURANCE
(a) Sellers have delivered to Purchaser:
(i) true and complete copies of all policies of insurance to which any
Acquired Company is a party or under which any Acquired Company, or any director
of any Acquired Company, is or has been covered at any time within the seven (7)
years preceding the date of this Agreement;
(ii) true and complete copies of all pending applications for policies
of insurance; and
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(iii) any statement by the auditor of any Acquired Company's financial
statements with regard to the adequacy of such entity's coverage or of the
reserves for claims.
(b) Part 3.18(b) of the Disclosure Letter describes:
(i) any self-insurance arrangement by or affecting any Acquired
Company, including any reserves established thereunder;
(ii) any contract or arrangement, other than a policy of insurance,
for the transfer or sharing of any risk by any Acquired Company; and
(iii) all obligations of the Acquired Companies to third parties with
respect to insurance (including such obligations under leases and service
agreements) and identifies the policy under which such coverage is provided.
(c) Part 3.18(c) of the Disclosure Letter sets forth, by year, for the
current policy year and each of the seven (7) preceding policy years:
(i) a summary of the loss experience under each policy;
(ii) a statement describing each claim under an insurance policy which
sets forth:
(A) the name of the claimant;
(B) a description of the policy by insurer, type of insurance,
and period of coverage; and
(C) the amount and a brief description of the claim; and
(iii) a statement describing the loss experience for all claims that
were self-insured, including the number and aggregate cost of such claims.
(d) Except as set forth on Part 3.18(d) of the Disclosure Letter:
(i) All policies to which any Acquired Company is a party or that
provide coverage to Sellers, any Acquired Company, or any director or officer of
an Acquired Company:
(A) are valid, outstanding, and enforceable;
(B) are issued by an insurer that is financially sound and
reputable;
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(C) taken together, provide adequate insurance coverage for the
assets and the operations of the Acquired Companies [for all risks normally
insured against by a Person carrying on the same business or businesses as the
Acquired Companies] [for all risks to which the Acquired Companies are normally
exposed];
(D) are sufficient for compliance with all Legal Requirements and
Contracts to which any Acquired Company is a party or by which any of them is
bound;
(E) will continue in full force and effect following the
consummation of the Contemplated Transactions; and
(F) do not provide for any retrospective premium adjustment or
other experienced-based liability on the part of any Acquired Company.
(ii) No Seller or Acquired Company has received (A) any refusal of
coverage or any notice that a defense will be afforded with reservation of
rights, or (B) any notice of cancellation or any other indication that any
insurance policy is no longer in full force or effect or will not be renewed or
that the issuer of any policy is not willing or able to perform its obligations
thereunder.
(iii) The Acquired Companies have paid all premiums due, and have
otherwise performed all of their respective obligations, under each policy to
which any Acquired Company is a party or that provides coverage to any Acquired
Company or director thereof.
(iv) The Acquired Companies have given notice to the insurer of all
claims that may be insured thereby.
3.19 ENVIRONMENTAL MATTERS
Except as set forth in part 3.19 of the disclosure letter:
(a) Each Acquired Company is, and at all times has been, in full compliance
with, and has not been and is not in violation of or liable under, any
Environmental Law. No Seller or Acquired Company has any basis to expect, nor
has any of them or any other Person for whose conduct they are or may be held to
be responsible received, any actual or Threatened order, notice, or other
communication from (i) any Governmental Body or private citizen acting in the
public interest, or (ii) the current or prior owner or operator of any
Facilities, of any actual or potential violation or failure to comply with any
Environmental Law, or of any actual or Threatened obligation to undertake or
bear the cost of any Environmental, Health, and Safety Liabilities with respect
to any of the Facilities or any other properties or assets (whether real,
personal, or mixed) in which Sellers or any Acquired Company has had an
interest, or with respect to any property or Facility at or to which Hazardous
Materials were
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generated, manufactured, refined, transferred, imported, used, or processed by
Sellers, any Acquired Company, or any other Person for whose conduct they are or
may be held responsible, or from which Hazardous Materials have been
transported, treated, stored, handled, transferred, disposed, recycled, or
received.
(b) There are no pending or, to the Knowledge of Sellers and the Acquired
Companies, Threatened claims, Encumbrances, or other restrictions of any nature,
resulting from any Environmental, Health, and Safety Liabilities or arising
under or pursuant to any Environmental Law, with respect to or affecting any of
the Facilities or any other properties and assets (whether real, personal, or
mixed) in which Sellers or any Acquired Company has or had an interest.
(c) No Seller or Acquired Company has Knowledge of any basis to expect, nor
has any of them or any other Person for whose conduct they are or may be held
responsible, received, any citation, directive, inquiry, notice, Order, summons,
warning, or other communication that relates to Hazardous Activity, Hazardous
Materials, or any alleged, actual, or potential violation or failure to comply
with any Environmental Law, or of any alleged, actual, or potential obligation
to undertake or bear the cost of any Environmental, Health, and Safety
Liabilities with respect to any of the Facilities or any other properties or
assets (whether real, personal, or mixed) in which Sellers or any Acquired
Company had an interest, or with respect to any property or facility to which
Hazardous Materials generated, manufactured, refined, transferred, imported,
used, or processed by Sellers, any Acquired Company, or any other Person for
whose conduct they are or may be held responsible, have been transported,
treated, stored, handled, transferred, disposed, recycled, or received.
(d) No Seller or Acquired Company, or any other Person for whose conduct
they are or may be held responsible, has any Environmental, Health, and Safety
Liabilities with respect to the Facilities or, to the Knowledge of Sellers and
the Acquired Companies, with respect to any other properties and assets (whether
real, personal, or mixed) in which Sellers or any Acquired Company (or any
predecessor), has or had an interest, or at any property geologically or
hydrologically adjoining the Facilities or any such other property or assets.
(e) There are no Hazardous Materials present on or in the Environment at
the Facilities or at any geologically or hydrologically adjoining property,
including any Hazardous Materials contained in barrels, above or underground
storage tanks, landfills, land deposits, dumps, equipment (whether moveable or
fixed) or other containers, either temporary or permanent, and deposited or
located in land, water, sumps, or any other part of the Facilities or such
adjoining property, or incorporated into any structure therein or thereon. No
Seller, Acquired Company, any other Person for whose conduct they are or may be
held responsible, or to the Knowledge of Sellers and the Acquired Companies, any
other Person, has permitted or conducted, or is aware of, any Hazardous Activity
conducted with respect to the Facilities or any other properties or assets
(whether real, personal, or mixed) in which Sellers or any
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Acquired Company has or had an interest except in full compliance with all
applicable Environmental Laws.
(f) There has been no Release or, to the Knowledge of Sellers and the
Acquired Companies, Threat of Release, of any Hazardous Materials at or from the
Facilities or at any other locations where any Hazardous Materials were
generated, manufactured, refined, transferred, produced, imported, used, or
processed from or by the Facilities, or from or by any other properties and
assets (whether real, personal, or mixed) in which Sellers or any Acquired
Company has or had an interest, or [to the Knowledge of Sellers and the Acquired
Companies] any geologically or hydrologically adjoining property, whether by
Sellers, any Acquired Company, or any other Person.
(g) Sellers have delivered to Purchaser true and complete copies and
results of any reports, studies, analyses, tests, or monitoring possessed or
initiated by Sellers or any Acquired Company pertaining to Hazardous Materials
or Hazardous Activities in, on, or under the Facilities, or concerning
compliance by Sellers, any Acquired Company, or any other Person for whose
conduct they are or may be held responsible, with Environmental Laws.
3.20 EMPLOYEES
(a) Part 3.20 of the Disclosure Letter contains a complete and accurate
list of the following information for each employee or director of the Acquired
Companies, including each employee on leave of absence or layoff status:
employer; name; job title; current compensation paid or payable and any change
in compensation since January 1, 1993; vacation accrued; and service credited
for purposes of vesting and eligibility to participate under any Acquired
Company's pension, retirement, profit-sharing, thrift-savings, deferred
compensation, stock bonus, stock option, cash bonus, employee stock ownership
(including investment credit or payroll stock ownership), severance pay,
insurance, medical, welfare, or vacation plan, other Employee Pension Benefit
Plan or Employee Welfare Benefit Plan, or any other employee benefit plan or any
Director Plan.
(b) No employee or director of any Acquired Company is a party to, or is
otherwise bound by, any agreement or arrangement, including any confidentiality,
noncompetition, or proprietary rights agreement, between such employee or
director and any other Person ("Proprietary Rights Agreement") that in any way
adversely affects or will affect (i) the performance of his duties as an
employee or director of the Acquired Companies, or (ii) the ability of any
Acquired Company to conduct its business, including any Proprietary Rights
Agreement with Sellers or the Acquired Companies by any such employee or
director. To Sellers' Knowledge, no director, officer, or other key employee of
any Acquired Company intends to terminate his employment with such Acquired
Company.
(c) Part 3.20 of the Disclosure Letter also contains a complete and
accurate list of the following information for each retired employee or director
of the Acquired Companies, or
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their dependents, receiving benefits or scheduled to receive benefits in the
future: name, pension benefit, pension option election, retiree medical
insurance coverage, retiree life insurance coverage, and other benefits.
3.21 LABOR RELATIONS; COMPLIANCE
No Acquired Company has been or is a party to any collective bargaining or other
labor Contract. There has not been, there is not presently pending or existing,
and [to Sellers' Knowledge] there is not Threatened, (a) any strike, slowdown,
picketing, work stoppage, or employee grievance process, (b) any Proceeding
against or affecting any Acquired Company relating to the alleged violation of
any Legal Requirement pertaining to labor relations or employment matters,
including any charge or complaint filed by an employee or union with the
National Labor Relations Board, the Equal Employment Opportunity Commission, or
any comparable Governmental Body, organizational activity, or other labor or
employment dispute against or affecting any of the Acquired Companies or their
premises, or (c) any application for certification of a collective bargaining
agent. To Sellers' Knowledge, no event has occurred or circumstance exists that
could provide the basis for any work stoppage or other labor dispute. There is
no lockout of any employees by any Acquired Company, and no such action is
contemplated by any Acquired Company. Each Acquired Company has complied in all
respects with all Legal Requirements relating to employment, equal employment
opportunity, nondiscrimination, immigration, wages, hours, benefits, collective
bargaining, the payment of social security and similar taxes, occupational
safety and health, and plant closing. No Acquired Company is liable for the
payment of any compensation, damages, taxes, fines, penalties, or other amounts,
however designated, for failure to comply with any of the foregoing Legal
Requirements.
3.22 INTELLECTUAL PROPERTY
(a) Intellectual Property Assets--The term "Intellectual Property Assets"
includes:
(i) the name [the Company's name], all fictional business names,
trading names, registered and unregistered trademarks, service marks, and
applications (collectively, "Marks");
(ii) all patents, patent applications, and inventions and discoveries
that may be patentable (collectively, "Patents");
(iii) all copyrights in both published works and unpublished works
(collectively, "Copyrights");
(iv) all rights in mask works (collectively, "Rights in Mask Works");
and
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(v) all know-how, trade secrets, confidential information, customer
lists, software, technical information, data, process technology, plans,
drawings, and blue prints (collectively, "Trade Secrets"); owned, used, or
licensed by any Acquired Company as licensee or licensor.
(b) Agreements--Part 3.22(b) of the Disclosure Letter contains a complete
and accurate list and summary description, including any royalties paid or
received by the Acquired Companies, of all Contracts relating to the
Intellectual Property Assets to which any Acquired Company is a party or by
which any Acquired Company is bound, except for any license implied by the sale
of a product and perpetual, paid-up licenses for commonly available software
programs under which an Acquired Company is the licensee. There are no
outstanding and, to Sellers' Knowledge, no Threatened disputes or disagreements
with respect to any such agreement.
(c) Know-How Necessary for the Business
(i) The Intellectual Property Assets are all those necessary for the
operation of the Acquired Companies' businesses as they are currently conducted
[or as reflected in the business plan given to Purchaser]. One or more of the
Acquired Companies is the owner of all right, title, and interest in and to each
of the Intellectual Property Assets, free and clear of all liens, security
interests, charges, encumbrances, equities, and other adverse claims, and has
the right to use without payment to a third party all of the Intellectual
Property Assets.
(ii) Except as set forth in Part 3.22(c) of the Disclosure Letter, all
former and current employees of each Acquired Company have executed written
Contracts with one or more of the Acquired Companies that assign to one or more
of the Acquired Companies all rights to any inventions, improvements,
discoveries, or information relating to the business of any Acquired Company. No
employee of any Acquired Company has entered into any Contract that restricts or
limits in any way the scope or type of work in which the employee may be engaged
or requires the employee to transfer, assign, or disclose information concerning
his work to anyone other than one or more of the Acquired Companies.
(d) Patents
(i) Part 3.22(d) of the Disclosure Letter contains a complete and
accurate list and summary description of all Patents. One or more of the
Acquired Companies is the owner of all right, title, and interest in and to each
of the Patents, free and clear of all liens, security interests, charges,
encumbrances, entities, and other adverse claims.
(ii) All of the issued Patents are currently in compliance with formal
legal requirements (including payment of filing, examination, and maintenance
fees and proofs of working or use), are valid and enforceable, and are not
subject to any maintenance fees or taxes or actions falling due within ninety
days after the Closing Date.
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(iii) No Patent has been or is now involved in any interference,
reissue, reexamination, or opposition proceeding. To Sellers' Knowledge, there
is no potentially interfering patent or patent application of any third party.
(iv) No Patent is infringed or, to Sellers' Knowledge, has been
challenged or threatened in any way. None of the products manufactured and sold,
nor any process or know-how used, by any Acquired Company infringes or is
alleged to infringe any patent or other proprietary right of any other Person.
(v) All products made, used, or sold under the Patents have been
marked with the proper patent notice.
(e) Trademarks
(i) Part 3.22(e) of Disclosure Letter contains a complete and accurate
list and summary description of all Marks. One or more of the Acquired Companies
is the owner of all right, title, and interest in and to each of the Marks, free
and clear of all liens, security interests, charges, encumbrances, equities, and
other adverse claims.
(ii) All Marks that have been registered with the United States Patent
and Trademark Office are currently in compliance with all formal legal
requirements (including the timely post-registration filing of affidavits of use
and incontestability and renewal applications), are valid and enforceable, and
are not subject to any maintenance fees or taxes or actions falling due within
ninety days after the Closing Date.
(iii) No Xxxx has been or is now involved in any opposition,
invalidation, or cancellation and, to Sellers' Knowledge, no such action is
Threatened with the respect to any of the Marks.
(iv) To Sellers' Knowledge, there is no potentially interfering
trademark or trademark application of any third party.
(v) No Xxxx is infringed or, to Sellers' Knowledge, has been
challenged or threatened in any way. None of the Marks used by any Acquired
Company infringes or is alleged to infringe any trade name, trademark, or
service xxxx of any third party.
(vi) All products and materials containing a Xxxx xxxx the proper
federal registration notice where permitted by law.
(f) Copyrights
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(i) Part 3.22(f) of the Disclosure Letter contains a complete and
accurate list and summary description of all Copyrights. One or more of the
Acquired Companies is the owner of all right, title, and interest in and to each
of the Copyrights, free and clear of all liens, security interests, charges,
encumbrances, equities, and other adverse claims.
(ii) All the Copyrights have been registered and are currently in
compliance with formal legal requirements, are valid and enforceable, and are
not subject to any maintenance fees or taxes or actions falling due within
ninety days after the date of Closing.
(iii) No Copyright is infringed or, to Sellers' Knowledge, has been
challenged or threatened in any way. None of the subject matter of any of the
Copyrights infringes or is alleged to infringe any copyright of any third party
or is a derivative work based on the work of a third party.
(iv) All works encompassed by the Copyrights have been marked with the
proper copyright notice.
(g) Trade Secrets
(i) With respect to each Trade Secret, the documentation relating to
such Trade Secret is current, accurate, and sufficient in detail and content to
identify and explain it and to allow its full and proper use without reliance on
the knowledge or memory of any individual.
(ii) Sellers and the Acquired Companies have taken all reasonable
precautions to protect the secrecy, confidentiality, and value of their Trade
Secrets.
(iii) One or more of the Acquired Companies has good title and an
absolute (but not necessarily exclusive) right to use the Trade Secrets. The
Trade Secrets are not part of the public knowledge or literature, and, to
Sellers' Knowledge, have not been used, divulged, or appropriated either for the
benefit of any Person (other than one or more of the Acquired Companies) or to
the detriment of the Acquired Companies. No Trade Secret is subject to any
adverse claim or has been challenged or threatened in any way.
3.23 CERTAIN PAYMENTS
No Acquired Company or director, officer, agent, or employee of any Acquired
Company, or any other Person associated with or acting for or on behalf of any
Acquired Company, has directly or indirectly (a) made any contribution, gift,
bribe, rebate, payoff, influence payment, kickback, or other payment to any
Person, private or public, regardless of form, whether in money, property, or
services (i) to obtain favorable treatment in securing business, (ii) to pay for
favorable treatment for business secured, (iii) to obtain special concessions or
for special concessions already obtained, for or in respect of any Acquired
Company or any Affiliate of an Acquired Company, or (iv) in violation of any
Legal Requirement, (b) established or
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maintained any fund or asset that has not been recorded in the books and records
of the Acquired Companies.
3.24 DISCLOSURE
(a) No representation or warranty of Sellers in this Agreement and no
statement in the Disclosure Letter omits to state a material fact necessary to
make the statements herein or therein, in light of the circumstances in which
they were made, not misleading.
(b) No notice given pursuant to Section 5.5 will contain any untrue
statement or omit to state a material fact necessary to make the statements
therein or in this Agreement, in light of the circumstances in which they were
made, not misleading.
(c) There is no fact known to Sellers that has specific application to
Sellers or any Acquired Company (other than general economic or industry
conditions) and that materially adversely affects or, as far as Sellers can
reasonably foresee, materially threatens, the assets, business, prospects,
financial condition, or results of operations of the Acquired Companies (on a
consolidated basis) that has not been set forth in this Agreement or the
Disclosure Letter.
3.25 RELATIONSHIPS WITH RELATED PERSONS
Except as set forth in Part 3.25 of the Disclosure Letter, no Seller or any
Related Person of Sellers or of any Acquired Company has, or has had, any
interest in any property (whether real, personal, or mixed and whether tangible
or intangible), used in or pertaining to the Acquired Companies' businesses. No
Seller or any Related Person of Sellers or of any Acquired Company is, or has
owned (of record or as a beneficial owner) an equity interest or any other
financial or profit interest in, a Person that has (i) had business dealings or
a material financial interest in any transaction with any Acquired Company other
than business dealings or transactions conducted in the Ordinary Course of
Business with the Acquired Companies at substantially prevailing market prices
and on substantially prevailing market terms, or (ii) engaged in competition
with any Acquired Company with respect to any line of the products or services
of such Acquired Company (a "Competing Business") in any market presently served
by such Acquired Company. Except as set forth in Part 3.25 of the Disclosure
Letter, No Seller or any Related Person of Sellers or of any Acquired Company is
a party to any Contract with, or has any claim or right against, any Acquired
Company.
3.26 BROKERS OR FINDERS
Sellers and their agents have incurred no obligation or liability, contingent or
otherwise, for brokerage or finders' fees or agents' commissions or other
similar payment in connection with this Agreement.
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3.27 MORTGAGE LOANS AND SERVICING RIGHTS
(a) The Acquired Company is (i) an FHA-approved mortgagee, (ii) a Xxxxxx
Xxx approved Seller/servicer in good standing, and (iii) in full compliance with
all of the material provisions contained in the applicable FHA and Xxxxxx Mae
guides, any subsequent amendments in or to any of them, and all other applicable
regulations and Investor requirements. Except as set forth on Schedule 3.27 (a)
of the Disclosure Letter, neither the Company nor any of the Sellers have at any
time in the past received notice from any governmental, quasi-governmental or
private agency of pending or threatened actions or investigations which would
question the status of the Company as an approved lender or issuer as provided
in this Section. No outstanding claims exist against the Company (directly or
indirectly) from or through the FHA or any Investors (including, without
limitation, claims under FHA multifamily co-insurance program). No event has
occurred which, with the passage of time or the giving of notice, or both, would
result in the loss by the Company of its qualification as an approved lender or
issuer as set forth in this Section or of the Company or any officer, director
or employee of the Company as a contractor or as a Person otherwise permitted to
transact business with any such governmental, quasi-governmental or private
agency.
(b) Set forth on Schedule 3.27(b) of the Disclosure Letter is a complete
and correct list, as of the date of this Agreement, of all Owned Mortgage
Loans, the aggregate unpaid principal of each Owned Mortgage Loan, the Investor
and the PMI (if applicable) with respect to each Owned Mortgage Loan, the
interest rate, maturity date, amendments, adjustment dates and terms (if
applicable), debt service coverage ratios, loan to value ratios, lock-out dates,
prepayment penalties, yield maintenance fees, servicing fees, current and
previous default status (including, without limitation, workouts and threatened
defaults), amounts of balloon payments, if any, due on maturity, descriptions of
any additional Collateral beyond real property, fixtures and leases, and other
material terms of each Owned Mortgage Loan, and all other information reasonably
required by the Purchaser.
(c) Set forth on Schedule 3.27(c) of the Disclosure Letter is a true and
complete list, as of September 30, 1996, of each Investor with which the Company
has a Mortgage Servicing Agreement or an agreement for the acquisition of
Mortgage Loans originated or brokered by the Company ("Correspondent
Agreements"), listing for each such Investor the Investor's name and address,
and, as applicable, the aggregate principal amount and number of Mortgage Loans
subject to a Mortgage Servicing Agreement or a Correspondent Agreement, the
weighted average servicing rate, the unpaid principal balance, the overall
interest payable by the borrower, the maturity date, amendments, adjustment
dates and terms (if applicable), debt service coverage ratios, loan to value
ratios, lock-out dates, prepayment penalties, yield maintenance fees, servicing
fees, current and previous default status (including, without limitation,
workouts and threatened defaults), amounts of balloon payments, if any, due on
maturity, descriptions of any additional Collateral beyond real property,
fixtures and leases, the applicable aggregate escrow balance under each such
Mortgage Servicing Agreement, and
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other material terms, and listing for the Mortgage Servicing Portfolio interest
rates by group and principal balances by age. The Sellers have made available
to the Purchaser true and complete copies of each Mortgage Servicing Agreement
and Correspondent Agreement, and all amendments, modifications and extensions
thereof.
(d) Each Originated Mortgage Loan, the related Loan Documents and Loan
Files have complied with (i) all Legal Requirements applicable to such Mortgage
Loan and (ii) the terms of any sales contracts with Investors by which the
Mortgage Loans were transferred to the Investors ("Correspondent Agreements")
and any schedule, statement or certificate furnished to the Investors pursuant
to any of the Mortgage Servicing Agreements or the Correspondent Agreements.
Except as described in Schedule 3.27 (d) of the Disclosure Letter, each Mortgage
Loan (i) is evidenced by an enforceable note or other evidence of indebtedness
and is subject to no defense, offset or counterclaim, and (ii) is secured by a
duly recorded and enforceable first Mortgage. The Company has not assumed any
obligations with respect to Non-Originated Mortgage Loans other than non-
recourse servicing obligations. The Company has complied with all guidelines,
procedures, rules and regulations of FHA Xxxxxx Xxx, and Investors and/or
state banking authorities relating to the origination, underwriting and
servicing thereof, which are applicable to the Company.
(e) Except as set forth on Schedule 3.27(e) of the Disclosure Letter, all
Taxes, governmental assessments, insurance premiums, water, sewer and municipal
charges, leasehold payments and ground rents which previously became due and
owing with respect to any Collateral or REO have been paid. or an escrow of
funds identified on Schedule 3.27(e) of the Disclosure Letter has been
established in an amount sufficient to pay for every such item which remains
unpaid and which has been assessed but is not yet due and payable. Except as
set forth on Schedule 3.27(e), the Company has not advanced funds, directly or
indirectly, for the payment of any amount required under the Loan Documents
except for interest accruing from the date of the Mortgage Note or date of
disbursement of the Mortgage Loan proceeds, whichever is earlier, to the date
which precedes by one month the due date of the first installment of principal
and interest.
(f) Except as set forth in the Loan Documents or the Loan Files and
identified on Schedule 3.27(f) of the Disclosure Letter, the terms of each
Mortgage Note and Mortgage have not been impaired, waived, altered or modified
in any respect from the date of their origination except by a written
instrument, which written instrument has been recorded if recordation is
necessary to protect the interests of the owner thereof. The substance of any
such waiver, alteration or modification has been communicated to and approved in
writing by (i) the relevant Investor, to the extent required by the relevant
Investor and (ii) the title insurer, to the extent required by the relevant
policies, and its terms are reflected in the Loan Documents or the applicable
Loan Files. Except as set forth in the Loan Documents or the Loan Files and
identified on Schedule 3.27(f) of the Disclosure Letter, the Company has not (i)
subordinated the Lien of any Mortgage Loan to any other Mortgage or Lien, (ii)
released
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any portion of the Collateral from the Lien of any Mortgage Loan or (iii)
executed any instrument of release, cancellation or satisfaction with respect to
any Mortgage Loan.
(g) Except to the extent that the enforceability may be affected by
bankruptcy or other laws affecting the rights of creditors generally, each of
the Originated Mortgage Loans and Loan Documents and, to the best of Sellers'
Knowledge, each Non-Originated Mortgage Loan, is enforceable in accordance with
its terms and the exercise of any right thereunder will not render the Mortgage
Loan or Loan Documents unenforceable, in whole or in part, or subject to any
right of rescission, and no such right of rescission has been asserted with
respect thereto.
(h) Except as set forth on Schedule 3.27(h) of the Disclosure Letter, none
of the Servicing Rights is subject to recourse against the Company for losses on
liquidation of a Mortgage Loan, borrower defaults or repurchase obligations upon
the occurrence of non-payment or other events, and the Company has no obligation
or recourse to any Person to which it may have sold or transferred any Mortgage
Loans or Servicing Rights. For the purposes of this Section, "recourse" shall
not include industry standard representations and warranties (such as those
concerning title, zoning, etc.), except to the extent that such representations
and/or warranties relate generally to economic performance.
(i) Except as set forth on Schedule 3.27(i) of the Disclosure Letter,
neither the Sellers nor the Company has any notice or knowledge of (i) any
proceeding pending or threatened for the partial or total condemnation of any of
the property securing a Mortgage Loan or that all or any part of the property
securing a Mortgage Loan has been or will be condemned or (ii) any casualty
affecting any portion of the property securing a Mortgage Loan.
(j) To the best knowledge of the Sellers, after diligent inquiry, all
Persons which have had any interest in a Mortgage Loan, whether as mortgagee,
assignee, pledgee or otherwise, are (or, during the period in which they held
and disposed of such interest, were) (i) in compliance with any and all
applicable licensing requirements of the laws of the state in which the
Collateral is located, and (ii) (1) organized under the laws of such state, (2)
qualified to do business in such state, (3) federal savings and loan
associations or national banks having principal offices in such state, or (4)
not doing business in such state. No act or acts by any Person which has had an
interest in an Owned Mortgage Loan will render the Mortgage Loan or Loan
Documents unenforceable, in whole or in part, or subject to any right of
rescission, and no such right of rescission has been asserted with respect
thereto.
(k) To the extent required by the applicable Investor, each Originated
Mortgage Loan and, to the best of Sellers' knowledge, each Non-Originated
Mortgage Loan is insured by an ALTA lender's title insurance policy or other
generally acceptable form of policy or insurance acceptable to the relevant
Investor, containing such endorsements and affirmative insurance as is customary
for similar transactions; each such title insurance policy is issued by a title
insurer acceptable to the applicable Investor qualified to do business in the
jurisdiction where
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the Collateral is located, and insures the originator and its successors and
assigns as to the first priority Lien of the Mortgage in the original principal
amount of the Mortgage Loan subject only to those Liens shown on the title
policy and approved in writing by the Investor. The applicable Investor, as
assignee of the originator's rights, is an insured of such lender's title
insurance policy, and such lender's policy is in full force and effect. Neither
the Company nor any prior servicer has committed or suffered any act or omission
which would impair the coverage of such lender's policy.
(l) Except as set forth on Schedule 3.27(l) of the Disclosure Letter, there
are no payment defaults under the Loan Documents nor any events which, with the
giving of notice or the passage of time, or both, would constitute a payment
default.
(m) In the event a Mortgage Loan is secured by a deed of trust, all
applicable requirements of law with respect to the trustee service under such
deed of trust have been complied with or, if not complied with, can be cured
solely by substituting trustees thereunder and by filing a substitution of
trustee document in the appropriate filing or recording office.
(n) The Collateral securing each of the Mortgage Loans has been covered by
policies of hazard, builders' risk, all-risk property and flood insurance, to
the extent required by all applicable Legal Requirements or Investor
requirements applicable to such Mortgage Loan, all in a form usual and customary
in the industry and all of which are in full force and effect, and all amounts
due and payable under each policy have been, or will be, paid prior to the
Closing Date. Any and all claims under such insurance policies have been
submitted and processed in accordance with the applicable Investor requirements.
The Company has not been informed of any uninsured casualty losses to the
premises securing the Mortgage Loans or any casualty losses to such premises
where coinsurance has been, or the Company has reason to believe will be,
claimed by the insurance company or where the loss, exclusive of contents, is
greater than the net recovery from the casualty insurance carrier. To the best
knowledge of the Sellers and the Shareholder, all damage with respect to which
casualty insurance proceeds have been received by or through the Company has
been repaired or is in the process of being repaired with such proceeds. Except
as set forth in Schedule 3.27(n) of the Disclosure Letter, the Company has not
been informed nor does the Company have any independent knowledge that any
property subject to a Mortgage has been or will be condemned in whole or in
part.
(o) Each Mortgage Loan which is represented on Schedule 3.17 of the
Disclosure Letter to have FHA Insurance is insured under the National Housing
Act. As to each contract of FHA mortgage insurance, the Company has complied
with all applicable provisions of the related insurance or guarantee contract
and all applicable Legal Requirements, the insurance or guarantee is in full
force and effect with respect to each Mortgage Loan or related obligation, and
there does not exist any event or condition which currently, or but for the
passage of time or the giving of notice or both, can result in a revocation,
impairment or reduction of or set off with respect to any such insurance or
guarantee.
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(p) Except as set forth on Schedule 3.27(p) of the Disclosure Letter, the
Company collects all escrows related to the Mortgage Loans. Except as set forth
on Schedule 3.27(p) of the Disclosure Letter, all escrow accounts have been
maintained by the Company and, to the best of the Sellers' Knowledge, all prior
servicers in accordance with all applicable Legal Requirements and the
requirements of Investors, and in accordance with the Mortgage Servicing
Agreements and the Loan Documents related thereto. Except as set forth on
Schedule 3.27(p) of the Disclosure Letter, the Company has credited to the
account of mortgagors all interest required to be paid on any escrow account
through the Closing Date. All escrow, custodial, and suspense accounts related
to the Owned Mortgage Loans are held in the Company's name or the Investor's
name by the Company. Schedule 3.27(p) of the Disclosure Letter sets forth the
correct account number and location of each escrow account.
(q) The Company is the sole owner and holder of legal title to each of the
Owned Mortgage Loans and no other Person has any interest in the Owned Mortgage
Loan other than the applicable Investor.
(r) Except as set forth on Schedule 3.27(r), no defaults of any nature
under the terms of any of the FHA Loans have occurred and are continuing or are
reasonably expected by the Company to occur, which would entitle the Company to
assign the FHA Loan to the FHA in exchange for mortgage insurance benefits.
(s) Set forth on Schedule 3.27(s) of the Disclosure Letter is a complete
and correct list of all letters of credit held by the Company, identifying for
each the Investor or PMI, amount, expiration date, reason held, account party
and other material information relating thereto. Each such letter of credit is
irrevocable, unconditional, fully enforceable and satisfies all applicable
Investor requirements.
(t) Except as identified on Schedule 3.27(t) of the Disclosure Letter, the
Company's warehousing lender or other Investor or a custodian therefor has
physical possession of the executed original Mortgage Note for each Mortgage
Loan, which Mortgage Notes are located in the location set forth in Schedule
3.27(t) of the Disclosure Letter and are held in a fire-proof vault.
(u) Except as identified on Schedule 3.27(u) of the Disclosure Letter, the
Company is under no obligation to make any future advances under any of the
Mortgage Loans. Except as identified on Schedule 3.27(u) which also identifies
the source and amount of future funding, any mortgage amounts that may hereafter
be required to be disbursed to the applicable borrower are held in escrow or
other reserve accounts with or on behalf of the Company. All agreements to
provide future funding from Investors are in full force and effect and the
Sellers and the Shareholder has no reason to believe, after diligent inquiry,
that such funding will not be available as and when necessary.
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(v) All of the real property and improvements included in the Collateral
securing the Originated Mortgage Loans and, to the best of Sellers' and
Shareholder's knowledge, all of the real property and improvements included in
the Collateral securing the Non-Originated Mortgage Loans comply in all material
respects with all applicable zoning, land use, environmental and, to the best
knowledge of the Sellers and the Shareholder, after diligent inquiry, other
Legal Requirements applicable to the property or the related borrower as well as
any regulatory agreement or restrictive covenant affecting the Collateral.
(w) Each of the Originated Mortgage Loans and, to the best of Sellers' and
Shareholder's knowledge, each of the Non-Originated Mortgage Loans complies with
or is exempt from applicable Legal Requirements pertaining to usury. The
requirements of all applicable Legal Requirements governing consumer credit and
truth-in-lending have been complied with respect to each Originated Mortgage
Loan and to the best of Sellers' and Shareholder's knowledge, with respect to
each Non-Originated Mortgage Loan.
(x) To the best Knowledge of the Sellers, after diligent inquiry, there are
no structural defects affecting any of the improvements included in the
Collateral securing the Mortgage Loans, other than defects for which adequate
reserves have been established by the borrower with the Company which are
identified on Schedule 3.27(x) of the Disclosure Letter.
(y) The Company has filed or caused to be filed all necessary UCC financing
statements, including all necessary extension statements, in the appropriate
offices to perfect and maintain the first Lien security interest in all
Collateral for which such filings are necessary.
(z) Except as set forth on Schedule 3.27(z) of the Disclosure Letter, there
exists a binding contract or agreement providing for the purchase of each of the
Owned Mortgage Loans by an Investor; each such contract or agreement is in full
force and effect; there exists no basis upon which any of such Investors could
refuse to purchase any of the Owned Mortgage Loans pursuant to such contracts or
agreements; and the Sellers have no reason to believe, after diligent inquiry,
that any of the Owned Mortgage Loans will not be purchased by the applicable
Investors in due course in accordance with such contracts or agreements.
(aa) Except as set forth on Schedule 3.27(aa) of the Disclosure Letter, the
Company has never been required to re-purchase any Mortgage Loan and has never
been subject to any surcharge or experienced any deduction from the amount of
any claim that it has presented for mortgage insurance, guarantee or similar
benefits with respect to any defaulted Mortgage Loan.
(bb) The Company has no Flow Servicing Agreements.
(cc) Attached hereto as Schedule 3.27(cc) of the Disclosure Letter are true
and complete lists, as of September 30, 1996, of (i) all outstanding loan
commitments, other than
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repurchase obligations under Mortgage Servicing Agreements and purchase
obligations made by the Company, (ii) any commitments made by Investors to
purchase Mortgage Loans from the Company (or to guarantee and purchase mortgage-
backed securities with respect thereto), (iii) the discount/purchase price of
each of the Investor commitments, and (iv) all future and option contracts.
(dd) Except as set forth in Schedule 3.27(dd) of the Disclosure Letter, the
Company owns the entire right, title and interest in and to the servicing of
each Mortgage Loan in the Mortgage Servicing Portfolio and the sole right to
service such Mortgage Loans subject to the Mortgage Servicing Agreements, free
and clear of all Liens. Except as set forth in Schedule 3.27(dd) of the
Disclosure Letter, the Company has the full right, power and authority to enter
into and consummate this Agreement without any negative impact on any of the
Mortgage Servicing Agreements and to sell the Servicing Rights under the
Mortgage Servicing Agreements, including the Servicing Rights to the Mortgage
Loans in the Mortgage Servicing Portfolio and the Company is not obligated to
sell all or any part of same to any other party.
(ee) Except as set forth in Schedule 3.27(ee) of the Disclosure Letter, the
Company has not received notice of a servicing impropriety for any Mortgage Loan
in the Mortgage Servicing Portfolio, and each Mortgage Loan serviced by the
Company has been properly serviced and accounted for in all respects in
accordance with standard industry practices. To the extent that any applicable
Legal Requirement in any jurisdiction or of FHA, Xxxxxx Xxx, or and Investor
requires the payment of interest on escrow accounts by the Company with respect
to any particular Mortgage Loan, all such interest has been properly paid. All
amounts payable in respect of a Mortgage Note, Mortgage, or the property covered
by a Mortgage which the Company is responsible for paying, directly or on behalf
of a mortgagor, have been paid when due and payable. All pools for which the
Company is responsible are in compliance with all applicable Xxxxxx Mae and
Investor requirements, procedures, rules, regulations and guidelines. The
custodial files for each Mortgage Loan will contain upon the Closing Date all
items required by all applicable FHA, Xxxxxx Xxx, or Investors requirements,
procedures, rules, regulations and guidelines for the certification of such
pools. The securities backed by such pools are issued on uniform documents in
accordance with the applicable Xxxxxx Mae or Investor requirements, procedures,
rules, regulations and guidelines. The principal balances outstanding and owing
on the Mortgage Loans in each pool equal or exceed the amounts owing to the
security holders of each pool.
(ff) Each Mortgage Servicing Agreement is valid, binding and enforceable in
accordance with its terms. The Company has serviced all Mortgage Loans in
accordance with all applicable Investor requirements. There are no pending or
threatened claims by any Investor against the Company relating directly or
indirectly to any Mortgage Loan or any Mortgage Servicing Agreement. The
Company has no notice of any default by other parties under any Mortgage
Servicing Agreement or Flow Servicing Agreement. No material default of the
Company exists under any Mortgage Servicing Agreement or Flow Servicing
Agreement, including any default arising with notice or lapse of time, or both.
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(gg) Each Mortgage Loan File is complete in all material respects, and all
monies received with respect to each Mortgage Loan have been properly accounted
for and applied. There are no Defects in any Mortgage Loan File, Mortgage Loan
or pool.
(hh) Except as set forth in Schedule 3.27(hh) of the Disclosure Letter, the
Company has received no notice from the FHA disclaiming liability on the
insurance or guaranty of any Mortgage Loan in the Mortgage Servicing Portfolio,
and neither the Sellers nor the Shareholder has any knowledge, after diligent
inquiry, of any facts or circumstances which if disclosed to any such entities
would result in such a disclaimer of liability.
(ii) The Company has properly conducted, in all material respects, an
escrow analysis for each Mortgage Loan within the 12 month period immediately
preceding the Closing Date. All books and records with respect to each such
Mortgage Loan are in good condition and are adjusted to reflect properly the
results of the escrow analysis. The Company has delivered notification to the
mortgagor under each such Mortgage Loan of all payment adjustments resulting
from such escrow analysis.
(jj) All Mortgage Loans with adjustable rates, if any, have been timely and
appropriately adjusted, in all material respects, and the mortgagors
appropriately advised where it is the obligation of the Company to do so. All
buydown funds with respect to such Mortgage Loans have been properly applied.
All real estate taxes, assessments and similar charges due in respect of the
property covered by each such Mortgage Loan having an impound account
administered by the Company are current.
(kk) No amounts are owing to HUD or any other entity with respect to
Mortgage Loans in the Mortgage Servicing Portfolio for overpaid subsidies,
except in the ordinary course of business and in an amount which in the
aggregate is less than $20,000. No amounts are owing to the Company by
mortgagors or anyone else with respect to Mortgage Loans in the Mortgage
Servicing Portfolio for overpaid subsidies.
3.28 REAL ESTATE OWNED
The Company does not hold any REO and does not own or lease real property other
than disclosed in Section 3.28 of the Disclosure Letter.
3.29 OWNERSHIP OF THE SHARES
As of the Closing Date, the Sellers own of record and beneficially all of the
Shares and as of the Closing Date Sellers will have, good and marketable title
to such Shares free and clear of all Liens.
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3.30 DELIVERY OF GOOD TITLE
Upon delivery of the Shares to be sold by Sellers hereunder and payment of the
Purchase Price therefor pursuant to the terms of this Agreement, Purchaser will
have good and marketable title to such Shares at Closing free and clear of all
Liens.
3.31 GOVERNMENTAL CONSENTS
No consent, approval, order, or authorization of, or registration,
qualification, designation, declaration, or filing with, any governmental
authority is required on the part of the Sellers in connection with the
execution and delivery of this Agreement, the offer, sale, and delivery of the
Shares, or the other transactions to be consummated at the Closing, as
contemplated by this Agreement, except as set forth on Schedule 3.31 of the
Sellers Disclosure Schedule.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Sellers as follows:
4.1 ORGANIZATION AND GOOD STANDING
Purchaser is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware.
4.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding obligation of
Purchaser, enforceable against Purchaser in accordance with its terms. Upon the
execution and delivery by Purchaser of the four Employment
Agreements(collectively, the "Purchaser's Closing Documents"), the Purchaser's
Closing Documents will constitute the legal, valid, and binding obligations of
Purchaser, enforceable against Purchaser in accordance with their respective
terms. Purchaser has the absolute and unrestricted right, power, and authority
to execute and deliver this Agreement and the Purchaser's Closing Documents and
to perform its obligations under this Agreement and the Purchaser's Closing
Documents.
(b) Except as set forth in Schedule 4.2, neither the execution and delivery
of this Agreement nor the consummation or performance of any of the Contemplated
Transactions will give any Person the right to prevent, delay, or otherwise
interfere with any of the Contemplated Transactions pursuant to:
(i) any provision of Purchaser's Organizational Documents;
(ii) any resolution adopted by the board of directors or the
stockholders of Purchaser;
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(iii) any Legal Requirement or Order to which Purchaser may be
subject; or
(iv) any Contract to which Purchaser is a party or by which Purchaser
may be bound.
Except as set forth in Schedule 4.2, Purchaser is not and will not be required
to obtain any Consent from any Person in connection with the execution and
delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions.
4.3 INVESTMENT INTENT
Purchaser is acquiring the Shares for its own account and not with a view to
their distribution within the meaning of Section 2(11) of the Securities Act.
4.4 CERTAIN PROCEEDINGS
There is no pending Proceeding that has been commenced against Purchaser and
that challenges, or may have the effect of preventing, delaying, making illegal,
or otherwise interfering with, any of the Contemplated Transactions. To
Purchaser's Knowledge, no such Proceeding has been Threatened.
4.5 BROKERS OR FINDERS
Purchaser and its officers and agents have incurred no obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement and will indemnify
and hold Sellers harmless from any such payment alleged to be due by or through
Purchaser as a result of the action of Purchaser or its officers or agents.
4.6 TAX ELECTION
In the event that Purchaser elects to cause the Company to step-up the basis of
its assets after Closing pursuant to Section 338 of the IRC, Sellers shall have
no obligation or responsibility, jointly or severally, for any tax liability
resulting from such election.
5. COVENANTS OF SELLERS PRIOR TO CLOSING DATE
5.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing Date, Sellers will, and will
cause each Acquired Company and its Representatives to, (a) afford Purchaser and
its Representatives and prospective lenders and their Representatives
(collectively, "Purchaser's Advisors") full and
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free access to each Acquired Company's personnel, properties (including
subsurface testing), contracts, books and records, and other documents and data,
(b) furnish Purchaser and Purchaser's Advisors with copies of all such
contracts, books and records, and other existing documents and data as Purchaser
may reasonably request, and (c) furnish Purchaser and Purchaser's Advisors with
such additional financial, operating, and other data and information as
Purchaser may reasonably request.
5.2 OPERATION OF THE BUSINESSES OF THE ACQUIRED COMPANIES
Between the date of this Agreement and the Closing Date, Sellers will, and will
cause each Acquired Company to:
(a) conduct the business of such Acquired Company only in the Ordinary
Course of Business;
(b) use their Best Efforts to preserve intact the current business
organization of such Acquired Company, keep available the services of the
current officers, employees, and agents of such Acquired Company, and maintain
the relations and good will with Investors, customers, landlords, creditors,
employees, agents, and others having business relationships with such Acquired
Company;
(c) confer with Purchaser concerning operational matters of a material
nature; and
(d) otherwise, upon request by the Purchaser, report periodically to
Purchaser concerning the status of the business, operations, and finances of
such Acquired Company.
5.3 NEGATIVE COVENANT
Except as otherwise expressly permitted by this Agreement, between the date of
this Agreement and the Closing Date, Sellers will not, and will cause each
Acquired Company not to, without the prior consent of Purchaser, take any
affirmative action, or fail to take any reasonable action within their or its
control, as a result of which any of the changes or events listed in Section
3.16 is likely to occur.
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5.4 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement, Sellers will, and
will cause each Acquired Company to, make all filings required by Legal
Requirements to be made by them in order to consummate the Contemplated
Transactions. Between the date of this Agreement and the Closing Date, Sellers
will, and will cause each Acquired Company to, (a) cooperate with Purchaser with
respect to all filings that Purchaser elects to make or is required by Legal
Requirements to make in connection with the Contemplated Transactions, and (b)
cooperate with Purchaser in obtaining all consents identified in Schedule 4.2.
5.5 NOTIFICATION
Between the date of this Agreement and the Closing Date, each Sellers will
promptly notify Purchaser in writing if such Sellers or any Acquired Company
becomes aware of any fact or condition that causes or constitutes a Breach of
any of Sellers' representations and warranties as of the date of this Agreement,
or if such Sellers or any Acquired Company becomes aware of the occurrence after
the date of this Agreement of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute a Breach of any
such representation or warranty had such representation or warranty been made as
of the time of occurrence or discovery of such fact or condition. Should any
such fact or condition require any change in the Disclosure Letter if the
Disclosure Letter were dated the date of the occurrence or discovery of any such
fact or condition, Sellers will promptly deliver to Purchaser a supplement to
the Disclosure Letter specifying such change. During the same period, each
Sellers will promptly notify Purchaser of the occurrence of any Breach of any
covenant of Sellers in this Section 5 or of the occurrence of any event that may
make the satisfaction of the conditions in Section 7 impossible or unlikely.
5.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS
Except as expressly provided in this Agreement, Sellers will cause all
indebtedness owed to an Acquired Company by Sellers or any Related Person of
Sellers to be paid in full prior to Closing.
5.7 NO NEGOTIATION
Until such time, if any, as this Agreement is terminated pursuant to Section 9,
Sellers will not, and will cause each Acquired Company and each of their
Representatives not to, directly or indirectly solicit, initiate, or encourage
any inquiries or proposals from, discuss or negotiate with, provide any non-
public information to, or consider the merits of any unsolicited inquiries or
proposals from, any Person (other than Purchaser) relating to any transaction
involving the sale of the business or assets (other than in the Ordinary Course
of Business) of any Acquired Company, or any of the capital stock of any
Acquired Company, or any merger, consolidation, business combination, or similar
transaction involving any Acquired Company.
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5.8 BEST EFFORTS
Between the date of this Agreement and the Closing Date, Sellers will use their
Best Efforts to cause the conditions in Sections 7 and 8 to be satisfied.
5.9 PAYMENT OF CERTAIN OBLIGATIONS
The Purchaser acknowledges that prior to Closing (i) the Company will have
renegotiated the existing stock subscription agreements between it and Xxxxxx
Xxxxxxxx and Xxxxxxx X. Xxxxx, respectively, and (ii) the promissory notes from
Xx. Xxxxxxxx and Xx. Xxxxx to the Company with respect to their stock
subscription agreements, and which appear on the Interim Balance Sheet as
Company receivables, will have been returned to Xx. Xxxxxxxx and Xx. Xxxxx. The
Purchaser further acknowledges that no other receivables or assets will be
substituted for the aforesaid promissory notes as assets or receivables of the
Company.
6. COVENANTS OF PURCHASER PRIOR TO CLOSING DATE
6.1 APPROVALS OF GOVERNMENTAL BODIES
As promptly as practicable after the date of this Agreement, Purchaser will, and
will cause each of its Related Persons to, make all filings required by Legal
Requirements to be made by them to consummate the Contemplated Transactions
(including all filings under the HSR Act). Between the date of this Agreement
and the Closing Date, Purchaser will, and will cause each Related Person to,
cooperate with Sellers with respect to all filings that Sellers are required by
Legal Requirements to make in connection with the Contemplated Transactions, and
(ii) cooperate with Sellers in obtaining all consents identified in Part 3.2 of
the Disclosure Letter; provided that this Agreement will not require Purchaser
to dispose of or make any change in any portion of its business or to incur any
other burden to obtain a Governmental Authorization.
6.2 BEST EFFORTS
Except as set forth in the proviso to Section 6.1, between the date of this
Agreement and the Closing Date, Purchaser will use its Best Efforts to cause the
conditions in Sections 7 and 8 to be satisfied.
7. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION TO CLOSE
Purchaser's obligation to purchase the Shares and to take the other actions
required to be taken by Purchaser at the Closing is subject to the satisfaction,
at or prior to the Closing, of each of the following conditions (any of which
may be waived by Purchaser, in whole or in part):
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7.1 ACCURACY OF REPRESENTATIONS
All of Sellers' representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties (considered
individually), must have been accurate in all material respects as of the date
of this Agreement, and must be accurate in all material respects as of the
Closing Date as if made on the Closing Date, without giving effect to any
supplement to the Disclosure Letter delivered after Closing Date.
7.2 SELLERS' PERFORMANCE
(a) All of the covenants and obligations that Sellers are required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been duly performed and complied with in
all material respects.
(b) Each document required to be delivered pursuant by the Sellers to
Section 2.4 must have been delivered, and each of the other covenants and
obligations of the Sellers in this Agreement must have been performed and
complied with in all respects.
7.3 CONSENTS
Each of the Consents must have been obtained by the Sellers and must be in full
force and effect.
7.4 ADDITIONAL DOCUMENTS
Each of the following documents must have been delivered to Purchaser:
(a) an opinion of counsel to the Company and the Sellers, who is reasonably
acceptable to the Purchaser and its counsel, and who may not be an employee of
the Company, dated the Closing Date, in a form substantially in the form of
Exhibit 7.4(a) which is attached to and made a part of this Agreement; and
(c) such other documents as Purchaser may reasonably request for the
purpose of (i) enabling its counsel to provide the opinion referred to in
Section 8.4(a), (ii) evidencing the accuracy of any of Sellers' representations
and warranties, (iii) evidencing the performance by Sellers of, or the
compliance by Sellers with, any covenant or obligation required to be performed
or complied with by such Sellers, (iv) evidencing the satisfaction of any
condition referred to in this Section 7, or (v) otherwise facilitating the
consummation or performance of any of the Contemplated Transactions.
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7.5 NO PROCEEDINGS
Since the date of this Agreement, there must not have been commenced or
Threatened against Purchaser, or against any Person affiliated with Purchaser,
any Proceeding (a) involving any challenge to, or seeking damages or other
relief in connection with, any of the Contemplated Transactions, or (b) that may
have the effect of preventing, delaying, making illegal, or otherwise
interfering with any of the Contemplated Transactions.
7.6 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS
There must not have been made or Threatened by any Person any claim asserting
that such Person (a) is the holder or the beneficial owner of, or has the right
to acquire or to obtain beneficial ownership of, any stock of, or any other
voting, equity, or ownership interest in, any of the Acquired Companies, or (b)
is entitled to all or any portion of the Purchase Price payable for the Shares.
7.7 NO PROHIBITION
Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time), materially contravene, or conflict with, or result in a material
violation of, or cause Purchaser or any Person affiliated with Purchaser to
suffer any material adverse consequence under, (a) any applicable Legal
Requirement or Order, or (b) any Legal Requirement or Order that has been
published, introduced, or otherwise proposed by or before any Governmental Body.
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
Sellers' obligation to sell the Shares and to take the other actions required to
be taken by Sellers at the Closing is subject to the satisfaction, at or prior
to the Closing, of each of the following conditions (any of which may be waived
by Sellers, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS
All of Purchaser's representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties (considered
individually), must have been accurate in all material respects as of the date
of this Agreement and must be accurate in all material respects as of the
Closing Date as if made on the Closing Date.
8.2 PURCHASER'S PERFORMANCE
(a) All of the covenants and obligations that Purchaser is required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively),
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and each of these covenants and obligations (considered individually), must have
been performed and complied with in all material respects.
(b) Purchaser must have delivered each of the documents required to be
delivered by Purchaser pursuant to Section 2.4 and must have made the cash
payments required to be made by Purchaser pursuant to Sections 2.4(b)(i) and
2.4(b)(ii).
8.3 CONSENTS
Each of the Consents required from the Purchaser pursuant to this Agreement must
have been obtained and must be in full force and effect.
8.4 ADDITIONAL DOCUMENTS
Purchaser must have caused the following documents to be delivered to Sellers:
(a) an opinion of Krooth & Xxxxxx, counsel to the Purchaser, dated the
Closing Date, in a form reasonably acceptable to the Sellers and their counsel;
and
(b) such other documents as Sellers may reasonably request for the purpose
of (i) enabling their counsel to provide the opinion referred to in Section
7.4(a), (ii) evidencing the accuracy of any representation or warranty of
Purchaser, (iii) evidencing the performance by Purchaser of, or the compliance
by Purchaser with, any covenant or obligation required to be performed or
complied with by Purchaser, (ii) evidencing the satisfaction of any condition
referred to in this Section 8, or (v) otherwise facilitating the consummation of
any of the Contemplated Transactions.
8.5 NO INJUNCTION
There must not be in effect any Legal Requirement or any injunction or other
Order that (a) prohibits the sale of the Shares by Sellers to Purchaser, and (b)
has been adopted or issued, or has otherwise become effective, since the date of
this Agreement.
9. TERMINATION
9.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at the Closing, be terminated:
(a) by either Purchaser or Sellers if a material Breach of any provision of
this Agreement has been committed by the other party and such Breach has not
been waived;
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(b) (i) by Purchaser if any of the conditions in Section 7 has not been
satisfied as of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Purchaser to comply with
its obligations under this Agreement) and Purchaser has not waived such
condition on or before the Closing Date; or (ii) by Sellers, if any of the
conditions in Section 8 has not been satisfied of the Closing Date or if
satisfaction of such a condition is or becomes impossible (other than through
the failure of Sellers to comply with their obligations under this Agreement)
and Sellers have not waived such condition on or before the Closing Date; or
(c) by mutual consent of Purchaser and Sellers.
9.2 EFFECT OF TERMINATION
Each party's right of termination under Section 9.1 is in addition to any other
rights it may have under this Agreement or otherwise, and the exercise of a
right of termination will not be an election of remedies. If this Agreement is
terminated pursuant to Section 9.1, all further obligations of the parties under
this Agreement will terminate, except that the obligations in Sections 11.1 and
11.3 will survive; provided, however, that if this Agreement is terminated by a
party because of the Breach of the Agreement by the other party or because one
or more of the conditions to the terminating party's obligations under this
Agreement is not satisfied as a result of the other party's failure to comply
with its obligations under this Agreement, the terminating party's right to
pursue all legal remedies will survive such termination unimpaired.
10. INDEMNIFICATION; REMEDIES
10.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE
All representations, warranties, covenants, and obligations except those
relating to Taxes in this Agreement, the Disclosure Letter, the supplements to
the Disclosure Letter, the certificate delivered pursuant to Section 2.4(a)(v),
and any other certificate or document delivered pursuant to this Agreement will
survive the Closing for a period of two (2) years from the Closing Date; those
relating to Taxes will survive the Closing for a period of three (3) years. If
Notice of any claim to a right of indemnification relating to the breach of such
representations, warranties, covenants and obligations, is not sent to the
Sellers within the prescribed two (2) year period (three (3) years if a Tax
claim is involved), the right of the Purchaser to bring suit to recover damages
for any such claims for indemnification shall be lost. Notwithstanding the
immediately preceding sentence, if the Purchaser's claim to a right of
indemnification relates to a claim or demand made by a third-party, or of which
the Purchaser becomes aware, within the last ten (10) days of the prescribed two
(2) year period (three (3) years if a Tax claim is involved), then the Purchaser
shall have ten (10) days from its receipt of notice of such claim or demand or
from the time it became aware of such claim or demand to send a Notice to the
Sellers of the Purchaser's claim to a right of indemnification
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relating to the third-party's claim or demand, even if such ten (10) day period
expires after the close of the prescribed two (2) year period (three (3) years
if a Tax claim is involved). In no event may the Notice to the Sellers be sent
by the Purchaser more than ten (10) days after the expiration of the prescribed
two (2) year period (three (3) years if a Tax claim is involved). If the
Purchaser fails so to notify the Sellers within the said ten (10) days as to
such claim or demand, then the right of the Purchaser to bring suit to recover
damages for any such claims for indemnification shall be lost. The right to
indemnification, payment of Damages or other remedy based on such
representations, warranties, covenants, and obligations will not be affected by
any investigation conducted with respect to the accuracy or inaccuracy of or
compliance with, any such representation, warranty, covenant, or obligation
provided, however, that such indemnification, payment of Damages or other remedy
shall not be applicable as to any Breach by the Sellers of which Purchaser has
actual knowledge prior to Closing and so fails to inform the Sellers prior to
Closing. The waiver of any condition based on the accuracy of any
representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification, payment of
Damages, or other remedy based on such representations, warranties, covenants,
and obligations. Any Notice by the Purchaser to the Sellers of any claim to a
right of indemnification relating to the breach of any representations,
warranties, covenants and obligations under this Agreement must describe the
claim with reasonable specificity and clarity. If any such Notice is deemed by
the Sellers not to be reasonably specific and clear, then Sellers shall so
notify the Purchaser within ten (10) days of the Sellers' receipt of such
Notice, and shall identify to the Purchaser the additional information which the
Sellers believe to be necessary to respond to the claim. The Purchaser shall
respond to the Sellers' request for additional information within ten (10) days.
Any failure by the Purchaser so to notify the Sellers with reasonable
specificity and clarity or to respond to the Sellers' request for additional
information which the Sellers deem to be specific and clear shall not relieve
the Sellers of any liability under this Agreement nor constitute a waiver by the
Purchaser of any of its rights under this Agreement, except as specifically
provided to the contrary in Section 10.5 below, except in no event may the
Purchaser bring an action against the Sellers for indemnification if the
Purchaser has failed to notify the Sellers of a claim or demand for
indemnification within the prescribed two (2) year period (plus ten (10) days)
(three (3) years (plus ten (10) days)) if a Tax claim is involved) specified
hereinbefore in this Section 10.1.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS
Subject to the limitations on liability set forth hereinafter in this Section
10.2, Sellers, jointly and severally, will indemnify and hold harmless (subject
to the survival period set forth in Section 10.1 above), the Purchaser, the
Acquired Companies, and their respective Representatives, stockholders,
controlling persons, and affiliates (collectively, the "Indemnified Persons")
for, and will pay to the Indemnified Persons, the amount of, any loss,
liability, claim, damages, (which damages may include incidental and
consequential damages if such damages are from a claim involving reimbursement
of the Purchaser for claims of third parties or payment to third parties in
satisfaction of claims that such third parties have brought
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against the Acquired Companies or the Purchaser (collectively, "Third-Party
Claims") for which indemnification is sought from the Sellers, but which damages
specifically exclude incidental and consequential damages relating to any claims
that may be made directly against the Sellers by the Purchaser), expense
(including (i) reasonable costs of investigation and defense, and (ii)
reasonable attorneys' fees if the claimant for indemnification substantially
prevails in the claim asserted for indemnification) or diminution of value,
whether or not involving a Third-Party claim (collectively, "Damages"), arising,
directly or indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by Sellers in this
Agreement (without giving effect to any supplement to the Disclosure Letter
delivered after Closing), the Disclosure Letter, the supplements to the
Disclosure Letter, or any other certificate or document delivered by Sellers
pursuant to this Agreement;
(b) any Breach of any representation or warranty made by Sellers in this
Agreement as if such representation or warranty were made on and as of the
Closing Date without giving effect to any supplement to the Disclosure Letter
delivered after Closing, other than any such Breach that is disclosed in a
supplement to the Disclosure Letter and is expressly identified in the
certificate delivered pursuant to Section 2.4(a)(v) as having caused the
condition specified in Section 7.1 not to be satisfied;
(c) any Breach by Sellers of any covenant or obligation of such Sellers in
this Agreement;
(d) any services provided by, any Acquired Company prior to the Closing
Date; or
(e) any claim by any Person for brokerage or finder's fees or commissions
or similar payments based upon any agreement or understanding alleged to have
been made by any such Person with Sellers or any Acquired Company (or any Person
acting on their behalf) in connection with any of the Contemplated Transactions.
For purposes of this Agreement, a party will be deemed to have substantially
prevailed in litigation if it obtains a judgment equal to or in excess of 110%
of any settlement offer made to it in writing prior to the initiation of the
litigation. If no settlement offer is received prior to the initiation of
litigation, a party will be deemed to have substantially prevailed in litigation
if it obtains a judgment equal to or in excess of 50% of the amount of its
claim.
Notwithstanding anything in this Section 10.2 to the contrary, Sellers shall
have no liability for any single Breach where Damages are less than $1,000.00,
and shall have no liability until the amount of Damages, whether for a single
Breach or in the cumulative is greater than $25,000.00. Sellers' liability for
Damages shall be limited to $3,000,000.00, except to the extent that Damages
relate to
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fraud or any willful misconduct of any of the Sellers. Notwithstanding anything
herein to the contrary, except to the extent that Damages relate to fraud or
willful misconduct , the liability of each of the four (4) Sellers for Damages
shall be limited to $750,000 ($3,000,000.00 in the aggregate among the four (4)
Sellers). With respect to each separate claim for Damages, each of the four (4)
Sellers shall be separately liable for twenty-five percent (25%) of each
separate claim for Damages, but not to exceed the $750,000 limitation applied to
each individual Seller, provided, however, that in the event that the Damages
relate to fraud or any willful misconduct by any of the Sellers, then, as to
dollar amount, the liability of the Sellers shall be joint and several for the
amount of the Damages and such liability shall not be subject to any of the
limitations as to amount which are otherwise provided to the Sellers under this
Agreement, and further provided, however, that any liability for fraud or
willful misconduct with respect to Sections 3.3, 3.29 and 3.30 of this Agreement
shall not be subject to any of the limitations as to time or amount which are
otherwise provided to the Sellers under this Agreement.
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS-- ENVIRONMENTAL MATTERS
Subject to the limitations contained in the provisions of Section 10.1 and
Section 10.2, Sellers, jointly and severally, will indemnify and hold harmless
Purchaser, the Acquired Companies, and the other Indemnified Persons for, and
will pay to Purchaser, the Acquired Companies, and the other Indemnified Persons
the amount of, any Damages (including costs of cleanup, containment, or other
remediation) arising, directly or indirectly, from or in connection with:
(a) any Environmental, Health, and Safety Liabilities arising out of or
relating to: (i) (A) the ownership, operation, or condition at any time on or
prior to the Closing Date of the Facilities or any other properties and assets
(whether real, personal, or mixed and whether tangible or intangible) in which
Sellers or any Acquired Company has or had an interest, or (B) any Hazardous
Materials or other contaminants that were present on the Facilities or such
other properties and assets at any time on or prior to the Closing Date; or (ii)
(A) any Hazardous Materials or other contaminants, wherever located, that were,
or were allegedly, generated, transported, stored, treated, Released, or
otherwise handled by Sellers or any Acquired Company or by any other Person for
whose conduct they are or may be held responsible at any time on or prior to the
Closing Date, or (B) any Hazardous Activities that were, or were allegedly,
conducted by Sellers or any Acquired Company or by any other Person for whose
conduct they are or may be held responsible; or
(b) any bodily injury (including illness, disability, and death, and
regardless of when any such bodily injury occurred, was incurred, or manifested
itself), personal injury, property damage (including trespass, nuisance,
wrongful eviction, and deprivation of the use of real property), or other damage
of or to any Person, including any employee or former employee of Sellers or any
Acquired Company or any other Person for whose conduct they are or may be held
responsible, in any way arising from or allegedly arising from any Hazardous
Activity conducted or allegedly conducted with respect to the Facilities or the
operation of the Acquired Companies prior to the Closing Date, or from Hazardous
Material that was (i) present or
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suspected to be present on or before the Closing Date on or at the Facilities
(or present or suspected to be present on any other property, if such Hazardous
Material emanated or allegedly emanated from any of the Facilities and was
present or suspected to be present on any of the Facilities on or prior to the
Closing Date) or (ii) Released or allegedly Released by Sellers or any Acquired
Company or any other Person for whose conduct they are or may be held
responsible, at any time on or prior to the Closing Date.
Purchaser will be entitled to control any Cleanup, any related Proceeding, and,
except as provided in the following sentence, any other Proceeding with respect
to which indemnity may be sought under this Section 10.3. The procedure
described in Section 10.5 will apply to any claim solely for monetary damages
relating to a matter covered by this Section 10.3.
10.4 INDEMNIFICATION AND PAYMENT OF DAMAGES BY PURCHASER
Purchaser will indemnify and hold harmless Sellers, and will pay to Sellers the
amount of any Damages (as defined in Section 10.2 of this Agreement) arising,
directly or indirectly, from or in connection with (a) any Breach of any
representation or warranty made by Purchaser in this Agreement or in any
certificate delivered by Purchaser pursuant to this Agreement, (b) any Breach by
Purchaser of any covenant or obligation of Purchaser in this Agreement, or (c)
any claim by any Person for brokerage or finder's fees or commissions or similar
payments based upon any agreement or understanding alleged to have been made by
such Person with Purchaser (or any Person acting on its behalf) in connection
with any of the Contemplated Transactions.
10.5 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS
(a) Promptly after receipt by an Indemnified Person under Section 10.2,
10.4, or (to the extent provided in the last sentence of Section 10.3) Section
10.3 of notice of the commencement of any Proceeding against it, such
Indemnified Person will, if a claim is to be made against an indemnifying party
under such Section, give notice with thirty (30) days after the date it receives
notice of the claim to the indemnifying party of the commencement of such claim,
but the failure to notify the indemnifying party will not relieve the
indemnifying party of any liability that it may have to any indemnified party,
except to the extent that the indemnifying party demonstrates that the defense
of such action is prejudiced by the indemnifying party's failure to give such
notice.
(b) If any Proceeding referred to in Section 10.5(a) is brought against an
Indemnified Person and it gives notice to the indemnifying party of the
commencement of such Proceeding, the indemnifying party will be entitled to
participate in such Proceeding and, to the extent that it wishes (unless (i) the
indemnifying party is also a party to such Proceeding and the indemnified party
determines in good faith that joint representation would be inappropriate, or
(ii) the indemnifying party fails to provide reasonable assurance to the
indemnified party of its financial capacity to defend such Proceeding and
provide indemnification with respect to such
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Proceeding), to assume the defense of such Proceeding with counsel reasonably
satisfactory to the indemnified party and, after notice from the indemnifying
party to the indemnified party of its election to assume the defense of such
Proceeding, the indemnifying party will not, as long as it diligently conducts
such defense, be liable to the indemnified party under this Section 10 for any
fees of other counsel or any other expenses with respect to the defense of such
Proceeding, in each case subsequently incurred by the indemnified party in
connection with the defense of such Proceeding. If the indemnifying party
assumes the defense of a Proceeding, (i) no compromise or settlement of such
claims may be effected by the indemnifying party without the indemnified party's
consent unless (A) there is no finding or admission of any violation of Legal
Requirements or any violation of the rights of any Person and no effect on any
other claims that may be made against the indemnified party, or (B) the sole
relief provided is monetary damages that are paid in full by the indemnifying
party; and (ii) the indemnified party will have no liability with respect to any
compromise or settlement of such claims effected without its consent. If notice
is given to an indemnifying party of the commencement of any Proceeding and the
indemnifying party does not, within ten days after the indemnified party's
notice is given, give notice to the indemnified party of its election to assume
the defense of such Proceeding, the indemnifying party will be bound by any
determination made in such Proceeding or any compromise or settlement effected
by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party determines in
good faith that there is a reasonable probability that a Proceeding may
adversely affect it or its affiliates other than as a result of monetary damages
for which it would be entitled to indemnification under this Agreement, the
indemnified party may, by notice to the indemnifying party, assume the exclusive
right to defend, compromise, or settle such Proceeding, but the indemnifying
party will not be bound by any determination of a Proceeding so defended or any
compromise or settlement effected without its consent (which may not be
unreasonably withheld).
(d) Sellers hereby consent to the non-exclusive jurisdiction of any court
in which a Proceeding is brought against any Indemnified Person for purposes of
any claim that an Indemnified Person may have under this Agreement with respect
to such Proceeding or the matters alleged therein, and agree that process may be
served on Sellers with respect to such a claim anywhere in the world.
10.6 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS
A claim for indemnification for any matter not involving a third-party claim may
be asserted by notice to the party from whom indemnification is sought.
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11. GENERAL PROVISIONS
11.1 EXPENSES
Except as otherwise expressly provided in this Agreement, each party to this
Agreement will bear its respective expenses incurred in connection with the
preparation, execution, and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of agents, representatives,
counsel, and accountants. Purchaser will pay the HSR Act filing fee, if any.
Sellers will cause the Acquired Companies not to incur any out-of-pocket
expenses in connection with this Agreement, provided, however, that the Company
may pay legal, accounting and professional fees and related expenses, including
travel, in an amount not to exceed $75,000 with respect to the negotiation and
implementation of this Agreement and the Contemplated Transaction, so long as
the payment of any or all such fees and expenses does not result in a material
adverse change in violation of Section 3.12 of this Agreement. In the event of
termination of this Agreement, the obligation of each party to pay its own
expenses will be subject to any rights of such party arising from a breach of
this Agreement by another party.
11.2 PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with respect to this Agreement or
the Contemplated Transactions will be issued, if at all, at such time and in
such manner as Purchaser determines. Unless consented to by Purchaser in advance
or required by Legal Requirements, prior to the Closing Sellers shall, and shall
cause the Acquired Companies to, keep this Agreement strictly confidential and
may not make any disclosure of this Agreement to any Person. Sellers and
Purchaser will consult with each other concerning the means by which the
Acquired Companies' employees, customers, and suppliers and others having
dealings with the Acquired Companies will be informed of the Contemplated
Transactions, and Purchaser will have the right to be present for any such
communication.
11.3 CONFIDENTIALITY
Between the date of this Agreement and the Closing Date, Purchaser and Sellers
will maintain in confidence, and will cause the directors, officers, employees,
agents, and advisors of Purchaser and the Acquired Companies to maintain in
confidence, and not use to the detriment of another party or an Acquired Company
any written, oral, or other information obtained in confidence from another
party or an Acquired Company in connection with this Agreement or the
Contemplated Transactions, unless (a) such information is already known to such
party or to others not bound by a duty of confidentiality or such information
becomes publicly available through no fault of such party, (b) the use of such
information is necessary or appropriate in making any filing or obtaining any
consent or approval required for the consummation of the Contemplated
Transactions, or (c) the furnishing or use of such information is required by or
necessary or appropriate in connection with legal proceedings.
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If the Contemplated Transactions are not consummated, each party will return or
destroy as much of such written information as the other party may reasonably
request. Whether or not the Closing takes place, Sellers waive, and will upon
Purchaser's request cause the Acquired Companies to waive, any cause of action,
right, or claim arising out of the access of Purchaser or its representatives to
any trade secrets or other confidential information of the Acquired Companies
except for the intentional competitive misuse by Purchaser of such trade secrets
or confidential information.
Except as and to the extent required by law, without the prior written consent
of the other Party, neither the Purchaser nor the Company nor the Sellers will,
and each will direct its representatives not to make, directly or indirectly,
any public comment, statement, or communication with respect to, or otherwise to
disclose or to permit the disclosure of the existence of discussions regarding,
a possible transaction between the Parties or any of the terms, conditions, or
other aspects of the transaction proposed in this letter. If a Party is
required by law to make any such disclosure, it must first provide to the other
Party the content of the proposed disclosure, the reasons that such disclosure
is required by law, and the time and place that the disclosure will be made.
11.4 NOTICES
All notices, consents, waivers, and other communications under this Agreement
must be in writing and will be deemed to have been duly given when (a) delivered
by hand (with written confirmation of receipt), (b) sent by telecopier (with
written confirmation of receipt), provided that a copy is mailed by registered
mail, return receipt requested, or (c) when received by the addressee, if sent
by a nationally recognized overnight delivery service (receipt requested), in
each case to the appropriate addresses and telecopier numbers set forth below
(or to such other addresses and telecopier numbers as a party may designate by
notice to the other parties):
Sellers: c/o Xx. Xxxxx X. Xxxxxxx
0000 Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx Xxxxx, Xxxxxxxx 00000
Facsimile No.: 000-000-0000
with a copy to: Xxxx X. Xxxxx, Esq.
Rupp, Ehrlich, Xxxxx, Serwer & Fish, P.C.
000 Xxxx Xxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000-0000
Facsimile No.: 000-000-0000
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Purchaser: Washington Mortgage Financial Group, Ltd.
0000 Xxxxxx Xxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Executive Vice President
Facsimile No.: 000-000-0000
with a copy to: Xxxxxxx X. Xxxxxx, Esq.
Krooth & Xxxxxx
0000 X. Xxxxxx, X.X., Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Facsimile No.: 000-000-0000
11.5 JURISDICTION; SERVICE OF PROCESS
Any action or proceeding seeking to enforce any provision of, or based on any
right arising out of, this letter may be brought against any of the parties in
the courts of the Commonwealth of Virginia, County of Fairfax, or, if it has or
can acquire jurisdiction, in the United States District Court for the Eastern
District of Virginia, and each of the parties consents to the jurisdiction of
such courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein. Process in any
action or proceeding referred to in the preceding sentence may be served on any
party anywhere in the world.
11.6 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents, and
(c) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
11.7 WAIVER
The rights and remedies of the parties to this Agreement are cumulative and not
alternative. Neither the failure nor any delay by any party in exercising any
right, power, or privilege under this Agreement or the documents referred to in
this Agreement will operate as a waiver of such right, power, or privilege, and
no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or
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the exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this Agreement
or the documents referred to in this Agreement can be discharged by one party,
in whole or in part, by a waiver or renunciation of the claim or right unless in
writing signed by the other party; (b) no waiver that may be given by a party
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
11.8 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the parties with respect
to its subject matter (including the Letter of Intent between Purchaser and
Sellers dated September 26, 1996), and constitutes (along with the documents
referred to in this Agreement) a complete and exclusive statement of the terms
of the agreement between the parties with respect to its subject matter. This
Agreement may not be amended except by a written agreement executed by the party
to be charged with the amendment.
11.9 DISCLOSURE LETTER
The disclosures in the Disclosure Letter, and those in any Supplement thereto,
must relate only to the representations and warranties in the Section of the
Agreement to which they expressly relate and not to any other representation or
warranty in this Agreement.
11.10 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither party may assign any of its rights under this Agreement without the
prior consent of the other parties[, which will not be unreasonably withheld,]
except that Purchaser may assign any of its rights under this Agreement to any
Subsidiary of Purchaser. Subject to the preceding sentence, this Agreement will
apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be construed to give any Person other than the parties
to this Agreement any legal or equitable right, remedy, or claim under or with
respect to this Agreement or any provision of this Agreement. This Agreement and
all of its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and assigns.
11.11 SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable by any court
of competent jurisdiction, the other provisions of this Agreement will remain in
full force and effect. Any
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provision of this Agreement held invalid or unenforceable only in part or degree
will remain in full force and effect to the extent not held invalid or
unenforceable.
11.12 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for convenience only and
will not affect its construction or interpretation. All references to "Section"
or "Sections" refer to the corresponding Section or Sections of this Agreement.
All words used in this Agreement will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
word "including" does not limit the preceding words or terms.
11.13 TIME OF ESSENCE
With regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.
11.14 GOVERNING LAW
This Agreement will be governed by the laws of the Commonwealth of Virginia,
without regard to conflicts of laws principles.
11.15 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which will
be deemed to be an original copy of this Agreement and all of which, when taken
together, will be deemed to constitute one and the same agreement.
Attachments: Exhibit 2.4(a)(ii) - Release
Exhibit 2.4(a)(iii) - Employment Agreement
Exhibit 2.6(a) - Methodology for Post-Closing Adjustment
Procedure
Exhibit 7.4(a) - Opinion of Counsel to Sellers
SIGNATURE PAGE FOLLOWS
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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of
the date first written above.
Witness: Purchaser:
WASHINGTON MORTGAGE
FINANCIAL GROUP, LTD.
By:
----------------------------------- -----------------------------------
Its: EVP
Sellers:
--------------------------- -------------------------------
Xxxxx Xxxxxxxxx Xxxxx X. Xxxxxxx
--------------------------- -------------------------------
Xxxxxxx Xxxxxx Xxxxxxx X. Xxxxxxxxx
--------------------------- -------------------------------
Xxxxx Xxxxxx Xxxxxx Xxxxxxxx
--------------------------- -------------------------------
Xxxxxxxx X. Xxxxxx Xxxxxxx X. Xxxxx
The Company:
XXXXXXX & ASSOCIATES
OF MICHIGAN, INC.
--------------------------- By: ----------------------------------
Xxxxxxx Xxxxxx Its: President
