CONFIDENTIAL TREATMENT REQUESTED
Exhibit
10.1
CONFIDENTIAL
TREATMENT REQUESTED
Confidential
material has been separately filed with the Securities and Exchange Commission
under an application for confidential treatment. Terms for which confidential
treatment has been requested have been omitted and marked with an asterisk
[*].
Dated
as
of May
9,
2005
HIGHLAND
UNDERTAKINGS, LLC
DYNEX
CAPITAL, INC.,
MSC
I,
L.P.,
MERIT
SECURITIES CORPORATION
and
ISSUED
HOLDINGS CAPITAL CORPORATION,
PURCHASE
OF
THE
OUTSTANDING CAPITAL STOCK OF
ISSUER
HOLDING CORP.
and
CERTAIN
ASSETS OF
MSC
I,
L.P.
and
MERIT
SECURITIES CORPORATION
This
PURCHASE AGREEMENT (the "Agreement")
is
made as of May 9, 2005 among HIGHLAND UNDERTAKINGS, LLC, a Nevis limited
liability company (together with its successors and assigns, "Highland"),
DYNEX
CAPITAL, INC., a Virginia corporation (together with its successors and assigns,
"Dynex"),
MSC
I, L.P., a Virginia limited partnership (together with its successors and
assigns, "MSC"),
MERIT
SECURITIES CORPORATION, a Virginia corporation (together with its successors
and
assigns, "MERIT"),
and
ISSUED HOLDINGS CAPITAL CORPORATION, a Virginia corporation (together with
its
successors and assigns, "IH
Capital").
RECITALS
WHEREAS,
Dynex desires to sell to Highland, and Highland desires to purchase from
Dynex,
in each case on the terms and conditions set forth in this Agreement, all
of the
issued and outstanding capital stock of Issuer Holding Corp., a Virginia
corporation (together with its successors and assigns, "IHC");
WHEREAS,
MSC desires to sell to IHC, and Highland desires to cause IHC to purchase
from
MSC, in each case immediately after the sale of all of the issued and
outstanding capital stock of IHC by Dynex to Highland and on the terms and
conditions set forth in this Agreement, the Class B-3 Bonds (as defined
below);
WHEREAS,
MERIT desires to sell to IHC, and Highland desires to cause IHC to purchase
from
MERIT, in each case immediately after the sale of all of the issued and
outstanding capital stock of IHC by Dynex to Highland and on the terms and
conditions set forth in this Agreement, the Redemption Rights (as defined
below); and
WHEREAS,
IH Capital desires to enter into with IHC, and Highland desires to cause
IHC to
enter into with IH Capital, in each case as soon as practicable after the
sale
of all of the issued and outstanding capital stock of IHC by Dynex to Highland
and on the terms and conditions set forth in this Agreement, the Derivative
Transaction (as defined below);
NOW,
THEREFORE, in consideration of the mutual covenants and agreements set forth
in
this Agreement, and for other good and valuable consideration, the receipt
and
sufficiency of which are hereby acknowledged, the parties agree as
follows:
ARTICLE
ONE
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Section
1.1 Definitions.
For
purposes of this Agreement, the following terms have the respective meanings
set
forth below:
"Affiliate"
means,
with respect to any Person, any other Person directly or indirectly controlling,
controlled by or under direct or indirect common control with the first Person
or any Subsidiary of the first Person; provided,
however,
that a
Person shall be deemed to control another Person if the controlling Person
owns
51% or more of any class of voting securities of the controlled Person or
possesses, directly or indirectly, the power to direct or cause the direction
of
the management or policies of the controlled Person, whether through ownership
of stock, by contract or otherwise.
"Available
Surplus"
means
(i) all amounts, if any, able to be released to MERIT from the surplus account
for the Series 11 Bonds pursuant to Section 7(i) of the Series 11 Supplement
and
(ii) all amounts, if any, able to be withdrawn by MERIT from the surplus
account
for the Series 12-1 Bonds pursuant to Section 12.07(d) of the Base Indenture.
"Available
Surplus Documents"
means
the documents identified on Schedule
1.1A.
"Base
Indenture"
means
the Indenture dated as of November 1, 1994, as amended, between MERIT and
the
Trustee.
"Business
Day"
means
any day except Saturday, Sunday or any other day on which commercial banks
located in Richmond, Virginia or Delray Beach, Florida are authorized by
law to
be closed for business.
"Class
Action Lawsuit"
means
the securities class action lawsuit filed in the United States District Court
for the Southern District of New York by Teamsters Local 445 Freight Division
Pension Fund against Dynex and certain other defendants named therein, as
such
lawsuit may be amended from time to time.
"Class
B-3 Bond Documents"
means
the documents identified on Schedule
1.1B.
"Class
B-3 Bonds"
means
the MERIT Securities Corporation Collateralized Bonds, Series 11, Class B-3,
due
September 28, 2032 issued on May 28, 1998 with an aggregate initial principal
balance of $20,000,000 (certain of the terms of which were amended pursuant
to
Supplemental Indenture No. 2 to the Series 11 Supplement) owned by
MSC.
"Class
B-3 Bond Assignments"
means
the First Bond Assignment and the Second Bond Assignment.
"Class
B-3 Bonds Purchase Price"
has the
meaning set forth in Section
3.4.
"Closing
Date"
has the
meaning set forth in Section
2.1.
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"Code"
means
the Internal Revenue Code of 1986.
"Consent"
means
any approval, consent, ratification, waiver or other authorization.
"Contemplated
Transactions"
means
the transactions contemplated by this Agreement.
"Contract"
means
any agreement, contract, obligation, promise or undertaking (whether written
or
oral and whether express or implied) that is legally binding.
"Damages"
has the
meaning set forth in Section
14.2.
"Derivative
Payment Agreement"
means
an Agreement among IH Capital, Dynex and IHC (Post-Sale) substantially in
the
form of Exhibit
1.1D.
"Derivative
Transaction"
means
the transaction contemplated by the Derivative Payment Agreement.
"Dynex"
has the
meaning set forth in the preamble to this Agreement.
"Dynex
Closing Documents"
means
the IHC Stock Endorsement Certificate, the documents described in Sections
2.4(iv)
and
(v)
and each
other agreement to be executed or delivered by Dynex at the First
Closing.
"Dynex
Company"
means
each of Dynex, IH Capital, MSC and MERIT.
"Dynex
Indemnified Persons"
has the
meaning set forth in Section
14.3.
"Escrow
Agent"
means a
financial institution reasonably acceptable to IH Capital and
Highland.
"Event
of Default"
means
(i) an Event of Default with respect to the Public Bonds (as such terms are
defined in the Series 11 Supplement), (ii) an Event of Default with respect
to
the Private Bonds (as such terms are defined in the Series 11 Supplement)
or
(iii) an Event of Default with respect to the Bonds (as such terms are defined
in the Series 12-1 Supplement).
"Exchange
Act"
means
the Securities Exchange Act of 1934.
"Financial
Statements"
has the
meaning set forth in Section
5.10.
"First
Bond Assignment"
means
an Assignment substantially in the form of Exhibit
1.1B.
"First
Closing"
has the
meaning set forth in Section
2.1.
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"GAAP" means
United States generally accepted accounting principles applied on a consistent
basis.
"Governmental
Authorization"
means
any Consent, license, registration or permit issued, granted, given or otherwise
made available by or under the authority of any Governmental Body.
"Governmental
Body"
means
any (i) nation, state, county, city, town, borough, village, district or
other
jurisdiction, (ii) federal, state, local, municipal, foreign or other
government, (iii) governmental or quasi-governmental authority of any nature
(including any agency, branch, department, board, commission, court, tribunal
or
other entity exercising governmental or quasi-governmental powers), (iv)
multinational organization or body, (v) body exercising, or entitled or
purporting to exercise, any administrative, executive, judicial, legislative,
police, regulatory or taxing authority or power or (vi) official of any of
the
foregoing.
"Highland"
has the
meaning set forth in the preamble to this Agreement.
"Highland
Indemnified Persons"
has the
meaning set forth in Section
14.2.
"IH
Capital"
has the
meaning set forth in the preamble to this Agreement.
"IH
Capital Closing Documents"
means
the Derivative Payment Agreement and each other agreement to be executed
or
delivered by IH Capital at the Third Closing.
"IHC"
has the
meaning set forth in the recitals to this Agreement.
"IHC
(Post-Sale)"
means
IHC after giving effect to the sale of the IHC Stock by Dynex to Highland
pursuant to this Agreement.
"IHC
Stock"
means
all of the issued and outstanding capital stock of IHC.
"IHC
Stock Endorsement Certificate"
means
an Endorsement Certificate substantially in the form of Exhibit
1.1A.
"IHC
Stock Purchase Price"
has the
meaning set forth in Section
2.3.
"Indemnified
Person"
has the
meaning set forth in Section
14.4(a).
"Indemnifying
Person"
has the
meaning set forth in Section
14.4(a).
"Knowledge"
means,
with respect to any Dynex Company, (i) the actual knowledge, after due inquiry,
of any of the executive officers, the chief accounting officer or the chief
legal officer of such Dynex Company and (ii) knowledge of any other fact
or
circumstance that would have or should have come to the attention of any
of the
individuals identified in
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clause
(i) in the course of discharging his or her duties in a reasonable and prudent
manner consistent with sound business practices.
"Legal
Requirement"
means
any federal, state, local, municipal, foreign, international, multinational
or
other constitution, law, ordinance, principle of common law, code, regulation,
rule, Order, Governmental Authorization, statute or treaty.
"Liability"
means,
with respect to any Person, any liability or obligation of such Person of
any
kind, character or description, whether known or unknown, absolute or
contingent, accrued or unaccrued, disputed or undisputed, liquidated or
unliquidated, secured or unsecured, joint or several, due or to become due,
vested or unvested, executory, determined, determinable or otherwise, and
whether or not the same is required to be accrued on the financial statements
of
such Person.
"Lien"
means,
with respect to any asset, any lien, pledge, charge, security interest, or
other
encumbrance of any kind in respect of that asset, including, in the case
of any
security or other equity interest, any right of first refusal or any restriction
on voting, transfer, the receipt of income or the exercise of any other
attribute of ownership.
"Material"
means
(i) with respect to any event, condition, statement or other circumstance
of
similar import applicable to any Dynex Company, a material adverse effect
on the
validity, value or existence of IHC, the IHC Stock, the Class B-3 Bonds,
the
Redemption Rights or the Available Surplus or on the ability of such Dynex
Company to consummate the Contemplated Transactions, and (ii) with respect
to
any event, condition, statement or other circumstance of similar import
applicable to Highland, a material adverse effect on the ability of Highland
to
consummate the Contemplated Transactions.
"MERIT"
has the
meaning set forth in the preamble to this Agreement.
"MERIT
Closing Documents"
means
the Redemption Rights Agreement and each other agreement to be executed or
delivered by MERIT at the Second Closing.
"MSC"
has the
meaning set forth in the preamble to this Agreement.
"MSC
Closing Documents"
means
the Class B-3 Bond Assignments and each other agreement to be executed or
delivered by MSC at the Second Closing or the Third Closing.
"Order"
means
any order, injunction, judgment, decree, ruling, assessment or arbitration
award
of any Governmental Body or arbitrator.
"Person"
means
(i) an individual or (ii) an entity, including a corporation (either non-profit
or other), partnership (either limited or general), joint venture, limited
liability company, trust, estate or other unincorporated association, whether
or
not a legal entity.
"Proceeding"
means
any action, arbitration, audit, hearing, investigation, litigation or suit
(whether civil, criminal, administrative, judicial or investigative, whether
formal or
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informal,
whether public or private) commenced, brought, conducted or heard by or before,
or otherwise involving, any Governmental Body or arbitrator.
"Redemption
Rights"
means
the Series 11 Redemption Rights and the Series 12-1 Redemption
Rights.
"Redemption
Rights Agreement"
means
an Agreement between MERIT and IHC (Post-Sale) substantially in the form
of
Exhibit
1.1C.
"Redemption
Rights Documents"
means
the documents identified on Schedule
1.1C.
"Redemption
Rights Purchase Price"
has the
meaning set forth in Section
3.4.
"Representative"
means,
with respect to any Person, any director, officer, manager, employee, agent,
consultant, advisor, accountant, financial advisor, legal counsel or other
representative of that Person.
"Second
Bond Assignment"
means
an Assignment substantially in the form of Exhibit
1.1E.
"Second
Closing"
has the
meaning set forth in Section
3.1.
"Series
11 Bonds"
means
the MERIT Securities Corporation Collateralized Bonds, Series 11.
"Series
11 Redemption Rights"
means
MERIT's right to redeem one or more classes of the Series 11 Bonds outstanding
as of the date of this Agreement pursuant to Section 9 of the Series 11
Supplement, including,
without limitation, MERIT's right to cause any such redeemed bonds to remain
outstanding (it being understood that MERIT has the right to redeem only
those
Series 11 Bonds identified on Schedule
1.1D).
"Series
11 Supplement"
means
the Series 11 Supplement dated as of May 1, 1998 to the Base Indenture between
MERIT, as Issuer, and the Trustee, as further supplemented by (i) Supplemental
Indenture No. 1 dated as of April 1, 2000 between MERIT, as Issuer, and the
Trustee and (ii) Supplemental Indenture No. 2 dated as of July 1, 2001 between
MERIT, as Issuer, and the Trustee.
"Series
12-1 Bonds"
means
the MERIT Securities Corporation Collateralized Bonds, Series 12-1.
"Series
12-1 Redemption Rights"
means
MERIT's right to redeem one or more classes of the Series 12-1 Bonds outstanding
as of the date of this Agreement pursuant to Section 9 of the Series 12-1
Supplement, including,
without limitation, MERIT's right to cause any such redeemed bonds to remain
outstanding (it being understood that MERIT has the right to redeem only
those
Series 12-1 Bonds identified on Schedule
1.1D).
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"Series
12-1 Supplement"
means
the Series 12-1 Supplement dated as of March 1, 1999 to the Base Indenture
between MERIT, as Issuer, and the Trustee.
"Subsidiary"
means,
with respect to any Person, any other Person of which the first Person owns,
directly or indirectly, securities or other interests having the power to
elect
a majority of the other Person's board of directors or similar governing
body or
otherwise having the power to direct or cause the direction of the management
or
policies of the other Person (other than securities or other interests having
such power only upon the happening of a contingency that has not
occurred).
"Tax"
means
any income, gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, property, environmental, windfall profit, customs,
vehicle, airplane, boat, vessel or other title or registration, capital stock,
franchise, employees' income withholding, foreign or domestic withholding,
social security, unemployment, disability, real property, personal property,
sales, use, transfer, value added, alternative, add-on minimum and other
tax,
fee, assessment, levy, tariff, charge or duty of any kind whatsoever and
any
interest, penalty, addition or additional amount thereon imposed, assessed
or
collected by or under the authority of any Governmental Body or payable under
any tax-sharing agreement or any other Contract.
"Tax
Return"
means
any return (including any information return), report, statement, schedule,
notice, form, declaration, claim for refund 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.
"Third
Closing"
has the
meaning set forth in Section
4.1.
"Third
Party"
means a
Person who is not a party to this Agreement.
"Third-Party
Claim"
means a
claim against an Indemnified Person by a Third Party, whether or not involving
a
Proceeding.
"Trustee"
means
JPMorgan Chase Bank, a New York banking corporation (formerly known as The
Chase
Manhattan Bank and successor by merger to Chase Bank of Texas, National
Association (formerly known as Texas Commerce Bank National Association)),
as
Trustee.
Section
1.2 Interpretation.
In this
Agreement, unless a clear contrary intention appears:
(i) any
reference to days means calendar days unless otherwise specified, and any
day or
deadline or end of a time period hereunder which falls on a day other
than
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a
Business Day shall be deemed to refer to the first Business Day following
such
day or deadline or end of the time period, as the case may be;
(ii) any
reference to an article, section, exhibit or schedule means an article or
section of, or exhibit or schedule attached to, this Agreement, as the case
may
be, and all article and section headings are for reference purposes only
and
shall not affect in any way the meaning or interpretation of this
Agreement;
(iii) any
reference to any Legal Requirement means such Legal Requirement as amended,
modified, codified, replaced or reenacted, in whole or in part, and in effect
from time to time, including rules and regulations promulgated thereunder,
and
any reference to any section or other provision of any Legal Requirement
means
that provision of such Legal Requirement from time to time in effect and
constituting the substantive amendment, modification, codification, replacement
or reenactment of such section or other provision;
(iv) the
word
"including"
means
without limitation, the word "or"
is not
exclusive and is used in the inclusive sense of "and/or"
and the
words "herein",
"hereof",
"hereby",
"hereto"
and
"hereunder"
refer
to this Agreement as a whole; and
(v) any
reference to any document, instrument or agreement shall be deemed to refer
as
well to all addenda, exhibits, schedules or amendments thereto, and all words
will be construed to be of such gender or number as the circumstances
require.
Section
1.3 Accounting
Terms And Determinations.
Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted and all accounting determinations hereunder shall be made in
accordance with GAAP.
Section
1.4 Legal
Representation Of The Parties.
This
Agreement was negotiated by the parties with the benefit of legal
representation, and any rule of construction or interpretation otherwise
requiring this Agreement to be construed or interpreted against a party shall
not apply to any construction or interpretation hereof.
ARTICLE
TWO
SALE
OF
IHC STOCK; FIRST CLOSING
Section
2.1 First
Closing.
The
purchase and sale of the IHC Stock provided for in this Agreement (the "First
Closing")
will
take place (i) at the offices of McGuireWoods LLP, One Xxxxx Center, 000
Xxxx
Xxxx Xxxxxx, Xxxxxxxx, Xxxxxxxx 00000, at 10:30 A.M. (local time) on the
later
of May 9, 2005 and the third Business Day following the date on which the
last
of the conditions set forth in Article
Twelve
and
Article
Thirteen
have
been satisfied or waived by the party entitled to waive the same or (ii)
at such
other place, time and date (if any) to which the parties may mutually agree
(the
"Closing
Date").
Section
2.2 Sale
Of IHC Stock.
Upon
the terms and subject to the conditions set forth in this Agreement, at the
First Closing, Dynex will sell, assign, transfer and otherwise convey to
Highland, and Highland will purchase and acquire from Dynex, in each case
free
and clear of any Lien, the IHC Stock. Highland will not assume any Liability
of
Dynex or any other Person in connection with such sale.
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Section
2.3 IHC
Stock Purchase Price.
The
purchase price for the IHC Stock (the "IHC
Stock Purchase Price")
will
be $[*].
Section
2.4 First
Closing Obligations
(Dynex).
At the
First Closing, Dynex will deliver to Highland:
(i) an
executed copy of a lost stock certificate affidavit (or other similar agreement)
relating to the loss of stock certificate #1, issued on September 4, 1996
and
registered in the name of Resource Mortgage Capital, Inc.
(predecessor-in-interest to Dynex), representing the IHC Stock and indemnifying
IHC in connection with such loss;
(ii) stock
certificate #2, issued on April 20, 2005 and registered in the name of Dynex,
representing the IHC Stock;
(iii) a
copy of
the IHC Stock Endorsement Certificate executed by Dynex, with signature
guaranteed by a commercial bank or trust company or by a member firm of a
national securities exchange with all required stock transfer stamps affixed
or
provided for;
(iv) an
executed copy of each xxxx of sale, contribution agreement or other transfer
document pursuant to which, in each case immediately before the sale of the
IHC
Stock to Highland, IHC shall have transferred to Dynex all of the assets
of IHC
(other than the books and records relating to the Financial Statements) and
Dynex shall have contributed such assets to IH Capital;
(v) an
executed copy of an assignment and assumption agreement (or other similar
agreement) between IHC and IH Capital pursuant to which, in each case
immediately before the sale of the IHC Stock to Highland, IHC shall have
assigned to IH Capital all covenants, obligations and other Liabilities of
IHC
and IH Capital shall have assumed all of such covenants, obligations and
other
Liabilities;
(vi) a
certificate executed by Dynex to the effect that, except as otherwise stated
in
such certificate, each of Dynex' 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;
and
(vii) resignation
letters signed by those officers and directors of IHC who were serving
immediately prior to the time of the First Closing.
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Section
2.5 First
Closing Obligations (Highland).
At the
First Closing, Highland will:
(i) deliver
to Dynex a certificate executed by Highland to the effect that, except as
otherwise stated in such certificate, each of Highland'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; and
(ii) pay
to
Dynex the IHC Stock Purchase Price in immediately available funds by wire
transfer to a bank account specified by Dynex.
ARTICLE
THREE
SALE
OF
CLASS B-3 BONDS;
SALE
OF
REDEMPTION RIGHTS; SECOND CLOSING
Section
3.1 Second
Closing.
The
purchase and sale of the Class B-3 Bonds and the Redemption Rights provided
for
in this Agreement (the "Second
Closing")
will
take
place
at
the
offices of McGuireWoods LLP, One Xxxxx Center, 000 Xxxx Xxxx Xxxxxx, Xxxxxxxx,
Xxxxxxxx 00000 immediately after the First Closing.
Section
3.2 Sale
Of Class B-3 Bonds.
Upon
the terms and subject to the conditions set forth in this Agreement, at the
Second Closing, MSC will sell, assign, transfer and otherwise convey to IHC
(Post-Sale), and IHC (Post-Sale) will purchase and acquire from MSC, in each
case free and clear of any Lien, the Class B-3 Bonds. IHC (Post-Sale) will
not
assume any Liability of MSC or any other Person in connection with such sale.
Section
3.3 Sale
Of Redemption Rights.
Upon
the terms and subject to the conditions set forth in this Agreement, at the
Second Closing, MERIT will sell, assign, transfer and otherwise convey to
IHC
(Post-Sale), and IHC (Post-Sale) will purchase and acquire from MERIT, in
each
case free and clear of any Lien, the Redemption
Rights. IHC (Post-Sale) will not assume any Liability of MERIT or any other
Person in connection with such sale.
Section
3.4 Purchase
Price.
The
purchase price for the Class B-3 Bonds (the "Class
B-3 Bonds Purchase Price")
will
be $[*].
The
purchase price for the Redemption Rights (the "Redemption
Rights Purchase Price")
will
be $[*].
Section
3.5 Second
Closing Obligations (MSC).
At the
Second Closing, MSC will deliver to Highland:
(i) evidence
satisfactory to Highland and its legal counsel that the Class B-3 Bonds are
held
in account #00000000 maintained with Wachovia Bank, N.A.;
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(ii) the
First
Bond Assignment and such other instruments of conveyance with respect to
$12,000,000 in initial principal balance of the Class B-3 Bonds as may
reasonably be requested by Highland, each in form and substance satisfactory
to
Highland and its legal counsel and executed by MSC;
(iii) an
irrevocable instruction letter substantially in the form of Exhibit
3.5 executed
by or at the direction of MSC with respect to $12,000,000 in initial principal
balance of the Class B-3 Bonds; and
(iv) a
certificate executed by MSC to the effect that, except as otherwise stated
in
such certificate, each of MSC'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.
Section
3.6 Second
Closing Obligations (MERIT).
At the
Second Closing, MERIT will deliver to Highland:
(i) the
Redemption Rights Agreement and such other instruments of conveyance with
respect to the Redemption Rights as may reasonably be requested by Highland,
each in form and substance satisfactory to Highland and its legal counsel
and
executed by MERIT; and
(ii) a
certificate executed by MERIT to the effect that, except as otherwise stated
in
such certificate, each of MERIT'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.
Section
3.7 Second
Closing Obligations (Highland).
At the
Second Closing, Highland will:
(i) deliver
to each of MSC and MERIT a certificate executed by Highland to the effect
that,
except as otherwise stated in such certificate, each of Highland'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;
(ii) cause
to
be paid to MSC the Class B-3 Bonds Purchase Price in immediately available
funds
by wire transfer to a bank account specified by MSC; and
(iii) cause
to
be paid to MERIT the Redemption Rights Purchase Price in immediately available
funds by wire transfer to a bank account specified by MERIT.
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ARTICLE
FOUR
DERIVATIVE
TRANSACTION; THIRD CLOSING
Section
4.1 Third
Closing.
The
execution and delivery of the Derivative Payment Agreement provided for in
this
Agreement (the "Third
Closing")
will
take place at the offices of McGuireWoods LLP, One Xxxxx Center, 000 Xxxx
Xxxx
Xxxxxx, Xxxxxxxx, Xxxxxxxx 00000 immediately after the Second
Closing.
Section
4.2 Third
Closing Obligations (IH Capital).
At the
Third Closing, IH Capital will deliver to Highland:
(i) the
Derivative Payment Agreement in form and substance satisfactory to Highland
and
its legal counsel and executed by IH Capital; and
(ii) a
certificate executed by IH Capital to the effect that, except as otherwise
stated in such certificate, each of IH Capital'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 date of the
Third
Closing as if made on such date.
Section
4.3 Third
Closing Obligations (MSC).
At the
Third Closing, MSC will deliver to Highland:
(i) the
Second Bond Assignment and such other instruments of conveyance with respect
to
$8,000,000 in initial principal balance of the Class B-3 Bonds as may reasonably
be requested by Highland, each in form and substance satisfactory to Highland
and its legal counsel and executed by MSC; and
(ii) an
irrevocable instruction letter substantially in the form of Exhibit
4.3 executed
by or at the direction of MSC with respect to $8,000,000 in initial principal
balance of the Class B-3 Bonds.
Section
4.4 Third
Closing Obligations (Highland).
At the
Third Closing, Highland will:
(i) cause
to
be delivered to IH Capital the Derivative Payment Agreement in form and
substance satisfactory to IH Capital and its legal counsel and executed by
IHC
(Post-Sale);
(ii) cause
to
be delivered to IH Capital a power of attorney executed by IHC (Post-Sale)
appointing IH Capital as IHC (Post-Sale)'s attorney-in-fact for the limited
purpose of continuing or terminating the financing statements attached as
Schedule
5.11
(it
being understood that the parties intend that IHC (Post-Sale) not have any
right, title or interest in, to or under the property subject to such financing
statements);
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(iii) deliver
to IH Capital a certificate executed by Highland to the effect that, except
as
otherwise stated in such certificate, each of Highland'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
date
of the Third Closing as if made on such date; and
(iv) cause
to
be paid to IH Capital $[*]
in
immediately available funds by wire transfer to a bank account specified
by IH
Capital.
ARTICLE
FIVE
REPRESENTATIONS
AND WARRANTIES OF DYNEX
Dynex
represents and warrants to Highland as follows:
Section
5.1 Organization;
Good Standing
(Dynex).
Dynex
is
a corporation duly organized, validly existing and in good standing under
the
laws of the Commonwealth of Virginia and has all necessary corporate power
and
authority to conduct its business as it is now being conducted and to own
or use
the properties and assets that it purports to own or use.
Dynex
has delivered to Highland complete and correct copies of its articles of
incorporation and bylaws as currently in effect.
Section
5.2 Organization;
Good Standing (IHC).
IHC is
a corporation duly organized, validly existing and in good standing under
the
laws of the Commonwealth of Virginia and has all necessary corporate power
and
authority to conduct its business as it is now being conducted and to own
or use
the properties and assets that it purports to own or use. IHC 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 either the ownership or use
of the
properties owned or used by it, or the nature of the activities conducted
by it,
requires such qualification. Dynex has delivered to Highland complete and
correct copies of the articles of incorporation and bylaws of IHC as currently
in effect.
Section
5.3 Authority;
Enforceability.
Dynex
has the absolute and unrestricted right, power and authority to execute and
deliver this Agreement and the Dynex Closing Documents and to perform its
obligations under this Agreement and the Dynex Closing Documents, and such
action has been duly authorized by all necessary corporate action. Assuming
the
valid and binding effect on the other parties, this Agreement constitutes
the
legal, valid and binding obligation of Dynex, enforceable against Dynex in
accordance with its terms, except that such enforcement may be subject to
bankruptcy, receivership, insolvency, moratorium, reorganization, fraudulent
transfer or similar laws affecting the enforcement of the rights of creditors
generally and to legal and equitable limitations on the enforceability of
specific remedies. Upon the execution and delivery by Dynex of the Dynex
Closing
Documents, and, assuming the valid and binding effect of such documents on
the
other parties thereto, each of the Dynex Closing Documents will constitute
the
legal, valid and binding obligation of Dynex, enforceable against Dynex in
accordance with its terms, except that such enforcement
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may
be
subject to bankruptcy, receivership, insolvency, moratorium, reorganization,
fraudulent transfer or similar laws affecting the enforcement of the rights
of
creditors generally and to legal and equitable limitations on the enforceability
of specific remedies.
Section
5.4 No
Conflicts.
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) conflict with or violate any provision
of
the articles of incorporation or bylaws of Dynex or IHC or any resolution
adopted by the board of directors or shareholders of Dynex or IHC, (ii) conflict
with, violate, result in a breach of, constitute a default under, give any
Person the right to challenge any of the Contemplated Transactions under
or give
any Person the right to exercise any remedy or obtain any relief under any
Legal
Requirement or Order to which Dynex or IHC may be subject, (iii) conflict
with,
violate, result in a breach of or constitute a default under any Contract
to
which Dynex or IHC is a party or by which Dynex or IHC is bound or (iv) result
in the imposition or creation of any Lien on or with respect to the IHC Stock
or
IHC, other than, in the case of clause (ii) or (iii), any such conflict,
violation, breach or default that could not reasonably be expected to have
a
Material adverse effect.
Section
5.5 No
Consents.
Neither
Dynex nor IHC is or will be required to give any notice to or obtain any
Consent
from any Person or Governmental Body in connection with
the
execution and delivery of this Agreement or the consummation or performance
of
any of the Contemplated Transactions.
Section
5.6 No
Proceedings.
Except
for the Class Action Lawsuit and as disclosed on Schedule
5.6,
there
is no pending or, to the Knowledge of Dynex, threatened Proceeding
(i) that
has been commenced by or against Dynex that would reasonably be expected
to have
a Material adverse effect on Dynex or that otherwise relates to or may affect
the IHC Stock or IHC, (ii) that has been commenced by or against IHC or that
otherwise relates to or may affect the IHC Stock or IHC or (iii) that
challenges, or that may have the effect of preventing, delaying, making illegal
or otherwise interfering with, any of the Contemplated Transactions. To the
Knowledge of Dynex, no event has occurred or circumstance exists that is
reasonably likely to give rise to or serve as the basis for the commencement
of
any Proceeding related directly to the IHC Stock. Dynex has delivered to
Highland or its Representatives copies of all pleadings and all Material
correspondence and other documents relating to the Class Action Lawsuit since
the date that such suit was filed (except to the extent such delivery would
jeopardize Dynex's attorney-client privilege in connection with the Class
Action
Lawsuit).
Section
5.7 No
Orders.
Neither
Dynex nor IHC is subject to any Order that relates to or may affect the IHC
Stock or IHC or that challenges, or that may have the effect of preventing,
delaying, making illegal or otherwise interfering with, any of the Contemplated
Transactions. Neither
Dynex nor IHC has received any notice or other communication (whether oral
or
written) from any Governmental Body or any other Person regarding the potential
or proposed issuance of any such Order.
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Section
5.8 Books
And Records.
The
books of account, minute books, stock record books and other records of IHC,
all
of which have been made available to Highland, are complete and correct in
all
Material respects and have been maintained in accordance with sound business
practices and the requirements of Section 13(b)(2) of the Exchange Act
(regardless of whether IHC is subject to that provision), including the
maintenance of an adequate system of internal accounting controls. The minute
books of IHC contain accurate and complete (in all Material respects) records
of
all meetings held of, and corporate action taken by, the shareholders, the
board
of directors and any committees of the board of directors of IHC, and no
meeting
of any such shareholders, board of directors or committee has been held for
which minutes have not been prepared or are not contained in such minute
books.
At the First Closing, all of such books and records will be in the possession
of
IHC.
Section
5.9 Capitalization.
The
authorized equity securities of IHC consist of 10,000 shares of common stock,
no
par value, of which 10,000 shares are outstanding. All of the outstanding
equity
securities of IHC have been duly authorized and validly issued and are fully
paid and nonassessable. There are no Contracts relating to the issuance,
sale or
transfer of any equity securities or other securities of IHC. None of the
outstanding equity securities or other securities of IHC was issued in violation
of the Securities Act of 1933, as amended, or any other Legal
Requirement.
Section
5.10 Financial
Statements.
Dynex
has delivered to Highland unaudited consolidated balance sheets of IHC as
of
December 31, 2003 and December 31, 2004 and the
related
consolidated statements of income for the years then ended (collectively,
the
"Financial
Statements").
To
the Knowledge of Dynex, the Financial Statements fairly present in all material
respects the financial condition and results of operations of IHC as of December
31, 2003 and December 31, 2004 and for the years then ended, all in accordance
with GAAP consistently applied throughout such periods. The Financial Statements
have been prepared from and are in accordance with the accounting records
of
IHC. IHC has also delivered to Highland copies of all letters from IHC's
accountants to IHC's board of directors or the audit committee thereof during
the twenty-four (24) months preceding the execution of this Agreement, together
with copies of all responses thereto.
Section
5.11 Limited
Assets; No Liabilities.
IHC has
no assets other than the books and records relating to the Financial Statements.
IHC has no Liabilities (all Liabilities of IHC having been assumed by IH
Capital). Except
for the Liens evidenced by the financing statements attached as Schedule
5.11,
there
are no Liens on or with respect to any assets of IHC.
Section
5.12 The
IHC Stock.
Dynex
is, and on the Closing Date will be, the record and beneficial owner and
holder
of the IHC Stock, free and clear of any Lien (and no legend or other reference
to any purported Lien appears on any certificate representing the IHC Stock).
Upon execution and delivery of the IHC Stock Endorsement Certificate and
payment
for the IHC Stock by Highland as provided in this Agreement, Highland will
acquire good and valid title to the IHC Stock, free and clear of any Lien.
Dynex
is not a party to any agreement, understanding or arrangement relating to
the
IHC Stock other than this Agreement.
-
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Section
5.13 No
Brokers Or Finders.
Neither
Dynex nor any of its Representatives has incurred any obligation or liability,
contingent or otherwise, for brokerage or finders' fees, agents' commissions
or
other similar payments in connection with this Agreement or the Contemplated
Transactions.
Section
5.14 Accuracy
Of Information.
All
written information provided by Dynex to Highland or its Representatives
in
connection with this Agreement or the Contemplated Transactions was true
and
correct in all Material respects as of the date provided, and such information
did not contain as of the date provided any statement that was untrue in
any
Material respect or omit to state a Material fact necessary to make such
information, in light of the circumstances in which it was provided, not
misleading. Dynex does not have Knowledge of any fact that has specific
application to the IHC Stock or IHC (other than general economic or industry
conditions) and that may have a Material adverse effect on the IHC Stock
or IHC
that has not been set forth in this Agreement or otherwise provided to Highland
or its Representatives in writing.
ARTICLE
SIX
REPRESENTATIONS
AND WARRANTIES OF MSC
MSC
represents and warrants to Highland as follows:
Section
6.1 Organization;
Good Standing.
MSC is
a limited partnership duly organized, validly existing and in good standing
under the laws of the Commonwealth of Virginia and has all necessary power
and
authority to conduct its business as it is now being conducted and to own
or use
the properties and assets that it purports to own or use. MSC has delivered
to
Highland complete and correct copies of its charter documents as currently
in
effect.
Section
6.2 Authority;
Enforceability.
MSC has
the absolute and unrestricted right, power and authority to execute and deliver
this Agreement and the MSC Closing Documents and to perform its obligations
under this Agreement and the MSC Closing Documents, and such action has been
duly authorized by all necessary partnership action. Assuming the valid and
binding effect on the other parties, this Agreement constitutes the legal,
valid
and binding obligation of MSC, enforceable against MSC in accordance with
its
terms, except that such enforcement may be subject to bankruptcy, receivership,
insolvency, moratorium, reorganization, fraudulent transfer or similar laws
affecting the enforcement of the rights of creditors generally and to legal
and
equitable limitations on the enforceability of specific remedies. Upon the
execution and delivery by MSC of the MSC Closing Documents, and assuming
the
valid and binding effect of such documents on the other parties thereto,
each of
the MSC Closing Documents will constitute the legal, valid and binding
obligation of MSC, enforceable against MSC in accordance with its terms,
except
that such enforcement may be subject to bankruptcy, receivership, insolvency,
moratorium, reorganization, fraudulent transfer or similar laws affecting
the
enforcement of the rights of creditors generally and to legal and equitable
limitations on the enforceability of specific remedies.
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Section
6.3 No
Conflicts.
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) conflict with or violate any provision
of
the charter documents of MSC or any resolution adopted by the partners or
general partner of MSC, (ii) conflict with, violate, result in a breach of,
constitute a default under, give any Person the right to challenge any of
the
Contemplated Transactions under or give any Person the right to exercise
any
remedy or obtain any relief under any Legal Requirement or Order to which
MSC
may be subject, (iii) conflict with, violate, result in a breach of or
constitute a default under any Contract to which MSC is a party or by which
MSC
is bound or (iv) result in the imposition or creation of any Lien on or with
respect to the Class B-3 Bonds, other than, in the case of clause (ii) or
(iii),
any such conflict, violation, breach or default that could not reasonably
be
expected to have a Material adverse effect.
Section
6.4 No
Consents.
Except
for the notices and Consents identified on Schedule
6.4,
MSC is
not required to give any notice to or obtain any Consent from any Person
or
Governmental Body in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the Contemplated
Transactions.
Section
6.5 No
Proceedings.
There
is no pending or, to the Knowledge of MSC, threatened Proceeding (i) that
has
been commenced by or against MSC that relates to the Class B-3 Bonds or that
may
otherwise affect the Class B-3 Bonds or (ii) that challenges, or that may
have
the effect of preventing, delaying, making illegal or otherwise interfering
with, any of the Contemplated Transactions. To the Knowledge of MSC, no event
has occurred or circumstance exists that is reasonably likely to give rise
to or
serve as the basis for the commencement of any Proceeding related directly
to
the Class B-3 Bonds.
Section
6.6 No
Orders.
MSC is
not subject to any Order that relates to or may affect the Class B-3 Bonds
or
that challenges, or that may have the effect of preventing, delaying, making
illegal or otherwise interfering with, any of the Contemplated Transactions.
MSC
has not received any notice or other communication (whether oral or written)
from any Governmental Body or any other Person regarding the potential or
proposed issuance of any such Order.
Section
6.7 The
Class B-3 Bonds.
MSC is,
and on the Closing Date will be, the sole owner of the Class B-3 Bonds free
and
clear of any Lien. Upon execution and delivery of the Class B-3 Bond Assignments
as provided in this Agreement, MSC will validly assign the Class B-3 Bonds
to
IHC (Post-Sale) and IHC (Post-Sale) will acquire the Class B-3 Bonds free
and
clear of any Lien not created by IHC (Post-Sale). MSC is not a party to any
agreement, understanding or arrangement relating to the Class B-3 Bonds other
than this Agreement.
Section
6.8 No
Brokers Or Finders.
Neither
MSC nor any of its Representatives has incurred any obligation or liability,
contingent or otherwise, for brokerage or finders' fees, agents' commissions
or
other similar payments in connection with this Agreement or the Contemplated
Transactions.
-
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Section
6.9 Accuracy
Of Information.
All
written information provided by MSC to Highland or its Representatives in
connection with this Agreement or the Contemplated Transactions was true
and
correct in all Material respects as of the date provided, and such information
did not contain as of the date provided any statement that was untrue in
any
Material respect or omit to state a Material fact necessary to make such
information, in light of the circumstances in which it was provided, not
misleading. MSC does not have Knowledge of any fact that has specific
application to the Class B-3 Bonds (other than general economic or industry
conditions) and that may have a Material adverse effect on the Class B-3
Bonds
that has not been set forth in this Agreement or otherwise provided to Highland
or its Representatives in writing.
ARTICLE
SEVEN
REPRESENTATIONS
AND WARRANTIES OF MERIT
MERIT
represents and warrants to Highland as follows:
Section
7.1 Organization;
Good Standing. MERIT
is
a corporation duly organized, validly existing and in good standing under
the
laws of the Commonwealth of Virginia and has all necessary corporate power
and
authority to conduct its business as it is now being conducted and to own
or use
the properties and assets that it purports to own or use.
MERIT
has delivered to Highland complete and correct copies of its articles of
incorporation and bylaws as currently in effect.
Section
7.2 Authority;
Enforceability.
MERIT
has
the absolute and unrestricted right, power and authority to execute and deliver
this Agreement and the MERIT Closing Documents and to perform its obligations
under this Agreement and the MERIT Closing Documents, and such action has
been
duly authorized by all necessary corporate action. Assuming the valid and
binding effect on the other parties, this Agreement constitutes the legal,
valid
and binding obligation of MERIT, enforceable against MERIT in accordance
with
its terms, except that such enforcement may be subject to bankruptcy,
receivership, insolvency, moratorium, reorganization, fraudulent transfer
or
similar laws affecting the enforcement of the rights of creditors generally
and
to legal and equitable limitations on the enforceability of specific remedies.
Upon the execution and delivery by MERIT of the MERIT Closing Documents,
and
assuming the valid and binding effect of such documents on the other parties
thereto, each of the MERIT Closing Documents will constitute the legal, valid
and binding obligation of MERIT, enforceable against MERIT in accordance
with
its terms, except that such enforcement may be subject to bankruptcy,
receivership, insolvency, moratorium, reorganization, fraudulent transfer
or
similar laws affecting the enforcement of the rights of creditors generally
and
to legal and equitable limitations on the enforceability of specific
remedies.
Section
7.3 No
Conflicts.
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) conflict
with or violate any provision of the articles of incorporation or bylaws
of
MERIT or any resolution adopted by the
-
-
board
of
directors or sole shareholder of MERIT, (ii) conflict with, violate, result
in a
breach of, constitute a default under, give any Person the right to challenge
any of the Contemplated Transactions under or give any Person the right to
exercise any remedy or obtain any relief under any Legal Requirement or Order
to
which MERIT may be subject, (iii) conflict with, violate, result in a breach
of
or constitute a default under any Contract to which MERIT is a party or by
which
MERIT is bound or (iv) result in the imposition or creation of any Lien on
or
with respect to the Redemption Rights, other than, in the case of clause
(ii) or
(iii), any such conflict, violation, breach or default that could not reasonably
be expected to have a Material adverse effect.
Section
7.4 No
Consents.
Except
for the notices and Consents identified on Schedule
7.4,
MERIT
is not required to give any notice to or obtain any Consent from any Person
or
Governmental Body in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the Contemplated
Transactions.
Section
7.5 No
Proceedings.
Except
for the Class Action Lawsuit and as disclosed on Schedule
5.6,
there
is no pending or, to the Knowledge of MERIT, threatened Proceeding (i) that
has
been commenced by or against MERIT that relates to the Redemption Rights
or that
may otherwise affect the Redemption Rights or (ii) that challenges, or that
may
have the effect of preventing, delaying, making illegal or otherwise interfering
with, any of the Contemplated Transactions. To
the
Knowledge of MERIT, no event has occurred or circumstance exists that is
reasonably likely to give rise to or serve as the basis for the commencement
of
any Proceeding related directly to the Redemption Rights.
Section
7.6 No
Orders.
MERIT
is not subject to any Order that relates to or may affect the Redemption
Rights
or that challenges, or that may have the effect of preventing, delaying,
making
illegal or otherwise interfering with, any of the Contemplated Transactions.
MERIT has not received any notice or other communication (whether oral or
written) from any Governmental Body or any other Person regarding the potential
or proposed issuance of any such Order.
Section
7.7 The
Class B-3 Bonds.
The
Class B-3 Bonds have been duly authorized, executed and delivered and are
the
legal, valid and binding obligations of MERIT enforceable against MERIT in
accordance with their terms, except that such enforcement may be subject
to
bankruptcy, receivership, insolvency, moratorium, reorganization, fraudulent
transfer or similar laws affecting the enforcement of the rights of creditors
generally and to legal and equitable limitations on the enforceability of
specific remedies.
Section
7.8 Class
B-3 Bond Documents.
The
Class B-3 Bond Documents constitute all of the documents that govern or
otherwise relate to the Class B-3 Bonds. MERIT and, to the Knowledge of MERIT,
the Trustee have performed in all Material respects each obligation to be
performed by them under the Class B-3 Bond Documents. Each of the Class B-3
Bond
Documents is in full force and effect and constitutes the legal, valid and
binding obligation of MERIT and, to the Knowledge of MERIT, the Trustee
enforceable against MERIT and, to the Knowledge of MERIT, the Trustee in
accordance with its terms, except that such enforcement may be subject to
bankruptcy, receivership, insolvency, moratorium,
reorganization,
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fraudulent
transfer or similar laws affecting the enforcement of the rights of creditors
generally and to legal and equitable limitations on the enforceability of
specific remedies. MERIT or its Representatives have delivered to Highland
or
its Representatives true and complete copies of the Class B-3 Bond Documents
as
in effect on the date of this Agreement and the Closing Date. To the Knowledge
of MERIT, no event or condition exists that constitutes or would constitute
(with notice or lapse of time) an Event of Default.
Section
7.9 The
Redemption Rights. MERIT
is,
and on the Closing Date will be, the holder of the Redemption Rights free
and
clear of any Lien. Upon execution and delivery of the Redemption Rights
Agreement as provided in this Agreement, MERIT will validly assign the
Redemption Rights to IHC (Post-Sale) and IHC (Post-Sale) will acquire the
Redemption Rights free and clear of any Lien not created by IHC (Post-Sale)
and
will be entitled to enforce the Redemption Rights against all Persons. MERIT
is
not a party to any agreement, understanding or arrangement relating to the
Redemption Rights other than this Agreement and the Redemption Rights
Documents. All
of
the Series 11 Bonds and Series 12-1 Bonds that are subject to the Redemption
Rights are identified on Schedule
1.1D.
Section
7.10 Redemption
Rights Documents.
The
Redemption Rights Documents constitute all of the documents that govern or
otherwise relate to the Redemption Rights. MERIT and, to the Knowledge of
MERIT,
the Trustee have performed in all Material respects each obligation to be
performed by them under the Redemption Rights Documents. Each of the Redemption
Rights Documents is in full force and effect and, assuming the valid and
binding
effect of such documents on the other parties thereto, constitutes the legal,
valid and binding obligation of MERIT and, to the Knowledge of MERIT, the
Trustee enforceable against MERIT and, to the Knowledge of MERIT, the Trustee
in
accordance with its terms, except that such enforcement may be subject to
bankruptcy, receivership, insolvency, moratorium, reorganization, fraudulent
transfer or similar laws affecting the enforcement of the rights of creditors
generally and to legal and equitable limitations on the enforceability of
specific remedies. MERIT or its Representatives have delivered to Highland
or
its Representatives true and complete copies of the Redemption Rights Documents
as in effect on the date of this Agreement and the Closing Date. To the
Knowledge of MERIT, no event or condition exists that constitutes or would
constitute (with notice or lapse of time) an Event of Default.
Section
7.11 Available
Surplus Documents.
The
Available Surplus Documents constitute all of the documents that govern or
otherwise relate to the Available Surplus. MERIT and, to the Knowledge of
MERIT,
the Trustee have performed in all Material respects each obligation to be
performed by them under the Available Surplus Documents. Each of the Available
Surplus Documents is in full force and effect and, assuming the valid and
binding effect of such documents on the other parties thereto, constitutes
the
legal, valid and binding obligation of MERIT and, to the Knowledge of MERIT,
the
Trustee enforceable against MERIT and, to the Knowledge of MERIT, the Trustee
in
accordance with its terms, except that such enforcement may be subject to
bankruptcy, receivership, insolvency, moratorium, reorganization, fraudulent
transfer or similar laws affecting the enforcement of the rights of creditors
generally and to legal and equitable limitations on the enforceability of
specific remedies. MERIT or its Representatives have delivered to Highland
or
its Representatives true and complete copies of
-
-
the
Available Surplus Documents as in effect on the date of this Agreement and
the
Closing Date.
Section
7.12 No
Brokers Or Finders.
Neither
MERIT nor any of its Representatives has incurred any obligation or liability,
contingent or otherwise, for brokerage or finders' fees, agents' commissions
or
other similar payments in connection with this Agreement or the Contemplated
Transactions.
Section
7.13 Accuracy
Of Information.
All
written information provided by MERIT to Highland or its Representatives
in
connection with this Agreement or the Contemplated Transactions was true
and
correct in all Material respects as of the date provided, and such information
did not contain as of the date provided any statement that was untrue in
any
Material respect or omit to state a Material fact necessary to make such
information, in light of the circumstances in which it was provided, not
misleading. MERIT does not have Knowledge of any fact that has specific
application to the Redemption Rights (other than general economic or industry
conditions) and that may have a Material adverse effect on the Redemption
Rights
that has not been set forth in this Agreement or otherwise provided to Highland
or its Representatives in writing.
ARTICLE
EIGHT
REPRESENTATIONS
AND WARRANTIES OF IH CAPITAL
IH
Capital represents and warrants to Highland as follows:
Section
8.1 Organization;
Good Standing.
IH
Capital is a corporation duly organized, validly existing and in good standing
under the laws of the Commonwealth of Virginia and has all necessary corporate
power and authority to conduct its business as it is now being conducted
and to
own or use the properties and assets that it purports to own or use.
IH
Capital
has delivered to Highland complete and correct copies of its articles of
incorporation and bylaws as currently in effect.
Section
8.2 Authority;
Enforceability.
IH
Capital has the absolute and unrestricted right, power and authority to execute
and deliver this Agreement and the IH Capital Closing Documents and to perform
its obligations under this Agreement and the IH Capital Closing Documents,
and
such action has been duly authorized by all necessary corporate action. Assuming
the valid and binding effect on the other parties, this Agreement constitutes
the legal, valid and binding obligation of IH Capital, enforceable against
IH
Capital in accordance with its terms, except that such enforcement may be
subject to bankruptcy, receivership, insolvency, moratorium, reorganization,
fraudulent transfer or similar laws affecting the enforcement of the rights
of
creditors generally and to legal and equitable limitations on the enforceability
of specific remedies. Upon the execution and delivery by IH Capital of the
IH
Capital Closing Documents, and assuming the valid and binding effect of such
documents on the other parties thereto, each of the IH Capital Closing Documents
will constitute the legal, valid and binding obligation of IH Capital,
enforceable against IH Capital in accordance with its terms, except
that
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-
such
enforcement may be subject to bankruptcy, receivership, insolvency, moratorium,
reorganization, fraudulent transfer or similar laws affecting the enforcement
of
the rights of creditors generally and to legal and equitable limitations
on the
enforceability of specific remedies.
Section
8.3 No
Conflicts.
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) conflict with or violate any provision
of
the articles of incorporation or bylaws of IH Capital or any resolution adopted
by the board of directors or sole shareholder of IH Capital, (ii) conflict
with,
violate, result in a breach of, constitute a default under, give any Person
the
right to challenge any of the Contemplated Transactions under or give any
Person
the right to exercise any remedy or obtain any relief under any Legal
Requirement or Order to which IH Capital may be subject, (iii) conflict with,
violate, result in a breach of or constitute a default under any Contract
to
which IH Capital is a party or by which IH Capital is bound or (iv) result
in
the imposition or creation of any Lien on or with respect to the assets of
IH
Capital, other than, in the case of clause (ii) or (iii), any such conflict,
violation, breach or default that could not reasonably be expected to have
a
Material adverse effect.
Section
8.4 No
Consents.
IH
Capital is not required to give any notice to or obtain any Consent from
any
Person or Governmental Body in connection with the execution and delivery
of
this Agreement or the consummation or performance of any of the Contemplated
Transactions.
Section
8.5 No
Proceedings.
There
is no pending or, to the Knowledge of IH Capital, threatened Proceeding (i)
that
has been commenced by or against IH Capital that relates to the Derivative
Transaction or that may otherwise affect the Derivative Transaction or (ii)
that
challenges, or that may have the effect of preventing, delaying, making illegal
or otherwise interfering with, any of the Contemplated Transactions. To the
Knowledge of IH Capital, no event has occurred or circumstance exists that
is
reasonably likely to give rise to or serve as the basis for the commencement
of
any such Proceeding.
Section
8.6 No
Orders.
IH
Capital is not subject to any Order that relates to or may affect the Derivative
Transaction or that challenges, or that may have the effect of preventing,
delaying, making illegal or otherwise interfering with, any of the Contemplated
Transactions. IH Capital has not received any notice or other communication
(whether oral or written) from any Governmental Body or any other Person
regarding the potential or proposed issuance of any such Order.
Section
8.7 No
Brokers Or Finders.
Neither
IH Capital nor any of its Representatives has incurred any obligation or
liability, contingent or otherwise, for brokerage or finders' fees, agents'
commissions or other similar payments in connection with this Agreement or
the
Contemplated Transactions.
Section
8.8 Accuracy
Of Information.
All
written information provided by IH Capital to Highland or its Representatives
in
connection with this Agreement or the
-
-
Contemplated
Transactions was true and correct in all Material respects as of the date
provided, and such information did not contain as of the date provided any
statement that was untrue in any Material respect or omit to state a Material
fact necessary to make such information, in light of the circumstances in
which
it was provided, not misleading. IH Capital does not have Knowledge of any
fact
that has specific application to the Derivative Transaction (other than general
economic or industry conditions) and that may have a Material adverse effect
on
the interest of IHC (Post-Sale) under the Derivative Transaction that has
not
been set forth in this Agreement or otherwise provided to Highland or its
Representatives in writing.
ARTICLE
NINE
REPRESENTATIONS
AND WARRANTIES OF HIGHLAND
Highland
represents and warrants to each Dynex Company as follows:
Section
9.1 Organization;
Good Standing.
Highland is a limited liability company duly organized, validly existing
and in
good standing under the laws of the Island of Nevis and has all necessary
limited liability company power and authority to conduct its business as
it is
now being conducted and to own or use the properties and assets that it purports
to own or use.
Section
9.2 Authority;
Enforceability.
Highland has the absolute and unrestricted right, power and authority to
execute
and deliver this Agreement and to perform its obligations under this Agreement,
and such action has been duly authorized by all necessary limited liability
company action. Assuming the valid and binding effect on the other parties,
this
Agreement constitutes the legal, valid and binding obligation of Highland,
enforceable against Highland in accordance with its terms, except that such
enforcement may be subject to bankruptcy, receivership, insolvency, moratorium,
reorganization, fraudulent transfer or similar laws affecting the enforcement
of
the rights of creditors generally and to legal and equitable limitations
on the
enforceability of specific remedies.
Section
9.3 No
Conflicts.
Neither
the execution and delivery by Highland of this Agreement nor the consummation
or
performance by Highland 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 the articles of organization, as amended, or operating agreement
of
Highland, (ii) any resolution adopted by the sole manager of Highland, (iii)
any
Legal Requirement or Order to which Highland may be subject, or (iv) any
Contract to which Highland is a party or by which Highland may be
bound.
Section
9.4 No
Consents.
Highland is not required to give any notice to or obtain any Consent from
any
Person or Governmental Body in connection with the execution and delivery
of
this Agreement or the consummation or performance of any of the Contemplated
Transactions.
Section
9.5 No
Proceedings.
There
is no pending or, to the knowledge of Highland, threatened Proceeding that
challenges, or that may have the effect of preventing,
-
-
delaying,
making illegal or otherwise interfering with, any of the Contemplated
Transactions. To the knowledge of Highland, no event has occurred or
circumstance exists that is reasonably likely to give rise to or serve as
a
basis for the commencement of any such Proceeding.
Section
9.6 No
Orders.
Highland is not subject to any Order that challenges, or that may have the
effect of preventing, delaying, making illegal or otherwise interfering with,
any of the Contemplated Transactions. Highland has not received any notice
or
other communication (whether oral or written) from any Governmental Body
or any
other Person regarding the potential or proposed issuance of any such
Order.
Section
9.7 No
Brokers Or Finders.
Neither
Highland nor any of its Representatives has incurred any obligation or
liability, contingent or otherwise, for brokerage or finders' fees, agents'
commissions or other similar payments in connection with this Agreement or
the
Contemplated Transactions.
Section
9.8 Accuracy
Of Information.
All
written information provided by Highland to any Dynex Company (or its
Representatives) in connection with this Agreement or the Contemplated
Transactions was true and correct in all Material respects as of the date
provided, and such information did not contain as of the date provided any
statement that was untrue in any Material respect or omit to state a Material
fact necessary to make such information, in light of the circumstances in
which
it was provided, not misleading.
Section
9.9 Patriot
Act.
Highland, and all of its directors, officers, Affiliates, agents and employees,
at all times has been in substantial compliance with the Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept
and
Obstruct Terrorism (USA Patriot Act) Act of 2001, as amended, and the rules
and
regulations promulgated thereunder, as applicable to Highland and its assets
and
properties as well as the assets and properties of its Affiliates.
Section
9.10 Anti-Money
Laundering Laws.
Highland, and all beneficial owners of Highland, are in substantial compliance
with the requirements of Executive Order No. 13224, 66 Fed. Reg. 49079 (Sept.
25, 2001) (the "Order")
and
other similar requirements applicable to Highland contained in the rules
and
regulations of the Office of Foreign Asset Control, Department of the Treasury
("OFAC")
and in
any enabling legislation or other Executive Orders in respect thereof (the
Order
and such other rules, regulations, legislation or orders are collectively
referred to as the "Orders").
Neither Highland nor any beneficial owner of Highland (i) is listed on the
Specially Designated Nationals and Blocked Persons List maintained by OFAC
pursuant to the Order and/or on any other list of terrorists or terrorist
organizations maintained pursuant to any of the rules and regulations of
OFAC or
pursuant to any other applicable Orders (such lists are collectively referred
to
as the "Lists"),
(ii)
has been indicted or arrested for money laundering or for predicate crimes
to
money laundering or has been convicted or pled nolo contendere to charges
involving money laundering or predicate crimes to money laundering, (iii)
has
been determined by competent authority to be subject to the prohibitions
contained in the Orders or (iv) is owned or controlled by, or acts for or
on
behalf of, any Person on the Lists or any other Person who has been determined
by competent authority to
-
-
be
subject to the prohibitions contained in the Orders. Highland has not committed
an offense under the St. Kitts & Nevis Proceeds of Crime Act, as amended,
the entering into and performance of the Contemplated Transactions by Highland
do not constitute a violation of the St. Kitts & Nevis Proceeds of Crime
Act, as amended, or any other relevant statute and Highland is not subject
to
any investigation by the St. Kitts & Nevis Financial Intelligence Unit. The
consideration for the Contemplated Transactions is not money or other property
that is the proceeds of any crime or other illicit activity. Neither the
execution and delivery by Highland of this Agreement nor the consummation
or
performance by Highland of any of the Contemplated Transactions will contravene,
or subject any Dynex Company to any liability under, the Bank Secrecy Act,
31
U.S.C. §§5311-5330 and 31 C.F.R. Part 103.
Section
9.11 Knowledge
of Risks.
Highland, through its officers and advisors, has carefully evaluated the
financial risk associated with the Contemplated Transactions and acknowledges
that it fully understands and is knowledgeable about such risks. Highland
understands that a substantial portion of the collateral securing the Series
11
Bonds and the Series 12-1 Bonds is comprised of "manufactured home loans"
that
are likely to experience rates of delinquency and foreclosure that are higher,
and may be substantially higher, than mortgage loans. Highland has such
knowledge and experience in business and financial matters that it is capable
of
evaluating the Contemplated Transactions and the risks and merits inherent
therein and of making informed decisions thereon. Highland has been given
ample
opportunity to ask questions of and receive answers from representatives
of each
Dynex Company concerning the nature and component elements generally used
to
assess the quality of the Series 11 Bonds (including the Class B-3 Bonds),
the
Series 12-1 Bonds, the Redemption Rights and the Available Surplus and to
obtain
additional information necessary to verify the accuracy of the information
provided. Notwithstanding anything herein to the contrary, the Dynex Companies
make no representation or warranty as to the realizable value of the Class
B-3
Bonds, the Redemption Rights or the Available Surplus.
ARTICLE
TEN
COVENANTS
OF THE DYNEX COMPANIES
Section
10.1 Access
And Investigation.
Between
the date of this Agreement and the Closing Date, and upon reasonable advance
notice received from Highland, each Dynex Company will, and will cause its
Representatives (and Dynex will cause IHC and its Representatives), to, (i)
afford Highland and its Representatives full access, during regular business
hours, to such Dynex Company's personnel, Contracts, books and records and
other
documents and data that relate to the IHC Stock, IHC, the Class B-3 Bonds,
the
Redemption Rights, the Available Surplus or the Class Action Lawsuit, (ii)
furnish Highland and its Representatives with copies of all such Contracts,
books and records and other documents and data as Highland may reasonably
request, (iii) furnish Highland and its Representatives with such additional
financial and other relevant data and information that relate to the IHC
Stock,
IHC, the Class B-3 Bonds, the Redemption Rights, the Available Surplus or
the
Class Action Lawsuit as Highland may reasonably request and (iv) to the extent
reasonably requested by Highland, otherwise cooperate and assist with Highland's
investigation of the IHC Stock, IHC, the Class B-3 Bonds, the Redemption
Rights,
the Available Surplus and the Class Action
-
-
Lawsuit.
Notwithstanding anything in this Section
10.1
to the
contrary, Highland shall not be given access to information if such access
by
Highland would jeopardize Dynex's attorney-client privilege in connection
with
the Class Action Lawsuit.
Section
10.2 Required
Approvals.
As soon
as practicable after the date of this Agreement, each Dynex Company will,
and
Dynex will cause IHC 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, each Dynex Company will, and
Dynex
will cause IHC to, (i) cooperate with Highland and its Representatives in
all
reasonable respects with respect to all filings that Highland elects to make
or
is required by Legal Requirements to make in connection with the Contemplated
Transactions and (ii) cooperate in all reasonable respects with Highland
and its
Representatives in obtaining all Consents required in connection with this
Agreement or the Contemplated Transactions.
Section
10.3 No
Adverse Actions; No Amendments.
Between
the date of this Agreement and the Closing Date, no Dynex Company will, and
Dynex will cause IHC not to, without the prior consent of Highland, (i) take
any
action that could reasonably be expected to prevent, delay or otherwise
interfere with the Contemplated Transactions, (ii) take any action that could
reasonably be expected to have a Material adverse affect on the value of
the IHC
Stock, IHC, the Class B-3 Bonds, the Redemption Rights or the Available Surplus
or (iii) amend any of the Class B-3 Bond Documents, the Redemption Rights
Documents or the Available Surplus Documents in any Material respect.
Section
10.4 Notification.
Between
the date of this Agreement and the Closing Date, each Dynex Company will
promptly notify Highland in writing if such Dynex Company (and Dynex will
promptly notify Highland in writing if IHC becomes aware) of (i) any fact
or
condition
that causes or constitutes a Material breach of any representation or warranty
made by any Dynex Company in this Agreement, (ii) the occurrence after the
date
of this Agreement of any fact or condition that would have caused or constituted
a Material breach of any such representation or warranty had such representation
or warranty been made as of the time of the occurrence or discovery of such
fact
or condition or (iii) the occurrence of any event that could reasonably be
expected to make satisfaction of the conditions in Article
Twelve
impossible or unlikely.
Section
10.5 No
Negotiation.
Between
the date of this Agreement and the Closing Date, no Dynex Company will, and
each
Dynex Company will cause its Representatives (and Dynex will cause IHC and
its
Representatives) not to, directly or indirectly (i) solicit, encourage or
entertain any inquiries or proposals with respect to a sale of the IHC Stock,
IHC, the Class B-3 Bonds, the Redemption Rights or the Available Surplus
or (ii)
discuss or negotiate a sale of the IHC Stock, IHC, the Class B-3 Bonds, the
Redemption Rights or the Available Surplus with any Person other than Highland
and its Representatives. Dynex will notify Highland of any such inquiry or
proposal within twenty-four (24) hours after any Dynex Company or IHC receives
such inquiry or proposal.
-
-
Section
10.6 Commercially
Reasonable Efforts.
Between
the date of this Agreement and the Closing Date, each Dynex Company will
use
commercially reasonable efforts to cause the conditions in Article
Twelve
to be
satisfied.
Section
10.7 Financial
Statements.
After
the Closing Date, Dynex will render such assistance as may be reasonably
requested by Highland to enable Highland to obtain, at its expense, audited
financial statements for IHC as of and for the years ended December 31, 2003
and
December 31, 2004. Dynex will allow Highland and its Representatives to review
the books and records of the Dynex Companies to the extent reasonably necessary
to prepare such financial statements.
Section
10.8 No
Adverse Actions.
After
the Closing Date, no Dynex Company will take any action that could reasonably
be
expected to have a Material adverse effect on the Class B-3 Bonds, the
Redemption Rights or the Available Surplus. MERIT will exercise in full any
rights it may have (it being understood that MERIT may have limited rights
or no
such rights) under the Series 11 Supplement and the Series 12-1 Supplement
to
withdraw or otherwise receive the Available Surplus and will promptly distribute
all Available Surplus that it withdraws or otherwise receives to IH
Capital.
Notwithstanding anything in this Section
10.8
to the
contrary, Dynex shall be under no obligation to take any action or refrain
from
taking any action that it determines (based upon opinion of counsel) would
constitute a breach of its obligations under the Base Indenture, the Series
11
Supplement or the Series 12-1 Supplement.
ARTICLE
ELEVEN
COVENANTS
OF HIGHLAND
Section
11.1 Required
Approvals.
As soon
as practicable after the date of this Agreement, Highland will make or cause
to
be made all filings required by Legal Requirements to be made by it or IHC
(Post-Sale) in order to consummate the Contemplated Transactions. Between
the
date of this Agreement and the Closing Date, Highland will (i) cooperate
with
each Dynex Company (and its Representatives) with respect to all filings
that
such Dynex Company elects to make or is required by Legal Requirements to
make
in connection with the Contemplated Transactions and (ii) cooperate with
each
Dynex Company (and its Representatives) in obtaining all Consents required
in
connection with this Agreement or the Contemplated Transactions.
Section
11.2 Commercially
Reasonable Efforts.
Between
the date of this Agreement and the Closing Date, Highland will use commercially
reasonable efforts to cause the conditions in Article
Thirteen
to be
satisfied.
Section
11.3 No
Further Rights.
The
parties intend that IHC will not contain any assets when transferred to Highland
other than the books and records relating to the Financial Statements. If
it
should be determined at any time after the Closing Date that any other assets
were owned by IHC and inadvertently conveyed to Highland on the Closing
Date,
-
-
Highland
hereby covenants and agrees to promptly transfer such other assets to Dynex
upon
discovery or notice of the existence of such other assets.
ARTICLE
TWELVE
CONDITIONS
PRECEDENT TO
HIGHLAND'S
OBLIGATION TO CLOSE
The
obligation of Highland to take (or to cause IHC Post-Sale to take) the actions
required to be taken by Highland (or IHC Post-Sale) at the First Closing,
the
Second Closing and the Third Closing are subject to the satisfaction, on
or
before the Closing Date, of each of the following conditions (any of which
may
be waived by Highland in whole or in part):
Section
12.1 Accuracy
Of Representations.
Each
of
each Dynex Company's representations and warranties in this Agreement 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.
Section
12.2 Performance
Of
Covenants.
Each
Dynex Company must have performed and complied with, in each case in all
Material respects, each of the covenants and obligations that it is required
to
perform or to comply with on or before the Closing Date pursuant to this
Agreement.
Section
12.3 Required
Consents.
Each of
the notices and Consents identified on Schedule
6.4
or
Schedule
7.4
must
have been given or obtained and must be in full force and effect.
Section
12.4 Additional
Documents.
Dynex
must have delivered or caused to be delivered to Highland each of the following
documents:
(i) an
opinion of Xxxxxxxx Xxxxxx, counsel to each Dynex Company and IHC, dated
the
Closing Date, in the form of Exhibit
12.4;
(ii) the
articles of incorporation of IHC, certified as of a date not earlier than
the
third Business Day prior to the First Closing by the Virginia State Corporation
Commission;
(iii) a
good
standing certificate for IHC issued by the Virginia State Corporation
Commission, dated as of a date not earlier than the third Business Day prior
to
the First Closing; and
(iv) all
such
other documents as Highland may reasonably request for the purpose of (i)
evidencing the accuracy of any representation or warranty of any Dynex Company,
(ii) evidencing the performance by any Dynex Company of, or the compliance
by
any Dynex Company with, any covenant or obligation required to be performed
or
-
-
complied
with by such Dynex Company, (iii) evidencing the satisfaction of any condition
referred to in this Article
Twelve
or (iv)
otherwise facilitating the consummation of any of the Contemplated Transactions.
Section
12.5 No
Proceedings.
There
must not have been commenced or threatened against Highland or any Affiliate
of
Highland, in each case after the date of this Agreement, any Proceeding (i)
that
seeks damages or other relief in connection with any of the Contemplated
Transactions or (ii) that challenges, or that may have the effect of preventing,
delaying, making illegal or otherwise interfering with, any of the Contemplated
Transactions.
Section
12.6 No
Claims.
There
must not have been made or threatened by any Person any claim that such Person
(i) is the record or beneficial owner of, has the right to acquire or to
obtain
beneficial ownership of or has any other interest in the IHC Stock or any
other
equity securities of IHC, (ii) is entitled to all or any portion of the IHC
Stock Purchase Price, (iii) is the owner of, has the right to acquire or
has any
other interest in the Class B-3 Bonds or the Redemption Rights or (iv) is
entitled to all or any portion of the Class B-3 Bonds Purchase Price or the
Redemption Rights Purchase Price.
ARTICLE
THIRTEEN
CONDITIONS
PRECEDENT TO
EACH
DYNEX COMPANY'S OBLIGATION TO CLOSE
The
obligation of each Dynex Company to take (or to cause IHC to take) the actions
required to be taken by such Dynex Company (or IHC) at the First Closing,
the
Second
Closing
and the Third Closing are subject to the satisfaction, on or before the Closing
Date, of each of the following conditions (any of which may be waived by
such
Dynex Company in whole or in part):
Section
13.1 Accuracy
Of Representations.
Each of
Highland's representations and warranties in this Agreement 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.
Section
13.2 Performance
Of Covenants.
Highland must have performed and complied with, in each case in all Material
respects, each of the covenants and obligations that it is required to perform
or to comply with on or before the Closing Date pursuant to this
Agreement.
Section
13.3 Required
Consents.
Each of
the notices and Consents identified on Schedule
6.4
or
Schedule
7.4
must
have been given or obtained and must be in full force and effect.
Section
13.4 Additional
Documents.
Highland must have delivered or caused to have been delivered to Dynex all
such
documents as any Dynex Company may reasonably
-
-
request
for the purpose of (i) enabling its counsel to provide the opinion referred
to
in Section
12.4,
(ii)
evidencing the accuracy of any representation or warranty of Highland, (iii)
evidencing the performance by Highland of, or the compliance by Highland
with,
any covenant or obligation required to be performed or complied with by
Highland, (iv) evidencing the satisfaction of any condition referred to in
this
Article
Thirteen
or (v)
otherwise facilitating the consummation of any of the Contemplated
Transactions.
Section
13.5 No
Proceedings.
There
must not have been commenced or threatened against any Dynex Company or any
Affiliate of any Dynex Company, in each case after the date of this Agreement,
any Proceeding (i) that seeks damages or other relief in connection with
any of
the Contemplated Transactions or (ii) that challenges, or that may have the
effect of preventing, delaying, making illegal or otherwise interfering with,
any of the Contemplated Transactions.
ARTICLE
FOURTEEN
INDEMNIFICATION;
REMEDIES
Section
14.1 Survival;
Knowledge.
All
representations, warranties,
covenants and obligations in this Agreement or in any certificate or document
delivered pursuant to this Agreement will survive the First Closing, the
Second
Closing and the Third Closing; provided,
however,
that
such representations and warranties (other than the representations and
warranties set forth in Sections 5.1,
5.2,
5.3,
5.12,
6.1,
6.2,
6.7,
7.1,
7.2,
7.7,
7.8,
7.9,
7.10,
7.11,
8.1
and
8.2)
shall
expire on the second anniversary of the Closing Date.
The
right
to indemnification, reimbursement or other remedy based on such representations,
warranties, covenants and
obligations
will not be affected by any investigation conducted with respect to, or any
knowledge acquired (or capable of being acquired) at any time, whether before
or
after the execution and delivery of this Agreement or the Closing Date, with
respect to the accuracy or inaccuracy of any such representation or warranty
or
the performance of or compliance with and such covenant or obligation. 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, reimbursement or other remedy based
on such
representations, warranties, covenants and obligations.
Section
14.2 Indemnification
And Reimbursement By Each Dynex
Company.
Each
Dynex Company, jointly and severally, will indemnify and hold harmless Highland
and IHC (Post-Sale), and their respective Representatives and Affiliates,
(collectively, the "Highland
Indemnified Persons")
from
and against, and will reimburse the Highland Indemnified Persons for, any
loss,
liability, claim, damage or expense (including costs of investigation and
defense and reasonable attorneys' fees but excluding exemplary, special,
incidental or consequential damages), whether or not involving a Third-Party
Claim (collectively, "Damages"),
arising from or in connection with (i) any breach of any representation or
warranty made by any Dynex Company in this Agreement or in any certificate
or
document delivered by such Dynex Company pursuant to this Agreement, (ii)
any
breach by any Dynex Company of any covenant or obligation of such Dynex Company
in this Agreement, (iii) the Class Action Lawsuit, (iv) any
-
-
claim
by
any Person for brokerage or finder's fees, agents' commissions or other similar
payments based upon any agreement or understanding alleged to have been made
by
such Person with any Dynex Company (or its Representatives) in connection
with
any of the Contemplated Transactions, (v) any claim by any Person or
Governmental Body relating to the operation of IHC before the Closing Date
(including any Proceeding that arises after the Closing Date and that relates
to
the operation of IHC before the Closing Date) or (vi) any claim by any Person
or
Governmental Body relating to the failure to obtain the Trustee's consent
or
agreement to the transactions described in clause (iv) or (v) of Section
2.4
or to
the sale of the IHC Stock to Highland pursuant to this Agreement.
Notwithstanding anything herein to the contrary, the maximum amount of the
aggregate liability of the Dynex Companies for any indemnification obligations
under this Article
Fourteen
arising
from or in connection with any breach of any representation or warranty shall
be
(i) in the case of the IHC Stock or IHC, $[*],
(ii) in
the case of the Redemption Rights, the Redemption Rights Purchase Price,
(iii)
in the case of the Class B-3 Bonds, the Class B-3 Bonds Purchase Price, and
(iv)
in the case of the Derivative Transaction, $[*];
provided,
however,
that
the maximum amount of the aggregate liability of the Dynex Companies for
any
indemnification obligations under this Article
Fourteen
arising
from or in connection with any breach of any representation or warranty shall
be
$[*].
The
remedies provided in this Section
14.2
will,
except with respect to Damages arising as a result of the fraud or willful
misconduct of any Dynex Indemnified Person, be the exclusive remedy available
to
the Highland Indemnified Persons.
Section
14.3 Indemnification
And Reimbursement By Highland.
Highland will indemnify and hold harmless each Dynex Company and its
Representatives and Affiliates (collectively, the "Dynex
Indemnified Persons")
from
and against, and will reimburse the Dynex Indemnified Persons for, any Damages
arising from or in connection with (i) any breach of any representation or
warranty made by Highland in this Agreement or in any certificate or
document
delivered
by Highland pursuant to this Agreement, (ii) any breach by Highland of any
covenant or obligation of Highland in this Agreement, (iii) any claim by
any
Person for brokerage or finder's fees, agents' commissions or other similar
payments based upon any agreement or understanding alleged to have been made
by
such Person with Highland or its Representatives in connection with any of
the
Contemplated Transactions or (iv) any claim by any Person or Governmental
Body
relating to the operation of IHC (Post-Sale) (it being understood that this
clause (iv) shall not include the Class Action Lawsuit or any other Proceeding
that arises after the Closing Date and that relates to the operation of IHC
before the Closing Date). Notwithstanding
anything herein to the contrary, the maximum amount of the aggregate liability
of Highland for any indemnification obligations under this Article
Fourteen
arising
from or in connection with any breach of any representation or warranty shall
be
$[*].
The
remedies provided in this Section
14.3
will,
except with respect to Damages arising as a result of the fraud or willful
misconduct of any Highland Indemnified Person, be the exclusive remedy available
to the Dynex Indemnified Persons.
Section
14.4 Indemnification
Procedure-Third Party Claims.
(a) Promptly
after receipt by a Person entitled to indemnification under this Article
Fourteen
(an
"Indemnified
Person")
of
notice of the assertion of any Third-Party Claim against it, such Indemnified
Person shall give notice to the Person obligated to indemnify
under
-
-
(b) If
an
Indemnified Person gives notice to an Indemnifying Person pursuant to
Section
14.4(a)
of the
assertion of a Third-Party Claim:
(i) the
Indemnifying Person will be entitled to participate in the defense of such
Third-Party Claim and, to the extent that it wishes (unless (A) the Indemnifying
Person is also a Person against whom the Third-Party Claim is made and the
Indemnified Person determines in good faith that joint representation would
be
inappropriate or (B) the Indemnifying Person fails to provide reasonable
assurance to the Indemnified Person of its financial capacity to defend such
Third-Party Claim and to provide indemnification with respect to such
Third-Party Claim), to assume the defense of such Third-Party Claim with
counsel
satisfactory to the Indemnified Person;
(ii) after
notice from the Indemnifying Person to the Indemnified Person of its election
to
assume the defense of such Third-Party Claim, the Indemnifying Person will
not,
so long as it diligently conducts such defense, be liable to the Indemnified
Person under this Article
Fourteen
for any
attorneys' fees or any other expenses with respect to the defense of such
Third-Party Claim, in each case subsequently incurred by the Indemnified
Person
in connection with the defense of such Third-Party Claim, other than reasonable
costs of investigation;
(iii) if
the
Indemnifying Person assumes the defense of a Third-Party Claim, (A) such
assumption will conclusively establish for purposes of this Agreement that
the
claims made in that Third-Party Claim are within the scope of and subject
to
indemnification pursuant to this Article
Fourteen
and (B)
no compromise or settlement of such claims may be effected by the Indemnifying
Person without the Indemnified Person's Consent unless (1) 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 Person, (2) the sole relief provided is monetary damages
that
are paid in full by the Indemnifying Person and (3) the Indemnified Person
will
have no liability with respect to any compromise or settlement of such claims
effected without its Consent;
and
(iv) if
notice
is given to an Indemnifying Person of the assertion of any Third-Party Claim
and
the Indemnifying Person does not, within ten (10) days after the Indemnified
Person's notice is given, give notice to the Indemnified Person of its election
to assume the defense of such Third-Party Claim, the Indemnifying Person
will be
bound by any determination made in such Third-Party Claim or any compromise
or
settlement effected by the Indemnified Person.
-
-
(c) Notwithstanding
the provisions of Section
14.4(b),
if an
Indemnified Person determines in good faith that there is a reasonable
probability that a Third-Party Claim 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 Person may, by notice
to
the Indemnifying Person, assume the exclusive right to defend, compromise
or
settle such Third-Party Claim, but the Indemnifying Person will not be bound
by
any determination of a Third-Party Claim so defended or any compromise or
settlement effected without its Consent (which may not be unreasonably
withheld).
(d) Notwithstanding
the provisions of Section
16.10,
each
Dynex Company hereby consents to the nonexclusive jurisdiction of any court
in
which a Proceeding in respect of a Third-Party Claim is brought against any
Highland Indemnified Person for purposes of any claim that a Highland
Indemnified Person may have under this Agreement with respect to such Proceeding
or the matters alleged therein and hereby agree that process may be served
on
any Dynex Company with respect to such a claim anywhere in the
world.
(e) With
respect to any Third-Party Claim subject to indemnification under this
Article
Fourteen,
(i) the
parties will keep each other fully informed as to the status of such Third-Party
Claim and any related Proceedings at all stages thereof where any such party
is
not represented by its own counsel and (ii) the parties (each at its own
expense) will render to each other such assistance as may be reasonably
requested and will cooperate in good faith with each other to ensure the
proper
and adequate defense of such Third-Party Claim.
(f) With
respect to any Third-Party Claim subject to indemnification under this
Article
Fourteen,
the
parties will cooperate in such a manner as to preserve in full (to the extent
possible) the confidentiality of all Confidential Information and the
attorney-client and
work-product
privileges. Each party agrees that (i) it will use commercially reasonable
efforts, in connection with any Third-Party Claim in which it has assumed
or
participated in the defense, to avoid production of Confidential Information
(consistent with applicable law and rules of procedure) and (ii) all
communications among the parties and counsel responsible for or participating
in
the defense of any Third-Party Claim will, to the extent possible, be made
so as
to preserve any applicable attorney-client or work-product
privilege.
Section
14.5 Indemnification
Procedure-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.
ARTICLE
FIFTEEN
TERMINATION
Section
15.1 Termination
Events.
This
Agreement may be terminated by notice given before the Closing Date as
follows:
-
-
(i) by
mutual
consent of Highland, on the one hand, and each Dynex Company, on the other
hand;
(ii) by
Highland if (A) any Dynex Company has breached any provision of this Agreement
in any Material respect and such breach has not been waived by Highland,
(B) any
condition set forth in Article
Twelve
has not
been satisfied as of the Closing Date or if satisfaction of any such condition
is or becomes impossible (other than through the failure of Highland to comply
with its obligations under this Agreement) and Highland has not waived such
condition on or before the Closing Date or (C) the First Closing has not
occurred on or before May 13, 2005 (or such later date to which the parties
may
agree), unless Highland is in Material breach of this Agreement;
and
(iii) by
any
Dynex Company if (A) Highland has breached any provision of this Agreement
in
any Material respect and such breach has not been waived by each Dynex Company,
(B) any condition set forth in Article
Thirteen
has not
been satisfied as of the Closing Date or if satisfaction of any such condition
is or becomes impossible (other than through the failure of any Dynex Company
to
comply with its obligations under this Agreement) and any Dynex Company has
not
waived such condition on or before the Closing Date or (C) the First Closing
has
not occurred on or before May 13, 2005 (or such later date to which the parties
may agree), unless any Dynex Company is in Material breach of this
Agreement.
Section
15.2 Effect
of Termination.
Each
party's right of termination under Section
15.1
is in
addition to any other rights such party 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
15.1,
all
further obligations of the parties under this Agreement will terminate;
provided,
however,
that
the obligations of the parties under Section
16.1
will
survive such termination; and, provided further,
that if
this Agreement is terminated by a party because of a breach of this Agreement
by
another party or because one or more conditions to the terminating party's
obligations under this Agreement are not satisfied as a result of another
party's failure to comply with its obligations under this Agreement, the
terminating party's rights to pursue all legal remedies will survive such
termination unimpaired.
ARTICLE
SIXTEEN
MISCELLANEOUS
PROVISIONS
Section
16.1 Expenses.
Except
as otherwise expressly provided in this Agreement, each party to this Agreement
will bear its respective fees and expenses incurred in connection with the
preparation, negotiation, execution and performance of this Agreement and
the
Contemplated Transactions, including all fees and expenses of its
Representatives. Dynex will cause IHC not to incur any out-of-pocket expenses
in
connection with 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
the other party.
Section
16.2 Confidentiality.
Between
the date of this Agreement and the Closing Date, the parties will maintain
in
confidence, and Dynex will cause IHC to maintain in confidence, any written,
oral or other information obtained in confidence in connection with this
Agreement or the Contemplated Transactions, unless (i) such information was
already known to the disclosing party or to others not bound by a duty of
confidentiality or such information becomes publicly available through no
fault
of such party, (ii) 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 (iii) the furnishing or
use of
such information is required by or necessary or appropriate in connection
with
legal proceedings (and the necessity of such use shall be supported by an
opinion of counsel). If
the
Contemplated Transactions are not consummated, each party will return or
destroy
as much of such written information as the other parties may reasonably request.
Section
16.3 Notices.
(a) All
notices, consents, waivers and other communications hereunder must be in
writing
and either (i) delivered personally, (ii) sent by facsimile transmission
(with
written confirmation of a successful transmission), (iii) mailed by prepaid
first class registered or certified mail, return receipt requested or (iv)
delivered by a nationally recognized prepaid overnight courier service (return
receipt requested), in each case to the appropriate addresses or facsimile
numbers set forth below (or to such other addresses or facsimile numbers
as any
party may designate by notice to the other parties):
Dynex: Dynex
Capital, Inc.
0000
Xxx
Xxxx, Xxxxx 000
Xxxx
Xxxxx, Xxxxxxxx 00000
Attention:
Xxxxxx X. Xxxxxxxxx
Facsimile
No: (000) 000-0000
with
a
copy (which shall not constitute notice) to:
R.
Xxxxx
Xxxx, Esquire
Xxxxxxxx
Xxxxxx
0000
Xxxx
Xxxx Xxxxxx
Xxxxxxxx,
Xxxxxxxx 00000
Facsimile
No: (000) 000-0000
Highland: Highland
Undertakings, LLC
-
-
c/o
The
Kleinfeld Law Firm, LLP
SunTrust
International Center, Suite 0000
Xxx
Xxxxxxxxx Xxxxx Xxxxxx
Xxxxx,
Xxxxxxx 00000
Attention:
Xxxx X. Xxxxxx
Facsimile
No: (000) 000-0000
with
a
copy (which shall not constitute notice) to:
Xxxxx
X.
Xxxxxx, Esquire
McGuireWoods
LLP
000
Xxxx
Xxxx Xxxxxx
Xxxxxxxx,
Xxxxxxxx 00000
Facsimile
No: (000) 000-0000
(b) All
such
notices, consents, waivers and other communications will (i) if delivered
personally in the manner and to the address provided in this Section
16.3,
be
deemed given upon delivery, (ii) if delivered by facsimile transmission in
the
manner and to the facsimile number provided in this Section
16.3,
be
deemed given on the earlier of receipt and the first Business Day after
transmission, (iii) if delivered by mail in the manner and to the address
provided in this Section
16.3,
be
deemed given on the earlier of receipt and the fourth Business Day following
mailing, and (iv) if delivered by overnight courier in the manner and to
the
address provided in this Section
16.3,
be
deemed given on the earlier of receipt and the first Business Day following
the
date sent by such overnight courier.
Section
16.4 Legal
Fees.
If a
legal proceeding is brought by one party against the other party based on
this
Agreement, after all appeals the prevailing party shall be entitled to its
reasonable attorney and paralegal fees and costs from the non-prevailing
party.
Section
16.5 Entire
Agreement; Modifications.
This
Agreement supersedes all prior agreements and understandings between the
parties
with respect to its subject matter (including any letter of intent or
confidentiality agreement) and constitutes (along with the exhibits, schedules
and other documents delivered pursuant to 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 or otherwise
modified except by a written agreement executed by the party to be charged
with
such amendment or other modification.
Section
16.6 Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws
of the
Commonwealth of Virginia without giving effect to any choice of law or conflict
of law provision or rule (whether of the Commonwealth of Virginia or any
other
jurisdiction) that would require the application of any other law.
Section
16.7 Assignment;
Successors; No Third-Party Rights.
No
party may assign any of its rights or delegate any of its obligations under
this
Agreement (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to
-
-
the
preceding sentence, this Agreement will be binding upon, inure to the benefit
of
and be enforceable by the 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 and their successors and
assigns.
Section
16.8 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 provision of this Agreement held invalid or
unenforceable only in part will remain in full force and effect to the extent
not held invalid or unenforceable.
Section
16.9 No
Waiver.
The
rights and remedies of the parties are cumulative and not alternative. Neither
the failure nor any delay by any party in exercising any right, power or
privilege under this Agreement will operate as a waiver of such right, power
or
privilege, and no single or partial exercise by any party of any right, power
or
privilege under this Agreement will preclude any other or further exercise
of
such right, power or privilege or the exercise of any other right, power
or
privilege.
Section
16.10 Jurisdiction;
Service Of Process.
Any
Proceeding arising out of or relating to this Agreement or any Contemplated
Transaction may be brought in the courts of the Commonwealth of Virginia
or, if
it has or can acquire jurisdiction, in the United States District Court for
the
Eastern District of Virginia, and each party irrevocably submits to the
exclusive jurisdiction of each such court in any such Proceeding, waives
any
objection it may now or hereafter have to venue or to convenience of forum,
agrees that all claims in respect of any such Proceeding shall be heard and
determined only in any such court and agrees not to bring any Proceeding
arising
out of or relating to this Agreement or any Contemplated Transaction in any
other court. The parties agree that any or all of them may file a copy of
this
Section
16.10
with any
court as written evidence of the knowing, voluntary and bargained agreement
among the
parties
irrevocably to waive any objections to venue or to convenience of forum.
Process
in any Proceeding referred to in the first sentence of this Section
16.10
may be
served on any party anywhere in the world.
Section
16.11 Further
Assurances.
The
parties agree to furnish upon request to each other such further information,
to
execute and deliver to each other such other documents and to take such other
actions as the other parties may reasonably request for the purpose of carrying
out the intent of this Agreement.
Section
16.12 Counterparts.
This
Agreement may be executed in one or more counterpart copies, 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. The exchange
of copies of this Agreement and of signature pages by facsimile transmission
shall constitute effective execution and delivery of this Agreement as to
the
parties and may be used in lieu of the original Agreement for all purposes.
Any
signatures of the parties transmitted by facsimile shall be deemed to be
their
original signatures for all purposes.
-
-
IN
WITNESS WHEREOF,
Highland and each Dynex Company have executed this Agreement as of the date
first written above.
HIGHLAND
UNDERTAKINGS, LLC,
a
Nevis
limited liability company by and through its manager, GMT MANAGERS, LLC,
a Nevis
limited liability company
By:______________________________
Xxxxx
Xxxxx-Xxxxx
Co-Manager
By:______________________________
Xxxxxx
Xxxxx-Xxxxx
Co-Manager
[SIGNATURES
CONTINUED ON NEXT PAGE]
DYNEX
CAPITAL, INC.
By:______________________________
Name:
Title:
MSC
I,
L.P.,
a
Virginia limited partnership by and through its General Partner, DYNEX CAPITAL,
INC.
By:______________________________
Name:
Title:
MERIT
SECURITIES CORPORATION
By:______________________________
Name:
Title:
ISSUED
HOLDINGS CAPITAL CORPORATION
By:______________________________
Name:
Title:
