EXHIBIT 1
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MERGER
AGREEMENT
DATED AS OF MARCH 10, 2000
AMONG
ROYAL BANK OF CANADA,
PRISM FINANCIAL CORPORATION
AND
RAINBOW ACQUISITION SUBSIDIARY, INC.
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TABLE OF CONTENTS
Page
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ARTICLE 1 THE OFFER........................................................2
SECTION 1.1. THE OFFER........................................................2
SECTION 1.2. COMPANY ACTION...................................................3
SECTION 1.3. BOARDS OF DIRECTORS AND COMMITTEES; SECTION 14(F)................4
ARTICLE 2 THE MERGER.......................................................5
SECTION 2.1. THE MERGER.......................................................5
SECTION 2.2. CLOSING OF THE MERGER............................................6
SECTION 2.3. EFFECTIVE TIME...................................................6
SECTION 2.4. EFFECTS OF THE MERGER............................................6
SECTION 2.5. CERTIFICATE OF INCORPORATION AND BYLAWS..........................6
SECTION 2.6. DIRECTORS........................................................6
SECTION 2.7. OFFICERS.........................................................7
SECTION 2.8. CONVERSION OF SHARES.............................................7
SECTION 2.9. PAYMENT OF CASH MERGER CONSIDERATION.............................7
SECTION 2.10. STOCK OPTIONS....................................................9
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................10
SECTION 3.1. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES....................10
SECTION 3.2. CAPITALIZATION OF THE COMPANY AND ITS SUBSIDIARIES..............11
SECTION 3.3. AUTHORITY RELATIVE TO THIS AGREEMENT; RECOMMENDATION............12
SECTION 3.4. SEC REPORTS; FINANCIAL STATEMENTS; ACCOUNTING PROCEDURES........12
SECTION 3.5. INFORMATION SUPPLIED............................................13
SECTION 3.6. CONSENTS AND APPROVALS; NO VIOLATIONS...........................14
SECTION 3.7. NO UNDISCLOSED LIABILITIES; ABSENCE OF CHANGES..................15
SECTION 3.8. LITIGATION......................................................15
SECTION 3.9 COMPLIANCE WITH LAWS............................................15
SECTION 3.10. FORMS; POLICIES AND PROCEDURES..................................16
SECTION 3.11. LICENSES AND PERMITS............................................16
SECTION 3.12. EMPLOYEE BENEFIT PLANS, LABOR MATTERS...........................17
SECTION 3.13. ENVIRONMENTAL LAWS AND REGULATIONS..............................19
SECTION 3.14. TAXES...........................................................20
SECTION 3.15. PROPERTIES .....................................................21
SECTION 3.16. MATERIAL CONTRACTS AND COMMITMENTS..............................22
SECTION 3.17. INTELLECTUAL PROPERTY...........................................24
SECTION 3.19. STOCK OPTIONS...................................................29
SECTION 3.20. INSURANCE ......................................................30
SECTION 3.21. POOL CERTIFICATIONS.............................................30
SECTION 3.22. BROKERS ........................................................30
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION........30
SECTION 4.1. ORGANIZATION....................................................30
SECTION 4.2. AUTHORITY RELATIVE TO THIS AGREEMENT............................31
SECTION 4.3. INFORMATION SUPPLIED............................................31
SECTION 4.4. FINANCING; SHARE OWNERSHIP......................................31
SECTION 4.5. CONSENTS AND APPROVALS; NO VIOLATIONS...........................32
SECTION 4.6. BROKERS AND FINDERS.............................................32
SECTION 4.7. NATURE AND INTERIM OPERATIONS OF ACQUISITION....................32
ARTICLE 5 COVENANT........................................................33
SECTION 5.1. INTERIM OPERATIONS..............................................33
SECTION 5.2. STOCKHOLDERS' MEETING; ACTION BY CONSENT........................35
SECTION 5.3. TERMINATION OF REGISTRATION OF SHARES...........................36
SECTION 5.4. OTHER POTENTIAL ACQUIRERS.......................................36
SECTION 5.5. ACCESS TO INFORMATION...........................................38
SECTION 5.6. FURTHER ACTIONS.................................................38
SECTION 5.7. PUBLIC ANNOUNCEMENTS............................................39
SECTION 5.8. EMPLOYEE BENEFIT MATTERS........................................39
SECTION 5.9. EXPENSES........................................................40
SECTION 5.10. NOTIFICATION OF CERTAIN MATTERS.................................40
SECTION 5.11. GUARANTEE OF PERFORMANCE........................................40
SECTION 5.12. EFFECT OF PARENTS KNOWLEDGE.....................................41
SECTION 5.13. INDEMNIFICATION, DIRECTORS' AND OFFICERS' INSURANCE.............41
ARTICLE 6 CONDITIONS TO THE OFFER.........................................42
SECTION 6.1. CONDITIONS TO THE OFFER.........................................42
ARTICLE 7 CONDITIONS TO CONSUMMATION OF THE MERGER........................44
SECTION 7.1. CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE MERGER.....44
ARTICLE 8 TERMINATION; AMENDMENT; WAIVER..................................44
SECTION 8.1. TERMINATION.....................................................44
SECTION 8.2. EFFECT OF TERMINATION...........................................45
SECTION 8.3. FEES AND EXPENSES...............................................45
SECTION 8.4. AMENDMENT.......................................................46
SECTION 8.5. EXTENSION; WAIVER...............................................47
ARTICLE 9 MISCELLANEOUS...................................................47
SECTION 9.1. ENTIRE AGREEMENT; ASSIGNMENT....................................47
SECTION 9.2. SURVIVAL OF REPRESENTATIONS AND WARRANTIES......................47
SECTION 9.3. VALIDITY........................................................47
SECTION 9.4. NOTICES.........................................................47
SECTION 9.5. GOVERNING LAW...................................................48
SECTION 9.6. DESCRIPTIVE HEADINGS............................................49
SECTION 9.7. PARTIES IN INTEREST.............................................49
SECTION 9.8. CERTAIN DEFINITIONS.............................................49
SECTION 9.9. PERSONAL LIABILITY..............................................49
SECTION 9.10. SPECIFIC PERFORMANCE............................................50
SECTION 9.11. WAIVER OF CONDITIONS............................................50
SECTION 9.12. COUNTERPARTS....................................................50
EXHIBIT A .................................................................52
EXHIBIT B .................................................................53
EXHIBIT C .................................................................54
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TABLE OF DEFINED TERMS
1999 Option Plan.............................Section 2.10(a)........................................9
2000 Option Plan.............................Section 2.10(b)........................................9
Acquisition..................................Preamble...............................................1
Affiliate....................................Section 9.8(a)........................................49
Agencies.....................................Section 3.9(a)........................................15
Agency and Investor Requirements.............Section 3.4(c)........................................13
Agency.......................................Section 3.9(a)........................................15
Agreement....................................Preamble...............................................1
Bank Act.....................................Section 4.5...........................................32
Bank Holding Company Act.....................Section 4.5...........................................32
Board........................................Recitals...............................................1
Breakup Fee..................................Section 8.3(a)........................................45
Business Day.................................Section 9.8(b)........................................49
Cash Merger Consideration....................Section 2.8(a).........................................7
Certificates.................................Section 2.9(b).........................................8
Closing Time.................................Section 2.2............................................6
Code.........................................Section 3.12(c).......................................17
Company Assets...............................Section 3.15..........................................22
Company Disclosure Schedule..................Article 3.............................................10
Company Employee Plan........................Section 3.12(a).......................................17
Company Marks................................Section 3.17(b).......................................25
Company Option Plans.........................Section 2.10(b)........................................9
Company Personnel............................Section 3.12(a).......................................17
Company SEC Reports..........................Section 3.4(a)........................................13
Company Securities...........................Section 3.2(a)........................................11
Company Stock Options........................Section 2.10(a)........................................9
Company......................................Preamble...............................................1
CompanyTrade Secrets.........................Section 3.17(e).......................................26
Confidentiality Agreement....................Section 5.5...........................................38
Consumer Credit Law..........................Section 3.9(a)........................................16
Continuing Directors.........................Section 1.3(a).........................................5
Continuing Employees.........................Section 5.8(a)........................................39
Contracts....................................Section 3.16(a).......................................22
DGCL.........................................Section 1.2(a).........................................3
Disclosure Statements........................Section 3.5...........................................13
Effective Time...............................Section 2.3............................................6
Environmental Claim..........................Section 3.13(b).......................................20
Environmental Laws...........................Section 3.12(a).......................................20
ERISA Affiliate..............................Section 3.12(a).......................................17
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ERISA........................................Section 3.12(a).......................................17
Exchange Act.................................Section 1.1(a).........................................2
Xxxxxx Xxx...................................Section 3.9(a)........................................15
Xxxxxxx Mac..................................Section 3.9(a)........................................15
GAAP.........................................Section 3.4(a)........................................13
GNMA.........................................Section 3.9(a)........................................15
Governmental Entity..........................Section 3.6...........................................14
HSR Act......................................Section 3.6...........................................14
HUD..........................................Section 3.9(a)........................................15
Indemnified Parties..........................Section 5.13..........................................41
Initial Expiration Date......................Section 1.1(b).........................................2
Intellectual Property Assets.................Section 3.17(a)(ii)...................................24
Intellectual Property Rights.................Section 3.17(a)(i)....................................24
Invention Disclosures........................Section 3.17(e).......................................26
Investor.....................................Section 3.8...........................................15
Knowledge....................................Section 3.8...........................................15
Licensed Intellectual Property...............Section 3.17(h)(vi)...................................29
Licensed Software Agreements.................Section 3.17(h).......................................28
Licensed Software............................Section 3.17(f).......................................27
Licensed Technology Agreements...............Section 3.17(h).......................................28
Lien.........................................Section 3.2(b)........................................12
Marks........................................Section 3.17(a)(i)(A).................................24
Material Adverse Effect......................Section 3.1(a)........................................10
Merger Certificate...........................Section 2.3............................................6
Merger Fund..................................Section 2.9(a).........................................8
Merger.......................................Section 2.1............................................5
Minimum Condition............................Section 1.1(a).........................................2
Mortgage Loan................................Section 3.9(b)........................................16
Offer Documents..............................Section 1.1(c).........................................3
Offer........................................Recitals...............................................1
Options......................................Section 8.3(c)........................................46
Other Licensed Technology Agreements.........Section 3.17(h).......................................28
Owned Copyrights.............................Section 3.17(d)(i)....................................26
Owned Software...............................Section 3.17(f).......................................27
Parent Material Adverse Effect...............Section 4.1(a)........................................30
Parent.......................................Preamble...............................................1
Patents......................................Section 3.17(a)(i)(B).................................24
Payment Agent................................Section 2.9(a).........................................7
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Per Share Amount.............................Recitals...............................................1
Person.......................................Section 9.8(d)........................................49
Pools........................................Section 3.21..........................................30
Potential Proposal...........................Section 5.4(a)........................................36
Prism Mortgage...............................Section 1.3(a).........................................5
Proxy Statement..............................Section 3.5...........................................13
Remaining Shares.............................Section 8.3(d)........................................46
Rights Agreement.............................Recitals...............................................1
Rights.......................................Recitals...............................................1
Schedule 14D-9...............................Section 1.2(b).........................................4
SEC..........................................Section 1.1(b).........................................2
Securities Act...............................Section 3.4(a)........................................13
Shares.......................................Section 3.2(a)........................................11
Software.....................................Section 3.17(a)(iii)..................................24
Stock........................................Section 9.8(c)........................................49
Stockholders' Agreement......................Recitals...............................................1
Stockholders' Meeting........................Section 5.2(a)(i).....................................35
Subsidiaries.................................Section 9.8(e)........................................49
Subsidiary...................................Section 9.8(e)........................................49
Superior Proposal Notice.....................Section 8.3(d)........................................46
Superior Proposal............................Section 5.4(b)........................................37
Surviving Corporation........................Section 2.1............................................5
Tax Return...................................Section 3.14(a).......................................20
Tax..........................................Section 3.14(a).......................................20
Taxes........................................Section 3.14(a).......................................20
Tender Offer Purchase Time...................Section 1.3(a).........................................4
Third Party Acquisition......................Section 5.4(b)........................................37
Third Party..................................Section 5.4(b)........................................37
Trade Secrets................................Section 3.17(a)(i)(C).................................24
VA...........................................Section 3.9(a)........................................15
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MERGER AGREEMENT
THIS MERGER AGREEMENT (this "Agreement") dated as of March 10,
2000, is among PRISM FINANCIAL CORPORATION, a Delaware corporation ("Company"),
ROYAL BANK OF CANADA, a Canadian commercial bank("Parent"), and RAINBOW
ACQUISITION SUBSIDIARY, INC., a Delaware corporation and a wholly owned,
indirect subsidiary of Parent ("Acquisition").
WHEREAS, the Board of Directors of the Company (the "Board") has,
in light of and subject to the terms and conditions set forth herein,
(i)determined that each of the Offer and the Merger (each as defined below) is
advisable and is fair to the stockholders of the Company and in the best
interests of such stockholders and (ii) approved and adopted this Agreement and
the transactions contemplated hereby and resolved to recommend acceptance of the
Offer and approval and adoption by the stockholders of the Company, if
necessary, of this Agreement;
WHEREAS, in furtherance thereof, it is proposed that Acquisition
shall promptly commence a tender offer (the "Offer") to acquire all of the
issued and outstanding Shares (defined in Section 3.2(a)), at a price of $7.50
per Share together with any associated rights (the "Rights") issued pursuant to
the Rights Agreement dated as of January 27, 2000, between the Company and
LaSalle Bank National Association (the "Rights Agreement") (such amount being
hereinafter referred to as the "Per Share Amount"), net to the seller in cash,
less any required withholding of taxes, in accordance with the terms and subject
to the conditions provided herein; and
WHEREAS, as a condition of and inducement to Parent's and
Acquisition's entering into this Agreement and incurring the obligations set
forth herein, certain stockholders of the Company concurrently herewith are
entering into a stockholders' agreement (the "Stockholders' Agreement") dated as
of the date hereof, with Parent and Acquisition, substantially in the form of
Exhibit A to this Agreement.
NOW THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein contained and
intending to be legally bound hereby, the Company, Parent and Acquisition hereby
agree as follows,
ARTICLE 1
THE OFFER
SECTION 1.1. The Offer.
(a) Provided that this Agreement shall not have been terminated
in accordance with Section 8.1 and none of the events or conditions set forth in
Article 6 shall have occurred and be existing, as promptly as practicable after
the date hereof (but in no event later than the fifth business day after the
public announcement of the terms of this Agreement, Acquisition shall commence
(within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Offer. The Offer will be made pursuant to the
Offer Documents (as defined below) containing terms
1
and conditions set forth in this Agreement. Acquisition shall accept for
payment, purchase and pay for all Shares which have been validly tendered and
not withdrawn pursuant to the Offer at the earliest time following expiration of
the Offer that all conditions to the Offer set forth in Article 6 shall have
been satisfied or waived by Acquisition. The obligation of Acquisition to accept
for payment, purchase and pay for Shares tendered pursuant to the Offer shall be
subject only to the condition that at least a majority of the issued and
outstanding Shares be validly tendered (the "Minimum Condition") and the other
conditions set forth in Article 6. Acquisition expressly reserves the right to
waive any such condition (other than the Minimum Condition) to increase the
price per Share payable in the Offer or to make any other changes in the terms
and conditions of the Offer (provided that, unless previously approved by the
Company in writing, no change may be made which decreases the Per Share Amount,
which reduces the number of Shares to be purchased in the Offer, which changes
the form of consideration to be paid in the Offer, which imposes conditions to
the Offer in addition to those set forth in Article 6 or which amends or changes
any term or condition of the Offer in a manner adverse to the holders of
Shares). The Per Share Amount shall be paid net to the seller in cash, less any
required withholding of taxes, upon the terms and subject to such conditions of
the Offer. The Company agrees that no Shares held by the Company or any of its
subsidiaries will be tendered in the Offer.
(b) Subject to the terms and conditions thereof, the Offer
shall expire at midnight, New York City time, on the date that is twenty (20)
business days after the date the Offer is commenced (the "Initial Expiration
Date"); provided, however, without the consent of the Board, Parent may cause
Acquisition to (i) from time to time extend the Offer, if at the Initial
Expiration Date of the Offer any of the conditions to the Offer necessary to
consummate the Offer have not been satisfied or waived (other than the Minimum
Condition, to which this clause does not apply), until such time as such
conditions are satisfied or waived; (ii) extend the Offer for any period
required by any rule, regulation, interpretation or position of the Securities
and Exchange Commission (the "SEC") or the staff thereof applicable to the
Offer; or (iii) if all of the conditions to the Offer are satisfied or waived
but the number of Shares validly tendered and not withdrawn is less than ninety
percent (90%) of the then outstanding number of Shares on a fully diluted basis,
for an aggregate period not to exceed twenty (20) business days (for all such
extensions), provided that Acquisition shall accept and promptly pay for all
securities tendered prior to the date of such extension and shall otherwise meet
the requirements of Rule 14d-11 under the Exchange Act in connection with each
such extension. In addition, Parent and Acquisition agree that Acquisition shall
from time to time extend the Offer, if requested by the Company, if at the
Initial Expiration Date (or any extended expiration date of the Offer, if
applicable), any of the conditions to the Offer other than (or in addition to)
the Minimum Condition shall not have been waived or satisfied, until (taking
into account all such extensions) September 30, 2000.
(c) As soon as practicable after the date of commencement of
the Offer, Acquisition shall file with the SEC a Tender Offer Statement on
Schedule TO with respect to the Offer, which shall include an offer to purchase
and form of transmittal letter (together with any amendments thereof or
supplements thereto, collectively the "Offer Documents"). The Offer Documents
will comply in all material respects with the provisions of applicable federal
securities laws. Parent, Acquisition and the Company
2
each agrees promptly to correct any information provided by it for use in the
Offer Documents if and to the extent that such information shall have become
false or misleading in any material respect, and Acquisition further agrees to
take all steps necessary to cause the Offer Documents as so corrected to be
filed with the SEC and to be disseminated to holders of Shares, in each case as
and to the extent required by applicable federal securities laws. The Company
and its counsel shall be given a reasonable opportunity to review and comment on
the Offer Documents prior to their being filed with the SEC. Parent and
Acquisition agree to provide to the Company and its counsel any comments or
other communications which Parent, Acquisition or their counsel receives from
the staff of the SEC with respect to the Offer Documents promptly after receipt
thereof.
SECTION 1.2. Company Action.
(a) The Company hereby approves of and consents to the Offer
and the Merger and represents and warrants that the Board, including all of the
independent directors of the Company, at a meeting duly called and held, has,
subject to the terms and conditions set forth herein, adopted resolutions, which
are not conditional and have not been amended or repealed, pursuant to which the
Board (i) determined that this Agreement and the transactions contemplated
hereby, including the Offer and the Merger, are fair to, and in the best
interests of, the stockholders of the Company, (ii) declared that the Merger is
advisable and approved this Agreement and the transactions contemplated hereby,
including the Offer and the Merger, in all respects and such approval
constitutes prior approval of the Offer, this Agreement and the Merger for
purposes of Section 203(a)(1) of the Delaware General Corporation Law (the
"DGCL") and similar provisions of any other similar state statutes that might be
deemed applicable to the transactions contemplated hereby, (iii) recommended
that the stockholders of the Company accept the Offer, tender their Shares
thereunder to Acquisition and, if required by law, approve and adopt this
Agreement and the Merger; and in addition that the Company consents, subject to
Section 5.4, to the inclusion of such recommendation and approval in the Offer
Documents, and (iv) takes all actions to amend the Company Option Plans and the
Rights Agreements contemplated by this Agreement.
(b) The Company hereby agrees to file with the SEC as soon as
practicable after the date hereof a Solicitation/Recommendation Statement on
Schedule 14D-9 pertaining to the Offer (together with any amendments thereof or
supplements thereto, the "Schedule 14D-9") containing the recommendation
described in Section 1.2(a) and to promptly mail the Schedule 14D-9 to the
stockholders of the Company. The Company, Parent and Acquisition each agrees
promptly to correct any information provided by it for use in the Schedule 14D-9
if and to the extent that such information shall have become false or misleading
in any material respect and the Company further agrees to take all steps
necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC
and disseminated to the holders of Shares, in each case as and to the extent
required by applicable federal securities laws. The Parent, Acquisition and
their counsel shall be given a reasonable opportunity to review and comment on
the Schedule 14D-9 prior to it being filed with the SEC. The Company agrees to
provide to Parent, Acquisition and their counsel any comments or other
communications which the Company or its counsel receives from the staff of the
SEC
3
with respect to the Schedule 14D-9 promptly after receipt thereof.
Notwithstanding anything to the contrary in this Agreement, the Board may
withdraw, modify or amend its recommendation under the circumstances set forth
in Section 5.4.
(c) In connection with the Offer, the Company will promptly
furnish Parent and Acquisition with mailing labels, security position listings
and any available listing or computer files containing the names and addresses
of the record holders of the Shares as of a recent date and shall furnish
Acquisition with such additional information and assistance (including, without
limitation, updated lists of stockholders, mailing labels and lists of
securities positions) as Acquisition or its agents may reasonably request in
communicating the Offer to the record and beneficial holders of Shares. Subject
to the requirements of applicable law, and except for such steps as are
necessary to disseminate the Offer Documents and any other documents necessary
to consummate the Merger, Parent, Acquisition and their affiliates, associates,
agents and advisors shall use the information contained in any such labels,
listings and files only in connection with the Offer and the Merger, and, if
this Agreement shall be terminated, will deliver to the Company all copies of
such information then in their possession.
SECTION 1.3. Boards of Directors and Committees; Section 14(f).
(a) Promptly after the purchase by Acquisition of Shares
pursuant to the Offer following the Initial Expiration Date or, if applicable,
the extended expiration date of the Offer (the "Tender Offer Purchase Time") and
from time to time thereafter, and subject to the last sentence of this Section
1.3(a), Acquisition shall be entitled to designate that number (but no more than
that number) of directors of the Company constituting a majority of the Board,
and the Company shall use its best efforts to, upon request by Acquisition,
promptly, at the Company's election, either increase the size of the Board
(subject to the provisions of Article Fifth of the Company's Certificate of
Incorporation) or secure the resignation of such number of directors as is
necessary to enable Acquisition's designees to be elected to the Board and to
cause Acquisition's designees to be so elected and to constitute at all times
after the Tender Offer Purchase Time a majority of the Board. At such times, and
subject to the last sentence of this Section 1.3(a), the Company will use its
best efforts to cause persons designated by Acquisition to constitute the same
percentage as is on the Board of (i) each committee of the Board (other than any
committee of the Board established to take action under this Agreement), (ii)
each board of directors of each subsidiary of the Company and (iii) each
committee of each such board. Notwithstanding the foregoing, until the Effective
Time (as defined in Section 2.3 hereof) (x) the Company shall retain at least
three directors who are directors of the Company on the date hereof (the
"Continuing Directors") and (y) Parent and Acquisition shall not, and shall
cause their affiliates not to, (A) initiate, propose, vote for, or solicit
others to vote for, any change in the number of directors of Prism Mortgage
Company, an Illinois corporation and a wholly-owned subsidiary of the Company
("Prism Mortgage"), as of the date hereof or (B) take any action that would be
reasonably likely to result in any change described in the foregoing clause (A).
(b) The Company's obligation to appoint designees to the Board
shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder. The Company shall promptly take all action required pursuant to such
Section and Rule
4
in order to fulfill its obligations under this Section 1.3 and shall include in
the Schedule 14D-9 such information with respect to the Company and its officers
and directors as is required under such Section and Rule in order to fulfill its
obligations under this Section 1.3. Acquisition will supply to the Company in
writing and be solely responsible for any information with respect to itself and
its nominees, officers, directors and affiliates required by such Section and
Rule.
(c) From and after the time, if any, that Acquisition's
designees constitute a majority of the Board until the Effective Time, any
amendment, modification or waiver of any term or condition of this Agreement,
any amendment or modification to the Certificate of Incorporation or By-Laws of
the Company, any termination of this Agreement by the Company, any extension of
time of performance of any of the obligations of Parent or Acquisition
hereunder, any waiver of any condition or any of the Company's rights hereunder
or other action by the Company in connection with the rights of the Company
hereunder may be effected only with the concurrence of a majority of the
Continuing Directors.
ARTICLE 2
THE MERGER
SECTION 2.1. The Merger. At the Effective Time (as defined below)
and upon the terms and subject to the conditions of this Agreement and in
accordance with the DGCL, Acquisition shall be merged with and into the Company
(the "Merger"). Following the Merger, the Company shall continue as the
surviving corporation (the "Surviving Corporation") and the separate corporate
existence of Acquisition shall cease. Parent, as the sole stockholder of
Acquisition, hereby approves this Agreement, the Merger and the other
transactions contemplated hereby. Subject to the terms and conditions of this
Agreement, Parent and Acquisition agree to cause the Effective Time to occur as
soon as practicable after the Stockholders' Meeting (as defined in Section
5.2(a)) or the purchase by Acquisition of 90% or more of the issued and
outstanding Shares pursuant to the Offer.
SECTION 2.2. Closing of the Merger. The closing of the Merger will
take place at a time (the "Closing Time") and on a date to be specified by the
parties, which shall be no later than the second business day after satisfaction
or waiver (in accordance with this Agreement) of the latest to occur of the
conditions set forth in Article 7 (other than those conditions that, by their
nature, are to be satisfied at the Closing Time, but subject to the satisfaction
or waiver of those conditions) at the offices of Xxxxxx, Xxxx & Xxxxxxxx LLP,
0000 Xxxxxxxxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000, unless another time, date
or place is agreed to in writing by the parties hereto.
SECTION 2.3. Effective Time. Subject to the terms and conditions
set forth in this Agreement, a Certificate of Merger or Certificate of Ownership
and Merger, (the "Merger Certificate") shall be duly executed and acknowledged
by Acquisition and the Company and thereafter delivered at the Closing Time to
the Secretary of State of the State of Delaware for filing pursuant to the DGCL.
The Merger shall become effective at such time as a properly executed and
certified copy of the Merger Certificate is duly
5
accepted for record by the Secretary of State of the State of Delaware for
filing pursuant to the DGCL, or such later time as Acquisition and the Company
may agree upon and set forth in the Merger Certificate (not exceeding 30 days
after the Merger Certificate is accepted for record; the time the Merger becomes
effective being referred to herein as the "Effective Time").
SECTION 2.4. Effects of the Merger. The Merger shall have the
effects set forth in the DGCL. Without limiting the generality of the foregoing
and subject thereto at the Effective Time, all the properties, rights,
privileges, powers and franchises of the Company and Acquisition shall vest in
the Surviving Corporation and all debts, liabilities and duties of the Company
and Acquisition shall become the debts, liabilities and duties of the Surviving
Corporation.
SECTION 2.5. Certificate of Incorporation and Bylaws. The
Certificate of Incorporation of Acquisition in effect at the Effective Time
shall be the Certificate of Incorporation of the Surviving Corporation until
amended in accordance with applicable law. The Bylaws of Acquisition in effect
at the Effective Time shall be the Bylaws of the Surviving Corporation until
amended in accordance with applicable law.
SECTION 2.6. Directors. The directors of Acquisition at the
Effective Time shall be the initial directors of the Surviving Corporation, each
to hold office in accordance with the Certificate of Incorporation and Bylaws of
the Surviving Corporation until the next annual meeting of stockholders and
until each such director's successor is duly elected or appointed and qualified.
SECTION 2.7. Officers. The officers of the Company at the
Effective Time shall be the initial officers of the Surviving Corporation, each
to hold office in accordance with the Certificate of Incorporation and Bylaws of
the Surviving Corporation until such officer's successor is duly elected or
appointed and qualified.
SECTION 2.8. Conversion of Shares.
(a) At the Effective Time, each Share, together with any
associated Rights, issued and outstanding immediately prior to the Effective
Time (excluding (i) Shares held by any of the Company's subsidiaries and (ii)
Shares held by Parent, Acquisition or any other subsidiary of Parent) shall, by
virtue of the Merger and without any action on the part of Acquisition, the
Company or the holder thereof, be converted into and shall become the right to
receive the Per Share Amount in cash, without interest (the "Cash Merger
Consideration"). Notwithstanding the foregoing, if between the date of this
Agreement and the Effective Time, the Shares shall have been changed into a
different number of shares or a different class by reason of any stock dividend,
subdivision, reclassification, recapitalization, split, combination or exchange
of shares, then the Cash Merger Consideration contemplated by the Merger shall
be correspondingly adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares.
(b) At the Effective Time, each Share held by Parent,
Acquisition or any subsidiary of Parent, Acquisition or the Company immediately
prior to the Effective
6
Time shall, by virtue of the Merger and without any action on the part of
Acquisition, the Company or the holder thereof, be canceled and retired and will
cease to exist and no payment shall be made with respect thereto.
(c) At the Effective Time, each share of common stock of
Acquisition issued and outstanding immediately prior to the Effective Time shall
be converted into and shall become one validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation.
SECTION 2.9. Payment of Cash Merger Consideration.
(a) As of the Effective Time, Acquisition shall deposit in
trust with such agent or agents as may be appointed by Parent and Acquisition
and reasonably acceptable to the Company (the "Payment Agent") for the benefit
of the holders of issued and outstanding Shares at the Effective Time (excluding
(i) Shares held by any of the Company's subsidiaries and (ii) Shares held by
Parent, Acquisition or any other subsidiary of Parent), an amount in cash equal
to the aggregate amount necessary to pay the Cash Merger Consideration (such
cash is hereinafter referred to as the "Merger Fund") payable pursuant to
Section 2.8 in exchange for such issued and outstanding Shares. The Payment
Agent shall, pursuant to irrevocable instructions, deliver the Cash Merger
Consideration out of the Merger Fund. The Merger Fund shall not be used for any
other purpose.
(b) As soon as reasonably practicable after the Effective Time,
Parent shall cause the Payment Agent to mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented issued and outstanding Shares (the "Certificates") whose Shares were
converted into the right to receive the Cash Merger Consideration pursuant to
Section 2.8: (i) a letter of transmittal (which shall specify that delivery
shall be effected and risk of loss and title to the Certificates shall pass only
upon delivery of the Certificates to the Payment Agent and shall be in such form
and have such other provisions as Parent and the Company may reasonably specify)
and (ii) instructions on how to surrender the Certificates in exchange for the
Cash Merger Consideration. Upon surrender to the Payment Agent of a Certificate
for cancellation, together with such letter of transmittal duly executed, the
holder of such Certificate shall be entitled to receive in exchange therefor,
and Parent shall cause the Payment Agent to deliver, a check representing the
Cash Merger Consideration which such holder has the right to receive pursuant to
the provisions of this Article 2 and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of Shares which
is not registered in the transfer records of the Company, payment of the Cash
Merger Consideration may be made to a transferee if the Certificate representing
such Shares is presented to the Payment Agent accompanied by all documents
required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.9, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the Cash Merger Consideration as contemplated by this Section 2.9.
7
(c) In the event that any Certificate shall have been lost,
stolen or destroyed, Parent shall cause the Payment Agent to issue in exchange
therefor, upon the making of an affidavit of that fact by the holder thereof,
such Cash Merger Consideration as may be required pursuant to this Agreement;
provided, however, that Acquisition or the Payment Agent may, in its discretion,
require the delivery of a suitable bond or indemnity.
(d) All Cash Merger Consideration paid upon the surrender for
exchange of Shares in accordance with the terms hereof shall be deemed to have
been paid in full satisfaction of all rights pertaining to such Shares; subject,
however, to the Surviving Corporation's obligation to pay any dividends or make
any other distributions with a record date prior to the Effective Time which may
have been declared or made by the Company on such Shares in accordance with the
terms of this Agreement, or prior to the date hereof and which remain unpaid at
the Effective Time, and there shall be no further registration of transfers on
the stock transfer books of the Surviving Corporation of the Shares which were
outstanding immediately prior to the Effective Time. If after the Effective Time
Certificates are presented to the Surviving Corporation for any reason they
shall be canceled and exchanged as provided in this Article 2.
(e) Any portion of the Merger Fund which remains undistributed
to the stockholders of the Company for six months after the Effective Time shall
be delivered to Parent upon demand and any stockholders of the Company who have
not theretofore complied with this Article 2 shall thereafter look only to
Parent for payment of their claim for the Cash Merger Consideration.
(f) Neither Acquisition nor the Company shall be liable to any
holder of Shares for cash from the Merger Fund delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
SECTION 2.10. Stock Options.
(a) At the Effective Time, each outstanding option to purchase
Shares (a "Company Stock Option" or collectively "Company Stock Options") issued
pursuant to the Company's 1999 Omnibus Stock Incentive Plan (the "1999 Option
Plan"), whether vested or unvested, the exercise price of which is greater than
the Cash Merger Consideration, shall be canceled and extinguished without
consideration and the 1999 Option Plan shall terminate as of the Effective Date.
(b) At the Effective Time, each outstanding Company Stock
Option issued pursuant to the 1999 Option Plan or the Company's 2000 Stock
Option Plan (the "2000 Option Plan" and, together with the 1999 Option Plan, the
"Company Option Plans") that is vested as of the Effective Time, the exercise
price of which is less than the Cash Merger Consideration shall be canceled and
extinguished and shall become the right to receive an amount, without interest,
in cash paid at the Effective Time equal to the excess, if any of the Cash
Merger Consideration over the exercise price per Share of such Company Stock
Option, less the amount of Taxes (as defined in Section 3.15(a)) required to be
withheld under applicable Federal, state or local laws and regulations
multiplied by the number of Shares subject to such Company Stock Option.
8
(c) At the Effective Time, each outstanding Company Stock
Option issued pursuant to the Company Option Plans or any other stock option
plan, program, arrangement or agreement to which the Company or any of its
subsidiaries is a party that is not vested as of the Effective Time, the
exercise price of which is less than the Cash Merger Consideration shall be
canceled and extinguished in consideration for certain compensatory payments to
be paid to the holder of such Company Stock Option at the time the Company
Stock Option would otherwise have vested (provided that such holder is employed
with the Company at such time and has not breached any of such holder's
obligations under any applicable employment agreement with the Company or any
Subsidiary) equal to an amount, without interest, in cash equal to the excess,
if any of the Cash Merger Consideration over the exercise price per Share of
such Company Stock Options that would otherwise have vested at such time.
Notwithstanding the foregoing, the right to receive such payments shall vest in
accordance with the terms of the applicable option agreement.
(d) If and to the extent required by the terms of the Company
Option Plan, or any other stock option plan, program, arrangement or agreement
to which the Company or any of its subsidiaries is a party or the terms of any
Company Stock Option granted thereunder, the Company shall cooperate with Parent
and Acquisition in obtaining the consent of each holder of outstanding Company
Stock Options to the foregoing treatment of such Company Stock Options and to
take any other action necessary to effectuate the foregoing provisions.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Disclosure Schedule previously
delivered by the Company to Parent (the "Company Disclosure Schedule"), the
Company hereby represents and warrants to each of Parent and Acquisition as of
the date hereof as follows:
SECTION 3.1. Organization and Qualification; Subsidiaries.
(a) Each of the Company and each of its subsidiaries is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, except where the failure to
qualify or to be in good standing would not have a Material Adverse Effect (as
defined below) and has all requisite power and authority to own lease and
operate its properties and to carry on its businesses as now being conducted,
except where the failure to have such power and authority would not have a
Material Adverse Effect. The Company has heretofore made available to Parent
complete and correct copies of the Certificate of Incorporation and Bylaws (or
similar governing documents), as currently in effect, of the Company and its
subsidiaries. When used in connection with the Company or its subsidiaries, the
term "Material Adverse Effect" means any change or effect (i) that is materially
adverse to the business, properties, financial condition, or results of
operations of the Company and its subsidiaries, taken as whole, or (ii) that
would materially impair the ability of the Company to perform its obligations
hereunder. Notwithstanding the foregoing, none of
9
the following shall be deemed, either alone or in combination, to constitute a
Material Adverse Effect: (i) changes or effects resulting from general changes
in economic, market, regulatory or political conditions or changes in conditions
or business practices generally applicable to the industries in which the
Company and its subsidiaries operate, including, but not limited to, changes and
effects resulting from a change in interest rates or an industry-wide decrease
in mortgage volume; (ii) changes in the market price or trading volume of the
Shares on the Nasdaq National Market; or (iii) changes or effects resulting from
the announcement or approval of the Offer and the Agreement or relating to the
identity of or facts pertaining to Parent or Acquisition.
(b) Each of the Company and its subsidiaries is duly qualified
or licensed and in good standing to do business in each jurisdiction in which
the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing would not have a Material Adverse Effect on the Company.
SECTION 3.2. Capitalization of the Company and its Subsidiaries.
(a) The authorized stock of the Company consists of 100,000,000
shares of common stock, par value $.01 per share of the Company (the "Shares"),
of which, as of January 31, 2000, 14,670,560 Shares were issued and outstanding,
and 10,000,000 shares of preferred stock, par value $.01 per share, no shares of
which are outstanding. All of the outstanding Shares have been validly issued
and are fully paid and nonassessable, and free of preemptive rights granted by
the Company. As of January 31, 2000, approximately 2,040,652 Shares were
reserved for issuance upon the exercise of outstanding Company Stock Options
issued pursuant to the Company Option Plans and other stock option plans, or
agreements to which the Company or any of its subsidiaries is a party. Except as
set forth in Section 3.2(a) of the Company Disclosure Schedule, since January
31, 2000, no shares of the Company's stock have been issued other than pursuant
to Company Stock Options or other stock-based employee benefit plans of the
Company and no options to acquire Shares have been granted other than pursuant
to the Company Option Plans. Except as set forth above and in Sections 3.2(a) of
the Company Disclosure Schedule, and except for the Rights, the Prism Equity
Value Plan-I and the Prism Equity Value Plan-II, as of the date hereof, there
are issued, reserved for issuance, or outstanding (i) no shares of stock or
other voting securities of the Company, (ii) no securities of the Company or its
subsidiaries convertible into or exchangeable for shares of stock or voting
securities of the Company, (iii) no options or other rights to acquire from the
Company or its subsidiaries and, except as described in Section 3.2(a) of the
Company Disclosure Schedule, no obligations of the Company or its subsidiaries
to issue any stock, voting securities or securities convertible into or
exchangeable for stock or voting securities of the Company, (iv) no bonds,
debentures, notes or other indebtedness or obligations of the Company or any of
its subsidiaries entitling the holders thereof to have the right to vote (or
which are convertible into, or exercisable or exchangeable for, securities
entitling the holders thereof to have the right to vote) with the stockholders
of the Company or any of its subsidiaries on any matter, and (v) no equity
equivalent interests in the ownership or earnings of the Company or its
subsidiaries or other similar rights (collectively "Company Securities"). As of
the date
10
hereof, there are no outstanding obligations of the Company or its subsidiaries
(absolute, contingent or otherwise) to repurchase, redeem or otherwise acquire
any Company Securities. There are no Shares outstanding subject to rights of
first refusal of the Company, nor are there any pre-emptive rights granted by
the Company with respect to any Shares. Other than this Agreement, there are no
stockholder agreements, voting trusts or other agreements or understandings to
which the Company is a party or by which it is bound relating to the voting or,
except as set forth in Section 3.2(a) of the Company Disclosure Schedule,
registration of any shares of stock of the Company.
(b) Except as set forth in Section 3.2(b) of the Company
Disclosure Schedule, all of the outstanding stock of the Company's subsidiaries
is owned by the Company, directly or indirectly, free and clear of any Lien (as
defined below). There are no securities of the Company or its subsidiaries
convertible into or exchangeable for, no options or other rights to acquire from
the Company or its subsidiaries and no other contract, understanding,
arrangement or obligation (whether or not contingent) providing for the issuance
or sale, directly or indirectly, of any stock or other ownership interests in,
or any other securities, of any subsidiary of, the Company. Except as set forth
in Section 3.2(b) of the Company Disclosure Schedule, there are no outstanding
contractual obligations of the Company or its subsidiaries to repurchase, redeem
or otherwise acquire any outstanding shares of capital stock or other ownership
interests in any subsidiary of the Company. For purposes of this Agreement,
"Lien" means, with respect to any asset (including without limitation any
security), any mortgage, lien, pledge, charge, security interest or encumbrance
of any kind in respect of such asset (including any restrictions on the right to
vote or sell the same except as may be provided as a matter of law).
(c) The Shares constitute the only class of equity securities
of the Company or its subsidiaries registered or required to be registered under
the Exchange Act.
SECTION 3.3. Authority Relative to this Agreement; Recommendation.
The Company has all necessary corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby except, if required by law, the approval and adoption of
this Agreement and the Merger by the holders of the outstanding Shares. This
Agreement has been duly and validly executed and delivered by the Company and,
assuming the due authorization, execution and delivery by Parent and
Acquisition, constitutes a valid, legal and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by any applicable conservator, receivership,
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally, and except as the
availability of equitable remedies may be limited by the application of general
principles of equity (regardless of whether such equitable principles are
applied in a proceeding at law or in equity).
11
SECTION 3.4. SEC Reports; Financial Statements; Accounting
Procedures.
(a) The Company has filed all required forms, reports and
documents ("Company SEC Reports") with the SEC since January 1, 1999, each of
which has complied (as of its respective date) in all material respects with all
applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the Exchange Act, each as in effect on the dates such
forms, reports and documents were filed. None of such Company SEC Reports,
including, without limitation, any financial statements or schedules included or
incorporated by reference therein, contained when filed any untrue statement of
a material fact or omitted to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The audited consolidated financial statements of the Company
included in the Company SEC Reports fairly present in all material respects in
conformity with generally accepted accounting principles in the United States as
in effect from time to time and applied on a consistent basis ("GAAP") (except
as may be indicated in the notes thereto or, in the case of unaudited
consolidated quarterly statements, as permitted by Form 10-Q of the SEC and
subject to normal year-end adjustments) the consolidated financial position of
the Company and its consolidated subsidiaries as of the dates thereof and their
consolidated results of operations and changes in financial position for the
periods then ended.
(b) The Company has heretofore made available or promptly will
make available to Acquisition or Parent a complete and correct copy of any
amendments or modifications which are required to be filed with the SEC but have
not yet been filed with the SEC to agreements, documents or other instruments
which previously had been filed by the Company with the SEC pursuant to the
Exchange Act.
(c) The Company and its subsidiaries maintain a system of
internal accounting controls, policies and procedures sufficient to ensure that
all transactions relating to their business are executed in conformity in all
material respects with the applicable rules, regulations, directives and
instructions of governmental and regulatory authorities, the Agencies (as
defined in Section 3.9) and Investors (as defined in Section 3.8) (the "Agency
and Investor Requirements"), and in a manner as to permit preparation of
financial statements in accordance the Agency and Investor Requirements and to
maintain accountability for the Company's assets.
SECTION 3.5. Information Supplied. None of the information
supplied by the Company in writing for inclusion or incorporation by reference
in the Offer Documents, Schedule 14D-9, any other tender offer materials,
Schedule 14A or 14C, or the proxy statement or information statement ("Proxy
Statement") relating to any meeting to be held in connection with the Merger
(all of the foregoing documents, collectively, the "Disclosure Statements")
will, at the date each and any of the Disclosure Statements is mailed to
stockholders of the Company and at the time of the meeting of stockholders of
the Company to be held, if necessary, in connection with the Merger, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances
12
under which they are made, not misleading, except that no representation or
warranty is made by the Company with respect to information supplied in writing
by Parent or Acquisition for inclusion in the Proxy Statement or Schedule 14D-9.
The Proxy Statement, if any, and Schedule 14D-9 will comply as to form in all
material respects with all provisions of applicable law. None of the information
supplied by the Company in writing for inclusion in the Disclosure Statements or
provided by the Company in the Schedule 14D-9 will, at the respective times that
any Disclosure Statement and the Schedule 14D-9 or any amendments thereof or
supplements thereto are filed with the SEC and are first published or sent or
given to holders of Shares, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
SECTION 3.6. Consents and Approvals; No Violations. Except as set
forth in Section 3.6 of the Company Disclosure Schedule and except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, (a) the Exchange Act, (b) state securities
laws ("Blue Sky Laws") or take-over laws, (c) the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), or (d) state insurance or
mortgage brokerage laws or regulations and the filing and recordation and
acceptance for record of the Merger Certificate as required by the DGCL, no
filing with or notice to, and no permit, authorization, consent or approval of,
any court or tribunal, or administrative governmental or regulatory body, agency
or authority (a "Governmental Entity") is necessary for the execution and
delivery by the Company of this Agreement or the consummation by the Company of
the transactions contemplated hereby, except where the failure to obtain such
permits, authorizations, consents or approvals or to make such filings or give
such notice would not have a Material Adverse Effect. Neither the execution,
delivery and performance of this Agreement by the Company nor the consummation
by the Company of the transactions contemplated hereby will (i) conflict with or
result in any breach of any provision of the respective Certificate of
Incorporation or Bylaws (or similar governing documents) of the Company or any
of its subsidiaries, (ii) except as set forth in Section 3.6 of the Company
Disclosure Schedule result in a violation or breach of or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration or Lien) under any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
lease, license, contract, agreement or other instrument or obligation to which
the Company or any of its subsidiaries is a party or by which any of them or any
of their respective properties or assets may be bound or (iii) except as set
forth in Section 3.6 of the Company Disclosure Schedule or in this Section 3.6
violate any order, writ, injunction, decree, law, statute, rule or regulation
applicable to the Company or any of its subsidiaries or any of their respective
properties or assets except, in the case of (ii) or (iii), for violations,
breaches, defaults or rights of termination, amendment, cancellation or
acceleration or Liens which would not have a Material Adverse Effect.
SECTION 3.7. No Undisclosed Liabilities; Absence of Changes.
Except to the extent publicly disclosed in the Company's SEC Reports or as set
forth in Section 3.7 of the Company Disclosure Schedule, as of December 31,
1999, none of the Company or any of its subsidiaries had any liabilities or
obligations of any nature,
13
whether or not accrued, contingent or otherwise, that would be required by GAAP
to be reflected on a consolidated balance sheet of the Company and its
subsidiaries (including the notes thereto) or which would have a Material
Adverse Effect and since such date, the Company has incurred no such liability
or obligation, which would have a Material Adverse Effect, other than in the
ordinary course of business consistent with past practice.
SECTION 3.8. Litigation. As of the date hereof, except as
disclosed in Section 3.8 of the Company Disclosure Schedule, there is no suit,
claim, action, proceeding or investigation pending or, to the Company's
Knowledge (as defined below), threatened against the Company or any of its
subsidiaries or any of their respective properties or assets before any
Governmental Entity that (a) involves any Agency or any owner, purchaser or
beneficiary (other than an Agency) of a Mortgage Loan or of any proceeds of, or
interest in or from, a Mortgage Loan ("Investor") or (b) individually or in the
aggregate, would have a Material Adverse Effect. Except as disclosed by the
Company in the Company SEC Reports, none of the Company or its subsidiaries nor
any property or asset of the Company or any of its subsidiaries is subject to
any outstanding order, writ, injunction or decree which would have a Material
Adverse Effect. For purposes of this Agreement, the term "Knowledge" with
respect to the Company means the actual knowledge of any of the officers and
other employees of the Company identified in Exhibit B hereto.
SECTION 3.9. Compliance with Laws.
(a) The Company and its subsidiaries have complied in all
material respects with all applicable material laws, rules, regulations,
ordinances and codes, whether federal, state, local or foreign and, including,
without limitation, (i) all laws and regulations relating to occupational health
and safety, equal employment opportunities, fair employment practices, and sex,
race, religious, age and other prohibited discrimination, all other labor laws,
including without limitation the Family and Medical Leave Act, and (ii) all
licensure, disclosure, usury and other consumer credit laws and regulations
governing residential mortgage lending and brokering, including, but not limited
to, all applicable rules, regulations, standards and guidelines promulgated by
the United States Department of Housing and Urban Development ("HUD"), Xxxxxxx
Mac ("Xxxxxxx Mac"), the Government National Mortgage Association ("GNMA"),
Xxxxxx Mae ("Xxxxxx Xxx"), the Veterans Administration ("VA" and, together with
HUD, Xxxxxxx Mac, GNMA and Xxxxxx Xxx, each, an "Agency" and, collectively the
"Agencies") and the Board of Governors of the Federal Reserve System, the state
agencies and all applicable provisions of the Real Estate Settlement Procedures
Act of 1974, the Flood Insurance Protection Act, the Consumer Credit Protection
Act, the Truth-in-Lending Act, the Equal Credit Opportunity Act and the Fair
Credit Reporting Act, each as amended from time to time, and all regulations
promulgated thereunder (the foregoing statutes and laws described in clause
(ii), collectively, "Consumer Credit Law") and, except as set forth on Section
3.9 of the Company Disclosure Schedule, no written notice or correspondence
(whether regarding litigation, regulatory action or otherwise) has been received
by the Company from or on behalf of consumers or from any regulatory agency in
which such consumer or regulatory agency has alleged
14
noncompliance with any Consumer Credit Law or other applicable law, except as
would not individually or in the aggregate, have a Material Adverse Effect.
(b) Each loan as to which applications were accepted and
processed by the Company or any subsidiary or which otherwise was originated,
underwritten, closed, funded or brokered by the Company of any subsidiary (each,
a "Mortgage Loan") conforms in to the Agency and Investor Requirements and each
Mortgage Loan is eligible for sale to, insurance by, or pooling to collateralize
securities issued or guaranteed by, the applicable Investor or insurer except,
in the case of any of the foregoing, as would not, individually or in the
aggregate, have a Material Adverse Effect. The Company and its subsidiaries have
originated, underwritten, funded, serviced and sold (as applicable) each
Mortgage Loan in compliance with applicable federal, state and local legal and
regulatory requirements (including licensing statutes and regulations) and in
accordance with Agency and Investor Requirements and the related Mortgage Loan
documents except, in the case of any of the foregoing, as would not,
individually or in the aggregate, have a Material Adverse Effect.
SECTION 3.10. Forms; Policies and Procedures. The Company has
provided Parent with a copy of the Company's internal practices and procedures
and the Company, its subsidiaries and their employees have complied and are in
compliance with such practices and procedures except, where the failure to be in
compliance would not have a Material Adverse Effect. All such practices and
procedures and all form disclosures, and notices, brokers agreements, notes,
mortgages, instruments and agreements used in the business of the Company and
its Subsidiaries comply in all material respects with (a) all applicable
Consumer Credit Law and (b) any standards imposed by the Agencies, to the extent
applicable, and (c) any other applicable law or regulation.
SECTION 3.11. Licenses and Permits. The Company or the applicable
subsidiary has obtained all material licenses, permits, qualifications,
franchises and other governmental authorizations and approvals, including,
without limitation, all state mortgage broker and mortgage banker licenses and,
as applicable, approvals by the Agencies required in order for it to conduct its
business as presently conducted. Each such license, permit, qualification,
franchise and other authorization is in full force and effect and, except as set
forth in Section 3.11 of the Company Disclosure Schedule, will remain in full
force and effect immediately after the Effective Time and shall not be violated,
affected or impaired by, or require any further action to remain effective as a
result of the Closing. No material violation exists in respect of any such
material license, permit, qualification, franchise, authorization or approval.
No proceeding is pending, or to the Company's Knowledge, threatened to revoke or
limit any such license, permit, qualification, franchise, authorization or
approval.
SECTION 3.12. Employee Benefit Plans; Labor Matters.
(a) Section 3.12(a) of the Company Disclosure Schedule sets
forth each plan that is subject to the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), and each other material agreement, arrangement or
commitment that is an employment or consulting agreement (other than
non-executive employment
15
agreements or loan officer agreements), executive or incentive compensation
plan, bonus plan, deferred compensation agreement, employee pension, profit
sharing, savings or retirement plan, employee stock option or stock purchase
plan, group life, health, or accident insurance or other employee benefit plan,
agreement, arrangement or commitment, including, without limitation, severance,
vacation, holiday or other bonus plans, currently maintained by the Company or
any of its subsidiaries (or any entity that is or was at the relevant time
treated as a single employer with the Company or any of its subsidiaries under
Section 414(b), (c), (m), or (o) of the Code ("ERISA Affiliate")) for the
benefit of any present or former employees, officers or directors of the
Company, any of its subsidiaries or ERISA Affiliates ("Company Personnel") or
with respect to which the Company or any of its subsidiaries or ERISA Affiliates
has liability or makes or has an obligation to make contributions (each such
plan, agreement, arrangement or commitment set forth in Section 3.12(a) of the
Company Disclosure Schedule being hereinafter referred to as a "Company Employee
Plan").
(b) The Company has made available to the Parent (i) copies of
all Company Employee Plans or in the case of an unwritten plan, a written
description thereof, (ii) copies of the most recent annual, financial and, if
applicable, actuarial reports and Internal Revenue Service determination letters
relating to such Company Employee Plans and (iii) copies of the most recent
summary plan descriptions relating to such Company Employee Plans and
distributed to Company Personnel.
(c) Except as disclosed in Section 3.12(c) of the Company
Disclosure Schedule, there are no Company Personnel who are entitled to any
medical, dental or life insurance benefits to be paid under any Company Employee
Plans after termination of employment other than as required by Section 601 of
ERISA, Section 4980B of the Internal Revenue Code of 1986, as amended (the
"Code"), or applicable state law.
(d) Each Company Employee Plan that is an employee welfare
benefit plan under Section 3(1) of ERISA is either (i) funded through an
insurance company contract and is not a "welfare benefit fund" within the
meaning of Section 419 of the Code or (ii) unfunded.
(e) All contributions or payments due with respect to any
periods prior to the Closing Time under any Company Employee Plan have been or
will be timely made or appropriate charges have been made on the financial
statements. Except as disclosed in Section 3.12(e) of the Company Disclosure
Schedule, each Company Employee Plan by its terms and operation is in compliance
in all material respects with all applicable laws (including, but not limited
to, ERISA, the Code and the Age Discrimination in Employment Act of 1967, as
amended). The Company has obtained a favorable determination as to the
qualification under Section 401(a) (and 401(k) where applicable) of each Company
Employee Plan that is an employee pension benefit plan from the IRS. To the
Company's Knowledge, nothing has occurred since the date of each such
determination that would adversely affect such tax qualification.
(f) Except as set forth in Section 3.12(f) of the Company
Disclosure Schedule, there are no actions, suits or claims pending or, to the
Company's Knowledge, threatened (other than routine noncontested claims for
benefits), against any Company
16
Employee Plan or, to the Company's Knowledge, any administrator or fiduciary of
any such Company Employee Plan. As to each Company Employee Plan for which an
annual report is required to be filed under ERISA or the Code, all such filings
(including Form 5500s and all schedules) have been made on a timely basis, in
accordance with all applicable requirements. No Company Employee Plan is a
defined benefit plan under Section 3(35) of ERISA.
(g) Except as disclosed in Section 3.12(g) of the Company
Disclosure Schedule neither the Company, any of its subsidiaries nor any ERISA
Affiliate maintains or has maintained, contributes to or has contributed to or
is or has been required to contribute to any plan under which more than one
employer makes contributions (within the meaning of Section 4064(a) of ERISA),
any plan that is a multiemployer plan within the meaning of Section 3(37) of
ERISA, or any plan subject to the minimum funding requirements of Section 412 of
the Code.
(h) Neither the Company nor any of its subsidiaries (nor, to
the Company's Knowledge, any other Person, including any fiduciary) has engaged
in any "prohibited transaction" (as defined in Section 4975 of the Code or
Section 406 of ERISA) or committed any breach of fiduciary duty, which would
subject any of the Company Employee Plans (or their trusts), the Company, any of
its subsidiaries or ERISA Affiliates, to any material tax or penalty or other
material liability imposed under the Code or ERISA.
(i) None of the assets of the Company Employee Plans is
invested in any property constituting employer real property or an employer
security within the meaning of Section 407(d) of ERISA.
(j) Except as disclosed in Section 3.12(k) of the Company
Disclosure Schedule or otherwise provided in this Agreement, the transactions
contemplated by this Agreement (either alone or together with any other
transaction(s) or event(s)) will not (i) entitle any Company Personnel to
severance pay under any Company Employee Plan, (ii) accelerate the time of
payment or vesting or materially increase the amount of benefits due under any
Company Employee Plan or compensation to any Company Personnel, (iii) result in
any payments (including parachute payments) under any Company Employee Plan
becoming due to any Company Personnel, or (iv) terminate or modify or give a
third party a right to terminate or modify the provisions or terms of any
Company Employee Plan. Section 3.12(j) of the Company Disclosure Schedule sets
forth, for each employee of the Company or any of its subsidiaries that will
receive any parachute payment within the meaning of Section 280G of the Code, a
preliminary calculation of the base amount for such employee and of the amount
of each such parachute payment, based upon information currently known by the
Company and assuming all circumstances that could give rise to such payment
occur.
(k) Except as set forth in Section 3.12(k) of the Company
Disclosure Schedule, neither the Company nor any of its subsidiaries is a party
to any collective bargaining or other labor union contract applicable to any
Company Personnel. There is no pending or, to the Company's Knowledge,
threatened labor dispute, strike or work stoppage against the Company or any of
its subsidiaries. There is no labor union
17
representing any of the Company's employees or, to the Company's Knowledge, any
organizational effort currently being made on behalf of any labor organization
to organize any such employees. Neither the Company nor any of its subsidiaries
nor their respective representatives or employees has committed any unfair labor
practices in connection with the operation of the respective businesses of the
Company or its subsidiaries, and there is no pending or, to the Company's
Knowledge, threatened charge or complaint against the Company or its
subsidiaries by the National Labor Relations Board or any comparable state
governmental agency. To the Company's Knowledge, the Company and its
subsidiaries are in compliance in all material respects with all applicable laws
and regulations respecting employment, employment practices, labor relations,
employment discrimination, safety and health, wages, hours and terms and
conditions of employment.
(l) All individuals who are performing or have performed
services for the Company or any affiliate thereof, whether as consultants,
contractors, agents or otherwise, and are or were classified by the Company or
any affiliate as "independent contractors" qualify for such classification under
Section 530 of the Revenue Act of 1978 or Section 1706 of the Tax Reform Act of
1986, as applicable. The Company has fully complied with and is not in default
or violation of any law, statute, rule, regulation or requirement applicable to
such individual. Except as set forth in Section 3.12(l) of the Company
Disclosure Schedule, there is no pending or, to the Company's Knowledge,
threatened claim against the Company by or on behalf of any such individual, or
investigation, audit or other proceeding relating to such an individual or
individuals, by any Governmental Entity. To the Company's Knowledge, there is no
labor union representing any such individuals or, to the Company's Knowledge,
any organizational effort currently being made on behalf of any labor
organization to organize any such individuals.
SECTION 3.13. Environmental Laws and Regulations.
(a) Except as publicly disclosed in the Company SEC Reports,
(i) the Company and its subsidiaries are in material compliance with all
applicable federal, state, local and foreign laws and regulations, orders,
decrees, judgments, permits and licenses relating to public and worker health
and safety and to the protection and clean-up of the natural environment
(including, without limitation, ambient air, surface water, ground water, land
surface or subsurface strata) and activities or conditions relating thereto,
including, without limitation, those relating to the generation, handling,
disposal, transportation or release of hazardous materials (collectively
"Environmental Laws"), except for non-compliance that would not have a Material
Adverse Effect, which compliance includes but is not limited to, the possession
by the Company and its subsidiaries of all material permits and other
governmental authorizations required under applicable Environmental Laws and
compliance with the terms and conditions thereof and; (ii) none of the Company
or its subsidiaries has received written notice of or, to the Company's
Knowledge, is the subject of any Environmental Claim (defined below) that would
have a Material Adverse Effect or, to the Company's Knowledge, against any
Person whose liability for any Environmental Claim the Company or any of its
subsidiaries has or may have retained or assumed either contractually or by
operation of law.
18
(b) Except as disclosed in the Company SEC Reports, there is no
action, cause of action, claim, investigation, demand or written notice by any
Person alleging liability under or non-compliance by the Company with any
Environmental Law (an "Environmental Claim") that is pending or, to the
Company's Knowledge, threatened against the Company or its subsidiaries which
would have a Material Adverse Effect.
SECTION 3.14. Taxes.
(a) For purposes of this Agreement: (i) "Tax" or "Taxes" means
any taxes, charges, fees, levies, or other assessments imposed by any U.S. or
foreign governmental entity, whether national, state, county, local or other
political subdivision, including, without limitation, all net income, gross
income, sales and use, rent and occupancy, value added, ad valorem, transfer,
gains, profits, excise, franchise, real and personal property, gross receipt,
capital stock, business and occupation, disability, employment, payroll,
license, estimated, or withholding taxes or charges imposed by any governmental
entity, and includes any interest and penalties on or additions to any such
taxes (and includes taxes for which the Company and/or any of its subsidiaries,
as the case may be, may be liable in its own right, or as the transferee of the
assets of, or as successor to, any other corporation, association, partnership,
joint venture, or other entity, or under Treasury Regulation Section 1.1502-6 or
any similar provision of foreign, state or local law), provided, however, that
to the extent that the following representations relate to state and local sales
taxes or lodging taxes, such representations are limited to the Company's
Knowledge; and (ii) "Tax Return" means a report, return or other information
required to be supplied to a governmental entity with respect to Taxes
including, where permitted or required, group, combined or consolidated returns
for any group of entities that includes the Company or any of its subsidiaries.
(b) Except as set forth in Section 3.14(b) of the Company
Disclosure Schedule, the Company and each of its subsidiaries, and any
affiliated or combined group of which the Company or any of its subsidiaries is
or was a member for applicable Tax purposes, have (i) filed all federal income
and all other Tax Returns required to be filed by applicable law and all such
federal income and other Tax Returns (A) reflect the liability for Taxes of the
Company and each of its subsidiaries, and (B) were filed on a timely basis and
(ii) within the time and in the manner prescribed by law, paid (and until the
Closing Time will pay within the time and in the manner prescribed by law) all
Taxes that were or are due and payable as set forth in such Tax Returns.
(c) Each of the Company and, where applicable, the Company's
subsidiaries has established (and until the Closing Time will maintain) on its
books and records reserves adequate to pay all Taxes of the Company or such
respective subsidiary, as the case may be, in accordance with GAAP, which are
reflected in the most recent consolidated financial statements of the Company
and its subsidiaries contained in the Company SEC Documents, as applicable, to
the extent required by GAAP.
(d) Except as disclosed in Section 3.14(d) of the Company
Disclosure Schedule, neither the Company nor any subsidiary thereof has
requested any extension of time within which to file any income, franchise or
other Tax Return, which Tax Return has not been filed as of the date hereof.
19
(e) Except as disclosed in Section 3.14(d) of the Company
Disclosure Schedule, neither the Company nor any subsidiary thereof has executed
any outstanding waivers or comparable consents that will be in effect after the
Effective Time regarding the application of the statute of limitations with
respect to any income, franchise or other Taxes or Tax Returns.
(f) Except as disclosed in Section 3.14(f) of the Company
Disclosure Schedule, no deficiency for any Tax which, alone or in the aggregate
with any other deficiency or deficiencies, would exceed $100,000, has been
proposed, asserted, or assessed in writing against the Company and/or any
subsidiary thereof that has not been resolved and paid in full or otherwise
settled, no audits or other administrative proceedings are presently in progress
or pending or threatened in writing with regard to any Taxes or Tax Returns of
the Company and/or any subsidiary thereof, and no written claim is currently
being made by any authority in a jurisdiction where any of the Company or any
subsidiary thereof, as the case may be, does not file Tax Returns that it is or
may be subject to Tax in that jurisdiction.
(g) Except as disclosed on Section 3.14(g) of the Company
Disclosure Schedule, neither the Company nor any of its subsidiaries is a party
to any agreement relating to allocating or sharing of the payment of, or
liability for, Taxes.
(h) The Company does not constitute and for the past five years
has not constituted a "United States real property holding corporation" within
the meaning of Section 897(c)(2) of the Code.
SECTION 3.15. Properties. Neither the Company nor any of its
Subsidiaries owns any real property. Each of the Company and its subsidiaries
has valid title to all properties, assets and rights shown on its balance sheet
or its last Company SEC Report prior to the date hereof as being owned by it
and valid leasehold interests in all material properties and assets (whether
real, personal or mixed) leased by it (collectively, the "Company Assets").
With respect to any leased Company Assets, there are no security deposits or
portions thereof that have been applied in respect of a breach or default under
the applicable lease which has not been redeposited in full and neither the
Company nor any of its subsidiaries has mortgaged, deeded in trust or otherwise
transferred or encumbered such Lease or any interest therein except in the
ordinary course of business. There are no pending or, to the Company's
Knowledge, threatened condemnation proceedings against or affecting any
material Company Assets.
SECTION 3.16. Material Contracts and Commitments.
(a) Section 3.16 of the Company Disclosure Schedule contains a
true and complete list as of the date of this Agreement of all of the following
contracts, agreements and commitments, whether oral or written ("Contracts"), to
which the Company or any of its subsidiaries is a party or by which any of them
or any of their material Company Assets is bound, as each such contract or
commitment may have been amended, modified or supplemented:
20
(i) any agreement (including all master commitments and
pool purchase contracts) between the Company or any of its subsidiaries
and any Agency or Investor pursuant to which the Company and its
subsidiaries sold more than $175 million in principal amount of Mortgage
Loans during fiscal year 1999, and all insurance or guaranty contracts
(including contracts with any private mortgage insurer or Pool (as
defined herein) insurance provider with respect to the Mortgage Loans;
(ii) any agreement (or group of related agreements) for
the lease of personal property to or from any Person providing for rent
in excess of $100,000 during any twelve-month period;
(iii) any agreement for the lease of real property
providing for the payment of rent in excess of $250,000 during any
twelve-month period;
(iv) any agreement (or group of related agreements) or
indemnity under which the Company or any of its subsidiaries has created,
incurred, assumed or guaranteed any debt including without limitation any
indebtedness for borrowed money, warehouse lines of credit, or any
capitalized lease or purchase money obligation (except for intercompany
obligations);
(v) any agreement under which the Company or any of its
subsidiaries has granted a lien, pledge, security interest or other
encumbrance upon any of its material assets;
(vi) any agreement under which the Company or any of its
subsidiaries has an obligation to indemnify a director, officer or
employee;
(vii) any agreement for the employment of any individual
on a full-time, part-time, consulting or other basis other than oral
retainers of professionals terminable at will except for employment
agreements of employees with a salary of less than $100,000 who have
signed the Company's or any of its subsidiaries' standard form employment
agreement (excluding commissioned employees);
(viii) any agreement concerning confidentiality or
noncompetition given by the Company other than those agreements (A) with
employees on the Company's standard form employment, (B) related to
Company Stock Options, (C) entered into with any Person in connection
with the proposed sale of the Company and (D) that do not materially
restrict the manner in which the Company or any of its subsidiaries
conduct its business;
(ix) any other plan, contract or arrangement, whether
formal or informal, which involves direct or indirect compensation
(including bonus, stock option, severance, golden parachute, deferred
compensation, special retirement, consulting and similar agreements and
all agreements and arrangements regarding the Company's net branches) for
the benefit of one or more of the current or former directors, officers
or employees of the Company (other than Company Employee Plans described
in Section 3.12(a));
21
(x) any guaranty or suretyship, performance bond or
contribution agreement;
(xi) any marketing, sales representative or dealership
agreement with respect to which the fees paid or payable by the Company
are or will be in excess of $100,000; any material agreement relating to
e-commerce or agreements related to the Company's "net branches"; and
(xii) any other material contract or commitment.
(b) The Company has heretofore made available to the Parent
true and complete copies of all of the Contracts required to be set forth in
Section 3.16 of the Company Disclosure Schedule. Each such Contract is a valid
and binding agreement of the Company or one of its subsidiaries in accordance
with its terms, and is in full force and effect (except as set forth in Section
3.16 of the Company Disclosure Schedule), except where the failure to be valid
and binding and in full force and effect would not individually or in the
aggregate have a Material Adverse Effect. Neither the Company nor any of its
subsidiaries is in default with respect to any such Contract, nor (to the
Company's Knowledge) does any condition exist that with notice or lapse of time
or both would constitute such a default thereunder or permit any other party
thereto to terminate such Contract, except as would not have a Material Adverse
Effect. To the Company's Knowledge, no other party to any such Contract is in
default in any respect with respect to any such Contract, which would have a
Material Adverse Effect. No party has given any written notice (i) of
termination or cancellation of any such Contract or (ii) that it intends to
assert a breach of any such Contract, whether as a result of the transactions
contemplated hereby or otherwise, which would have a Material Adverse Effect.
Each Contract identified in Section 3.16 of the Company Disclosure Schedule in
response to any item under this Section 3.16 shall be deemed incorporated by
reference to all other items in this Section 3.16.
SECTION 3.17. Intellectual Property.
(a) Certain Definitions. When used in this Section 3.17, the
following capitalized terms shall have the following meanings:
(i) the term "Intellectual Property Rights" means
intellectual property rights arising from or in respect of the following,
whether protected, created or arising under the laws ofthe United States
or any other jurisdiction:
(A) fictitious business names, trade names,
registered and unregistered trademarks and service marks and logos
(including any Internet domain names), and applications therefor
(collectively, "Marks");
(B) patents, patent rights and all applications
therefor, including any and all continuation, divisional,
continuation-in-part, or reissue patent applications or patents
issuing thereon (collectively, "Patents"); and
22
(C) know-how, inventions, discoveries, concepts,
ideas, methods, processes, designs, formulae, technical data,
drawings, specifications, data bases and other proprietary and
confidential information, including customer lists, in each case
to the extent not included in the foregoing subparagraphs (A) or
(B) (collectively, "Trade Secrets");
(ii) the term "Intellectual Property Assets" means all
Intellectual Property Rights owned or licensed by the Company necessary
to the conduct of the Company's business, and all further uses of the
terms Marks, Patents, Copyrights, and Trade Secrets in this Section 3.17
shall mean Marks, Patents, Copyrights, and Trade Secrets that are
Intellectual Property Assets; and
(iii) the term "Software" means any and all (w) computer
programs, including any and all software implementations of algorithms,
models and methodologies, whether in source code or object code, (x)
databases and compilations, including any and all data and collections of
data, whether machine readable or otherwise, (y) descriptions,
flow-charts and other work product used to design, plan, organize and
develop any of the foregoing, and (z) all documentation, including user
manuals and training materials, relating to any of the foregoing, in each
case developed or licensed by the Company necessary for the conduct of
its business as currently conducted, specifically excluding those items
prepared for customers in the operation of the Company's business for
which the customer contractually has vested title.
(b) Marks. Section 3.17(b) of the Company Disclosure Schedule
sets forth an accurate and complete list of all registered, pending applications
for registration of any Marks and material unregistered Marks, in each case
owned by the Company and used by the Company in its business as presently
conducted ("Company Marks"). Except as may be set forth in Section 3.17(b) of
the Company Disclosure Schedule and would not have an Material Adverse Effect:
(i) the Company owns all right, title and interest in
each of the Company Marks, free and clear of any and all liens and
encumbrances (subject to written licenses granted in the ordinary course
of business), and the Company has not received any written notice or
claim challenging the Company's exclusive and complete ownership of such
Company Marks;
(ii) the Company Marks are valid and enforceable and the
Company has not received any written notice or claim challenging the
validity or enforceability of any such Company Marks;
(iii) to the Company's Knowledge, the Company has not
taken any action (or failed to take any action), that would result in the
forfeiture, relinquishment, or unenforceability of any of the Company
Marks or any of the Company's rights therein;
23
(iv) the Company has taken reasonable steps to protect
the Company's rights in and to the Company Marks;
(v) except with respect to licensing arrangements,
business relationships, advertisements or publicity in each case made in
writing in the ordinary course of business, the Company has not granted
to any Person any right, license or permission to use any of the Company
Marks;
(vi) to the Company's Knowledge, there is no trademark or
service xxxx or application therefor of any other Person that conflicts
with any of the Company Marks;
(vii) none of the Company Marks used by the Company
infringes or to the Company's Knowledge is alleged to infringe any trade
name, trademark, service xxxx or trade dress right of any other Person,
and there have been no written claims made with respect thereto; and
(viii) to the Company's Knowledge, there has been no prior
use of any Company Marks by any third party which would confer upon such
third party superior rights in such Company Marks.
(c) Owned Patents. The Company does not own any right, title or
interest in any Patents.
(d) Owned Copyrights. Except as may be set forth on Section
3.17(d) of the Company Disclosure Schedule and would not have an Material
Adverse Effect:
(i) the Company is the owner of all right, title and
interest in and to each of the copyrights used by the Company in its
business as presently conducted other than those as to which the rights
being exercised by the Company have been licensed from another Person
(collectively, the "Owned Copyrights"), free and clear of any and all
liens and encumbrances (subject to written licenses granted in the
ordinary course of business), and the Company has not received any
written notice or claim challenging the Company's complete and exclusive
ownership of all Owned Copyrights;
(ii) the Company has not received any written notice or
claim challenging or questioning the validity or enforceability of any of
the Owned Copyrights or indicating an intention on the part of any Person
to bring a claim that any Owned Copyright is invalid, is unenforceable or
has been misused and, to the Company's Knowledge, no Owned Copyright
otherwise has been challenged or threatened in any way;
(iii) to the Company's Knowledge, the Company has not
taken any action (or failed to take any action), that would result in the
unenforceability of any of the Owned Copyrights;
(iv) the Company has taken all reasonable steps to
protect the Company's rights in and to the Owned Copyrights;
24
(v) the Company has not granted to any Person any right,
license or permission to exercise any rights under any of the Owned
Copyrights other than non-exclusive licenses of Software granted in the
ordinary course of business of distributors or customers;
(vi) to the Company's Knowledge, no other Person has
infringed or is infringing in any of the Owned Copyrights; and
(vii) none of the subject matter of any Owned Copyrights
nor, to the Company's Knowledge, any other work of authorship fixed in a
tangible medium that is used, copied, modified, displayed or distributed
by the Company, infringes, violates or conflicts with, or is to the
Company's Knowledge, alleged to infringe, violate or conflict with, any
Intellectual Property Right of any other Person.
(e) Trade Secrets. Section 3.17(e) of the Company Disclosure
Schedule sets forth an accurate and complete list of all memoranda of invention
or invention disclosures owned and received by the Company (collectively,
"Invention Disclosures"). The Company has taken reasonable precautions to
protect the secrecy, confidentiality and value of all material Invention
Disclosures and all of the Company's other material Trade Secrets ("Company
Trade Secrets"). Except as may be set forth in Section 3.17(e) of the Company
Disclosure Schedule and as would not have an Material Adverse Effect:
(i) the Company has the absolute and unrestricted right
to use all of the Company Trade Secrets and none of the Company Trade
Secrets is subject to any liens or encumbrances (subject to written
licenses granted in the ordinary course of business), and the Company has
not received any written notice or claim challenging the Company's
absolute and unrestricted right to use all of the Company Trade Secrets;
(ii) none of the Company Trade Secrets has been, or is to
the Company's Knowledge, alleged to have been, misappropriated from, any
other Person and to the Company's Knowledge none of the Company Trade
Secrets infringes, violates or conflicts with, or is to the Company's
Knowledge, alleged to infringe, violate or conflict with, any
Intellectual Property Right of any third party; and
(iii) except under appropriate confidentiality obligations
that, to the Company's Knowledge, have been fully observed and performed,
to the Company's Knowledge, there has been no disclosure by the Company
of Company Trade Secrets.
(f) Software. Section 3.17(f) of the Company Disclosure
Schedule sets forth a complete and accurate list of all of the material Software
(excluding licensed software that is contained in standard desktop applications
and is available through commercial distributors or in consumer retail stores).
Section 3.17(f) of the Company Disclosure Schedule specifically identifies all
material Software that is owned
25
exclusively by the Company (the "Owned Software") and all material Software that
is used by the Company in the conduct of their business as currently conducted
that is not exclusively owned by the Company (excluding licensed software that
is contained in standard desktop applications and is available through
commercial distributors or in consumer retail stores) (the "Licensed Software").
Except as may be set forth in Section 3.17(f) of the Company Disclosure Schedule
and as would not have an Material Adverse Effect:
(i) the Company is the owner of all right, title and
interest in and to all Owned Software and Intellectual Property Rights
relating thereto, free and clear of any and all liens and encumbrances
(subject to licenses granted in the ordinary course of business), and the
Company has not received any written notice or claim challenging the
Company's complete and exclusive ownership of all Owned Software and all
such Intellectual Property Rights relating thereto;
(ii) the Company has not assigned, licensed, transferred
or encumbered any of its rights in or to any Owned Software, to any
Person, excluding any non-exclusive licenses granted to distributors or
customers in the ordinary course of business;
(iii) no source code of any Owned Software has been
licensed or otherwise made available to any Person other than the Company
(other than pursuant to standard source code escrow agreements or
independent contractors subject to confidentiality obligations to the
Company), the Company has treated such source code as confidential and
proprietary business information, and has taken all reasonable steps to
protect the same as trade secrets of the Company;
(iv) none of the Owned Software contains any Software
that embody proprietary Intellectual Property Rights of any Person other
than the Company;
(v) the Company has lawfully acquired the right to use
the Licensed Software, as it is used in the conduct of their business as
presently conducted.
(g) [reserved]
(h) Agreements in Respect of Licensed Technology. Section
3.17(h) of the Company Disclosure Schedule contains a complete and accurate
specific list of all material agreements and arrangements pertaining to the
Licensed Software (excluding licensed software that is contained in standard
desktop applications and available through commercial distributors or in
consumer retail stores) (collectively, "Licensed Software Agreements") and a
complete and accurate specific list of all material agreements and arrangements
pertaining to any other technology used or practiced by the Company as to which
a Person other than the Company owns the applicable Intellectual Property Rights
(collectively, "Other Licensed Technology Agreements" and, together with
Licensed Software Agreements, the "Licensed Technology Agreements"). Section
3.17(h) of the Company Disclosure Schedule sets forth a complete and accurate
list of all royalty
26
obligations of the Company under any Licensed Technology Agreements. Except as
may be set forth in Section 3.17(h) of the Company Disclosure Schedule and as
would not have a Material Adverse Effect:
(i) all Licensed Technology Agreements are in full force
and effect, and the Company is not in material breach thereof, nor to the
Company's Knowledge is there any claim or information to the contrary;
(ii) all Licensed Technology Agreements will be
maintained by the Company to the extent within the Company's control in
full force and effect through the Closing;
(iii) there are no pending and, to the Company's
Knowledge, no threatened disputes or disagreements with respect to any
Licensed Technology Agreement;
(iv) [reserved]
(v) [reserved]
(vi) to the Company's Knowledge, the Licensed Technology
Agreements together expressly confer on the Company valid and enforceable
rights under or in respect of all of the Intellectual Property Rights
that are not owned exclusively by Company and that are necessary in the
Company's business as currently conducted (collectively, the "Licensed
Intellectual Property"); and
(vii) neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
will result in a breach of any of the material terms, conditions or
provisions of, or constitute a default under, or result in the material
impairment of any rights under, any Licensed Technology Agreement.
(i) Agreements Involving Distribution or Other Rights Granted
to Third Parties in Respect of Software. The Company does not have any
agreements and arrangements involving the grant by the Company to any Person of
any right to distribute, prepare derivative works based on, support or maintain
or otherwise commercially exploit any owned Software.
(j) Sufficiency of Owned and Licensed Intellectual Property.
Except as set forth in Section 3.17(j) of the Company Disclosure Schedule and as
would not have an Material Adverse Effect, the Company has all of the
Intellectual Property Rights necessary for the conduct of the Company's business
as presently conducted and all of the Intellectual Property Rights necessary to
operate such business after the Closing in substantially the same manner as such
business heretofore has been operated by the Company.
(k) [reserved]
27
(l) Employee Confidentiality Agreements. Except as set forth in
Section 3.17(l) of the Company Disclosure Schedule, all current and former
employees, contractors and consultants of the Company have entered into
confidentiality, invention assignment and proprietary information agreements
with the Company where appropriate, except as would not have an Material Adverse
Effect. The carrying on of the Company's business as currently conducted by the
employees, contractors and consultants of the Company does not, to the Company's
Knowledge, conflict with or result in a breach of the terms, conditions or
provisions of, or to the Company's Knowledge, constitute a default under, any
contract, covenant or instrument under which any of such employees, contractors
or consultants or the Company is now obligated.
SECTION 3.18. [reserved]
SECTION 3.19 Stock Options. Section 3.19 of the Company Disclosure
Schedule sets forth the following information concerning each of the Company
Personnel that has been granted Company Stock Options, the date of each such
grant, the total number of Shares for which the Company Stock Options are
exercisable, the number of Shares for which unvested options are exercisable and
the exercise price of all vested and unvested Company Stock Options.
SECTION 3.20. Insurance. The Company and its subsidiaries have
obtained and maintained in full force and effect insurance with responsible and
reputable insurance companies or associations in such amounts, on such terms and
covering such risks, as is customarily carried by reasonably prudent persons
conducting business or owning or leasing assets similar to those conducted,
owned or leased by the Company and its subsidiaries, except where the failure to
obtain or maintain such insurance would not have a Material Adverse Effect.
SECTION 3.21. Pool Certifications. All pools consisting of
Mortgage Loans that have been aggregated pursuant to the requirements of the
applicable Investor and assigned to collateralize securities ("Pools") are
properly balanced reconciled, fully funded and certified by the applicable
Investor or Agency.
SECTION 3.22. Brokers. No broker, finder or investment banker
(other than Friedman, Billings, Xxxxxx & Co., Inc., the Company's financial
adviser, a true and correct copy of whose entire engagement agreement has been
provided to Acquisition or Parent) is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Company.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF PARENT AND ACQUISITION
Parent and Acquisition hereby represent and warrant to the Company
as follows:
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SECTION 4.1. Organization.
(a) Each of Parent and Acquisition is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, and has all requisite power and authority to own, lease and
operate its properties and to carry on its businesses as now being conducted,
except in such jurisdictions where the failure to be so duly qualified or
licensed and in good standing would not have a Parent Material Adverse Effect.
The term "Parent Material Adverse Effect" means any change or effect that would
materially impair the ability of Parent and/or Acquisition to consummate the
transactions contemplated hereby.
(b) Each of Parent and Acquisition is duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing would not have a Parent Material Adverse Effect.
SECTION 4.2. Authority Relative to this Agreement. Each of Parent
and Acquisition has all necessary corporate power and authority to execute and
deliver this Agreement and the Stockholders' Agreement and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Stockholders' Agreement and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by the boards of directors of Parent and Acquisition and by Parent as
the sole stockholder of Acquisition and no other corporate proceedings on the
part of Parent or Acquisition are necessary to authorize this Agreement and the
Stockholders' Agreement or to consummate the transactions contemplated hereby
and thereby. This Agreement and the Stockholders' Agreement each have been duly
and validly executed and delivered by each of Parent and Acquisition and each
constitutes a valid, legal and binding agreement of each of Parent and
Acquisition enforceable against each of Parent and Acquisition in accordance
with its terms, except as such enforceability may be limited by any applicable
conservator, receivership, bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally, and
except as the availability of equitable remedies may be limited by the
application of general principles of equity (regardless of whether such
equitable principle are applied in a proceeding at law or in equity).
SECTION 4.3. Information Supplied. None of the information
supplied by Parent or Acquisition in writing for inclusion in the Disclosure
Statements will, at the respective times that the Proxy Statement (if necessary)
and the Schedule 14D-9 and any amendments of or supplements to any of the
foregoing are filed with the SEC and are first published or sent or given to
holders of Shares, and in the case of any required Proxy Statement, at the time
that it or any amendment thereof or supplement thereto is mailed to the
Company's stockholders, at the time of the Stockholders' Meeting or the written
consent of the stockholders, if either is required, or at the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading except that no representation or warranty is
29
made by Parent or Acquisition with respect to information supplied by the
Company for inclusion in the 14D-1. The Offer Documents shall comply in all
material respects as to form with applicable federal securities laws.
SECTION 4.4. Financing; Share Ownership. Parent has and will have
sufficient funds available to purchase all of the Shares that Parent agrees,
subject to the terms and conditions hereof, to purchase hereunder and to pay all
related fees and expenses, and will make such funds available to Acquisition
when required for the performance of its obligations hereunder. As of the date
hereof, Parent and Acquisition do not beneficially own any Shares.
SECTION 4.5. Consents and Approvals; No Violations. Except for
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Securities Act, the Bank Act,
as amended (the "Bank Act"), the Bank Holding Company Act of 1956, as amended
(the "Bank Holding Company Act"), state insurance and mortgage brokerage laws or
regulations, and the filing and acceptance for record or recordation of the
Merger Certificate as required by the DGCL, no filing with or notice to, and no
permit, authorization, consent or approval of, any Governmental Entity is
necessary for the execution and delivery by Parent or Acquisition of this
Agreement and the Stockholders' Agreement or the consummation by Parent or
Acquisition of the transactions contemplated hereby and thereby, except where
the failure to obtain such permits, authorizations, consents or approvals or to
make such filings or give such notice would not have a Parent Material Adverse
Effect. Neither the execution, delivery and performance of this Agreement and
the Stockholders' Agreement by Parent or Acquisition nor the consummation by
Parent or Acquisition of the transactions contemplated hereby and thereby will
(i) conflict with or result in any breach of any provision of the respective
Certificate of Incorporation or Bylaws (or similar charter or organizational
documents) of Parent or Acquisition, (ii) result in a violation or breach of or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, amendment, cancellation or acceleration
or Lien) under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, license, contract, agreement or other instrument or
obligation to which Parent or Acquisition or any of Parent's other subsidiaries
is a party or by which any of them or any of their respective properties or
assets may be bound or (iii) violate any order, writ, injunction, decree, law,
statute, rule or regulation applicable to Parent or Acquisition or any of
Parent's other subsidiaries or any of their respective properties or assets
except, in the case of (ii) or (iii), for violations, breaches or defaults which
would not have a Parent Material Adverse Effect.
SECTION 4.6. Brokers and Finders. Each of Parent and Acquisition
represents, as to itself and its affiliates, that no agent, broker, investment
banker, financial advisor or other firm or person is or will be entitled to any
brokers' or finders' fee or any other commission or similar fee in connection
with any of the transactions contemplated by this Agreement.
SECTION 4.7. Nature and Interim Operations of Acquisition.
Acquisition is a wholly owned, indirect subsidiary of the Parent and was formed
on March 9, 2000 solely for the purpose of engaging in the transactions
contemplated
30
hereby, has engaged in no other business activities and has conducted its
operations only as contemplated hereby.
ARTICLE 5
COVENANTS
SECTION 5.1. Interim Operations. From the date of this Agreement
until the Tender Offer Purchase Time, except as set forth in Section 5.1 of the
Company Disclosure Schedule or as expressly contemplated by any other provision
of this Agreement, unless the Parent has consented in writing thereto, the
Company shall, and shall cause each of its subsidiaries to:
(a) conduct its business and operations only in the ordinary
course of business consistent with past practice;
(b) use reasonable efforts to preserve intact the business,
organization, goodwill, rights, licenses, permits and franchises of the Company
and its subsidiaries and maintain their existing relationships with customers,
suppliers and other Persons having business dealings with them;
(c) use reasonable efforts to keep in full force and effect
adequate insurance coverage and maintain and keep its material Company Assets in
good repair, working order and condition, normal wear and tear excepted;
(d) not amend or modify its respective Certificate of
Incorporation, Bylaws, partnership agreement or other charter or organizational
documents;
(e) other than pursuant to the stock purchase right identified
as Item 1 in Section 3.2(a) of the Disclosure Schedule and other than up to
20,000 Company Stock Options that may be issued under the 2000 Stock Option Plan
in connection with the Company's fair share plan, not authorize for issuance,
issue, sell, grant, deliver, pledge or encumber or agree or commit to issue,
sell, grant, deliver, pledge or encumber any shares of any class or series of
capital stock of the Company or any of its subsidiaries or any other equity or
voting security or equity or voting interest in the Company or any of its
subsidiaries, any securities convertible into or exercisable or exchangeable for
any such shares, securities or interests, or any options, warrants, calls,
commitments, subscriptions or rights to purchase or acquire any such shares,
securities or interests (other than issuances of Shares upon exercise of Company
Stock Options granted prior to the date of this Agreement to directors,
officers, employees and consultants of the Company in accordance with the
Company Stock Plan as currently in effect);
(f) not (i) split, combine or reclassify any shares of its
stock or issue or authorize or propose the issuance of any other securities in
respect of, in lieu of, or in substitution for, shares of its stock or (ii) in
solely the case of the Company, declare, set aside or pay any dividends on, or
make other distributions in respect of, any of the Company's stock, repurchase,
redeem or otherwise acquire, or agree or commit to repurchase, redeem or
otherwise acquire, any shares of stock or other equity or debt securities or
equity interests of the Company or any of its subsidiaries;
31
(g) except as contemplated by Section 2.10, not amend or
otherwise modify the terms of any Company Stock Options or the Company Option
Plans, the effect of which shall be to make such terms more favorable to the
holders thereof or Persons eligible for participation therein;
(h) other than normal salary increases in the ordinary
course of business consistent with past practice, not (i) materially increase
the compensation payable or to become payable to any directors, officers or
employees of the Company or any of its subsidiaries except arrangements in
connection with employee transfers and agreements with new employees having a
salary of greater than $75,000, (ii) grant any severance or termination pay to,
or enter into any employment or severance agreement with any director or officer
or employee (other than in the ordinary course of business) of the Company or
any of its subsidiaries, or (iii) establish, adopt, enter into or amend in any
material respect or take action to accelerate any material rights or material
benefits under any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any director or officer or
employee (other than in the ordinary course of business) of the Company or any
of its subsidiaries;
(i) not acquire or agree to acquire (including, without
limitation, by merger, consolidation, or acquisition of stock, equity securities
or interests, or assets) any corporation, partnership, joint venture,
association or other business organization or division thereof or otherwise
acquire or agree to acquire any assets of any other Person outside the ordinary
course of business consistent with past practice or any interest in any real
properties (other than in the ordinary course of business);
(j) not incur, assume or guarantee any indebtedness for
borrowed money (including draw-downs on letters or lines of credit) or issue any
notes, bonds, debentures, debt instruments, evidences of indebtedness or other
debt securities of the Company or any of its subsidiaries or any options,
warrants or rights to purchase or acquire any of the same, except for (i)
renewals of existing bonds and letters of credit in the ordinary course of
business not to exceed $1,000,000 in the aggregate; (ii) incurring indebtedness
for borrowed money in the ordinary course of business consistent with past
practice in an aggregate amount not to exceed $100,000 or (iii) advances in the
ordinary course pursuant to (A) working capital lines of credit in an amount not
to exceed $15,000,000 in the aggregate and (B) warehouse lines of credit set
forth in Section 3.16(a)(v) of the Company Disclosure Schedule, or any renewal
or replacement thereof;
(k) not sell, lease, license, encumber or otherwise dispose of,
or agree to sell, lease, license, encumber or otherwise dispose of, any material
properties or assets of the Company or any of its subsidiaries, other than in
the ordinary course of business;
(l) not authorize or make any capital expenditures (including
by lease) in excess of $500,000 in the aggregate other than the ordinary course
of business for the Company and all of its subsidiaries;
32
(m) not make any material change in any of its accounting or
financial reporting (including tax accounting and reporting) methods, principles
or practices, including with respect to the method of accounting for loans held
for sale or premiums for risk management instruments, or recognizing loan
origination income, net premium income, or gains or losses on risk management
instruments, except as may be required by a change in law or in GAAP;
(n) not make any material tax election or settle or compromise
any material United States or foreign tax liability;
(o) except in the ordinary course of business consistent with
past practice, not amend, modify or terminate any material Contract or waive,
release or assign any material rights or claims thereunder;
(p) other than in the ordinary course of business, not enter
into contracts that reasonably would involve financial obligations by the
Company exceeding $100,000;
(q) not adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its subsidiaries;
(r) fail to report any facts, circumstance or events that has
resulted in any insurance claims that, individually or in the aggregate, would
have a Material Adverse Effect; and
(s) except as to subsections (a), (b) and (c) of Section 5.1,
not agree or commit in writing or otherwise to do any of the foregoing.
SECTION 5.2. Stockholders' Meeting; Action by Consent.
(a) The Company, acting through the Board, shall, if required
for the Merger under the DGCL:
(i) duly call, give notice of, convene and hold a
meeting of its stockholders (the "Stockholders' Meeting"), to be held as
soon as practicable after the Tender Offer Purchase Time for the purpose
of considering and taking action upon this Agreement using a record date,
to the extent possible, that is a day on which the Shares are listed on
the Nasdaq National Market;
(ii) except as otherwise permitted under Section 5.4,
include in the Proxy Statement (A) the recommendation of the Board that
stockholders of the Company vote in favor of the approval and adoption of
this Agreement, the Merger and the other transactions contemplated hereby
(including the Plan and Agreement of Merger attached hereto as Exhibit
C), and (B) a statement that the Board believes that the consideration to
be received by the stockholders of the Company pursuant to the Merger is
fair to such stockholders; and
33
(iii) except as otherwise permitted under Section 5.4, use
reasonable efforts (A) to obtain and furnish the information required to
be included by it in the Proxy Statement, if any, and, after consultation
with Parent and Acquisition, cause the Proxy Statement to be mailed to
its stockholders at the earliest practicable time following the Tender
Offer Purchase Time, and (B) to obtain the necessary approvals by its
stockholders of this Agreement and the transactions contemplated hereby.
At such meeting, Parent and Acquisition will, and will cause their
affiliates to, vote all Shares owned by them in favor of approval and
adoption of this Agreement, the Merger and the transactions contemplated
hereby.
(b) Notwithstanding subsection (a), if Parent, Acquisition and
any other subsidiary of Parent collectively acquire at least 90% of the issued
and outstanding Shares, the parties shall take all necessary and appropriate
action to cause the Merger to become effective as soon as practicable after the
purchase of the Shares pursuant to the Offer without a Stockholders' Meeting in
accordance with Section 253 of the DGCL.
SECTION 5.3. Termination of Registration of Shares. The Company,
acting through its Board, at the earliest practicable time following the Tender
Offer Purchase Time (but in no event prior to the record date for the
Stockholders' Meeting, if necessary, called for the purpose of approving the
Merger), if the number of holders of record of the Shares at such time is
smaller than 300, take all steps necessary or appropriate to terminate
registration of the Shares under the Exchange Act, including without limitation
the filing of Exchange Act Form 15 with the SEC and of a notice to the Nasdaq
National Market to delist the Shares.
SECTION 5.4. Other Potential Acquirers.
(a) The Company and its subsidiaries shall and shall direct
and use their reasonable best efforts to cause, its affiliates and their
respective officers, directors, employees, representatives and agents to
immediately cease any discussions or negotiations with any parties with respect
to any Third Party Acquisition (as defined below). The Company and its
subsidiaries shall and shall direct and use their reasonable best efforts to
cause their respective officers, directors, employees, representatives or
agents not to, directly or indirectly, encourage, solicit, participate in or
initiate discussions or negotiations with or provide any non-public information
to any Person or group (other than Parent and Acquisition or any designees of
Parent and Acquisition) concerning any Third Party Acquisition; provided,
however, that nothing herein shall prevent the Board from taking and disclosing
to the Company's stockholders a position contemplated by Rules 14d-9 and 14e-2
promulgated under the Exchange Act with regard to any tender offer; and
provided further, that notwithstanding the foregoing, if, prior to the Tender
Offer Purchase Time, the Company receives a "Potential Proposal" (defined as an
unsolicited Superior Proposal (defined below) or an unsolicited proposal, offer
or indication that the Company in good faith believes may lead to a Superior
Proposal), then, following written notice to Parent and Acquisition, the
Company may, pursuant to a non-disclosure agreement with terms regarding the
protection of confidential information at least as restrictive as such terms in
the Confidentiality Agreement, provide the Person making the Potential Proposal
with the same non-public information that the Company supplied to
34
Parent and consider and negotiate a Potential Proposal. The Company shall
promptly, and in any event before furnishing non-public information to any such
Person, notify the Parent in the event it receives any proposal or inquiry
concerning a Third Party Acquisition, including the material terms and
conditions thereof and the identity of the party submitting such proposal.
(b) Except as set forth in this Section 5.4(b), the Board shall
not withdraw its recommendation of the transactions contemplated hereby or
approve or recommend, or cause the Company to enter into any agreement with
respect to, any Third Party Acquisition. Notwithstanding the foregoing, if prior
to the Tender Offer Purchase Time the Board by a majority vote determines in its
good faith judgment, after consultation with its legal counsel, that failure to
do so would be inconsistent with their fiduciary duties under applicable law,
the Board may withdraw its recommendation of the transactions contemplated
hereby or approve or recommend a Superior Proposal; provided, however, that the
Company shall not be entitled to enter into any agreement with respect to a
Superior Proposal unless and until this Agreement is terminated by its terms
pursuant to Section 8.1. For the purposes of this Agreement, "Third Party
Acquisition" means the occurrence of any of the following events: (i) the
acquisition of the Company by merger or otherwise by any Person (which includes
a "person" as such term is defined in Section 13(d)(3) of the Exchange Act)
other than Parent, Acquisition or any affiliate thereof (a "Third Party") or by
an officer or director of the Company; (ii) the acquisition by a Third Party of
more than 20% of the total assets of the Company and its subsidiaries taken as a
whole; (iii) the acquisition by a Third Party of Shares which, together with all
other Shares owned by such Third Party and its affiliates, equal 20% or more of
the issued and outstanding Shares; (iv) the adoption by the Company of a plan of
liquidation or the declaration or payment of an extraordinary dividend; (v) the
repurchase by the Company or any of its subsidiaries of more than 20% of the
issued and outstanding Shares; or (vi) the acquisition by the Company or any
subsidiary by merger, purchase of stock or assets, joint venture or otherwise of
a direct or indirect ownership interest or investment in any business whose
annual revenues, net income or assets attributable to such ownership interest or
investment is equal or greater than 20% of the annual revenues net income or
assets of the Company. For purposes of this Agreement a "Superior Proposal"
means any bona fide proposal to acquire directly or indirectly for consideration
consisting of cash and/or securities all of the Shares then issued and
outstanding or all or substantially all the assets of the Company and otherwise
on terms which the Company Board by a majority vote determines in its good faith
judgment (consistent with the advice of a financial adviser of nationally
recognized reputation) to be more favorable to the Company's stockholders than
the Merger and the Offer. At and after the Tender Offer Purchase Time, the
Company shall not under any circumstances withdraw its recommendation of the
transactions contemplated hereby or approve or recommend, or cause the Company
to enter into any agreement with respect to, any Third Party Acquisition.
SECTION 5.5 Access to Information. From the date of this Agreement
until the Closing Time, upon reasonable prior notice, the Company shall (and
shall cause each of its subsidiaries to) (a) give the Parent and its
representatives full access, during normal business hours and at other
reasonable times without disruption to the Company's normal business affairs, to
the books, records, contracts, commitments, properties, offices
35
and other facilities of it and its subsidiaries, (b) arrange for Parent and its
representatives reasonable access, during normal business hours, to the
officers, employees and agents of it and its subsidiaries, and (c) furnish
promptly to the Parent and its representatives such financial and operating data
and other information concerning the business, operations, properties,
contracts, records and personnel of the Company and its subsidiaries as the
Parent may from time to time reasonably request. Parent agrees that it will not,
and will cause its representatives not to, use any information or access
obtained pursuant to this Section 5.5 for any purpose not reasonably related to
the consummation of the transactions contemplated by this Agreement. All
information obtained by the Parent pursuant to this Section 5.5 shall be kept
confidential in accordance with the confidentiality provisions of the Letter
Agreement between Parent and the Company dated as of January 31, 2000 (the
"Confidentiality Agreement").
SECTION 5.6. Further Actions.
(a) Each of the parties hereto shall use commercially
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations, and consult and fully cooperate with and provide
reasonable assistance to each other party hereto and their respective
representatives in order, to consummate and make effective the transactions
contemplated by this Agreement as promptly as practicable hereafter, including,
without limitation, (i) using commercially reasonable efforts to make all
filings, applications, notifications, reports, submissions and registrations
with, and to obtain all consents, approvals, authorizations or permits of,
Governmental Entities or other Persons as are necessary for the consummation of
the Merger and the other transactions contemplated hereby (including, without
limitation, pursuant to the HSR Act, the Bank Act, the Bank Holding Company Act,
state insurance or mortgage broker laws, the Home Owners' Loan Act, the
Securities Act, the Exchange Act, Blue Sky Laws, Delaware law and other
applicable laws and regulations in effect in the United States or any other
jurisdiction), and (ii) taking such actions and doing such things as any other
party hereto may reasonably request in order to cause any of the conditions to
such other party's obligation to consummate the Merger as specified in Article 7
of this Agreement to be fully satisfied. Prior to making any application to or
filing with any Governmental Entity or other Person in connection with this
Agreement, the Company, on the one hand, and the Parent, on the other hand,
shall provide the other with drafts thereof and afford the other a reasonable
opportunity to comment on such drafts.
(b) Without limiting the generality of the foregoing, each of
the Parent and the Company agrees to cooperate and use reasonable efforts to
vigorously contest and resist any action, suit, proceeding or claim, and to have
vacated, lifted, reversed or overturned any injunction, order, judgment or
decree (whether temporary, preliminary or permanent), that delays, prevents or
otherwise restricts the consummation of the Merger or any other transaction
contemplated by this Agreement, and to take any and all actions (but not
including the disposition of material assets, divestiture of businesses, or the
withdrawal from doing business in particular jurisdictions, if material) as may
be required by Governmental Entities as a condition to the granting of any such
necessary approvals or as may be required to avoid, vacate, lift, reverse or
overturn any injunction, order, judgment, decree or regulatory action (provided,
however, that in no event shall any party
36
hereto take, or be required to take, any action that could reasonably be
expected to have a Material Adverse Effect or that, individually or in the
aggregate, could reasonably be expected to have a Parent Material Adverse
Effect).
(c) The Company shall take all necessary action prior to the
Effective Time to cause the dilution provisions of the Rights Agreement to be
inapplicable to the transactions contemplated by this Agreement, without any
payment to holders of Rights.
(d) The Board shall administer the Company's Employee Stock
Purchase Plan such that no action thereunder would be permitted to be taken by
the President or any other officer of the Company without the approval of the
Board.
SECTION 5.7. Public Announcements. Parent, Acquisition and the
Company, as the case may be, will consult with one another and mutually agree
upon the content and timing of any press releases or public statements with
respect to the transactions contemplated by this Agreement, including, without
limitation, the Offer and the Merger, and shall not issue any such press release
or make any such public statement prior to such consultation and agreement
except to the extent that such disclosure may be required by applicable law or
by obligations pursuant to any listing agreement with the Toronto Stock
Exchange, the New York Stock Exchange or the Nasdaq National Market as
determined by Parent, Acquisition or the Company, as the case may be.
SECTION 5.8. Employee Benefit Matters.
(a) Parent agrees that, effective as of the Effective Time and
for a one year period following the Effective Time, Parent shall provide, or
cause Acquisition and its subsidiaries and successors to provide, those persons
who, immediately prior to the Effective Time, were employees of the Company and
its subsidiaries and who continue in such employment ("Continuing Employees"),
with benefits and compensation no less favorable in the aggregate to benefits
and compensation that are provided to the Continuing Employees as of the date of
this Agreement.
(b) Except with respect to accruals under any defined benefit
pension plan, at such time as a Continuing Employee is provided benefits under
the benefit plans or arrangements of Parent or the Surviving Corporation, or any
subsidiary of Parent or the Surviving Corporation, Parent will, or will cause
the Surviving Corporation and its subsidiaries to, give such Continuing Employee
full credit for purposes of eligibility and vesting under such employee benefit
plans or arrangements maintained by Parent, Acquisition or any subsidiary of
Parent or Acquisition for such Continuing Employees' service with the Company or
any subsidiary of the Company to the same extent recognized by the Company at
such time. Parent will, or will cause the Surviving Corporation and its
subsidiaries to, (i) waive all limitations as to preexisting conditions (except
to the extent that such limitations were not waived under the Company's
then-existing welfare plans), exclusions and waiting periods with respect to
participation and coverage requirements applicable to the Continuing Employees
under any welfare plan that such employees may be eligible to participate in
after the Effective Time, and (ii) provide each Continuing Employee with credit
for any co-payments and deductibles paid prior to the Effective Time in
satisfying any applicable deductible or out-of-pocket
37
requirements under any welfare plans that such employees are eligible to
participate in after the Effective Time to the same extent as if those
deductibles or co-payments had been paid under the welfare plans for which such
employees are eligible after the Effective Time.
(c) Parent and Acquisition (i) to cause Acquisition after
consummation of the Merger contemplated by this Agreement to assume, honor, and
pay all amounts provided under, all Company Employee Plans in accordance with
their terms, and (ii) to honor and to cause Acquisition to honor, all rights,
privileges and modifications to or with respect to any such Company Employee
Plans that become effective as a result of any of the transactions contemplated
by this Agreement.
SECTION 5.9. Expenses. Whether or not the Merger is consummated,
subject to Section 8.3 hereof, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby (including, without
limitation, fees and disbursements of representatives) shall be borne by the
party which incurs such cost or expense.
SECTION 5.10. Notification of Certain Matters. The Company shall
give prompt notice to Parent and Acquisition, and Parent and Acquisition shall
give prompt notice to the Company, of (a) the occurrence or nonoccurrence of any
event the occurrence or nonoccurrence of which would be likely to cause any
covenant, condition or agreement contained in this Agreement not to be complied
with or satisfied in all material respects prior to the Tender Offer Purchase
Time and (b) any material failure of the Company, Parent or Acquisition, as the
case may be, to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it hereunder; provided, however, that the
delivery of any notice pursuant to this Section 5.10 shall not cure such breach
or non-compliance or limit or otherwise affect the remedies available hereunder
to the party receiving such notice.
SECTION 5.11. Guarantee of Performance. Parent hereby guarantees
the performance by Acquisition and, after the Effective Time, the Surviving
Corporation of its obligations under this Agreement, including but not limited
to the Surviving Corporation's obligations under Section 5.13.
SECTION 5.12. Effect of Parent's Knowledge. If Parent or any
director, officer, employee, counsel, accountant, advisor or other
representative has obtained, prior to the execution of this Agreement, actual
knowledge of any information relevant to accuracy of the representation and
warranties of the Company under this Agreement, then for purposes of determining
whether the condition set forth in Section 6.1(a)(iv) has been satisfied, such
information shall be deemed to have been disclosed by the Company in the Company
Disclosure Schedule.
SECTION 5.13. Indemnification; Directors' and Officers' Insurance.
Subject to the occurrence of the Effective Time, the Surviving Corporation
shall cause its Certificate of Incorporation and Bylaws to contain the
38
indemnification provisions set forth in the Certificate of Incorporation and
Bylaws of the Company on the date of this Agreement, which provisions
thereafter shall not be amended, repealed or otherwise modified after the
Effective Time in any manner that would adversely affect the rights thereunder
of individuals who at any time prior to the Effective Time were directors,
officers or employees of the Company in respect of actions or omissions
occurring at or prior to the Effective Time (including, without limitation, the
transactions contemplated by this Agreement). Parent shall cause the Surviving
Corporation to comply with the terms of and maintain in existence the
indemnification agreements in effect on the date of this Agreement. In the
event the Surviving Corporation or any of its successors or assigns (a)
consolidates with or merges into any other Person and the Surviving Corporation
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (b) transfers all or substantially all of its
properties and assets to any Person, then, and in each such case, proper
provision shall be made so that the successors and assigns of the Surviving
Corporation shall assume the obligations set forth in this Section 5.13. The
Surviving Corporation shall obtain and maintain in effect for not less than
five years after the Effective Time, the current policies of directors' and
officers' liability insurance and fiduciary liability insurance maintained by
the Company and the Company's subsidiaries with respect to matters occurring at
or prior to the Effective Time (including, without limitation, the transactions
contemplated by this Agreement), provided, that Parent may, with no lapse in
coverage, substitute therefore policies of substantially the same coverage
containing terms and conditions which are no less advantageous, in any material
respect, to the Company's present or former directors, officers, employees,
agents or other individuals otherwise covered by such insurance policies prior
to the Effective Time (the "Indemnified Parties"). This Section 5.13 is
intended to benefit the Indemnified Parties and shall be binding on all
successors and assigns of Parent, Acquisition, the Company and the Surviving
Corporation.
ARTICLE 6
CONDITIONS TO THE OFFER
SECTION 6.1. Conditions to the Offer.
(a) Notwithstanding any other provisions of the Offer,
Acquisition shall not be required to accept for payment or, subject to any
applicable rules and regulations of the SEC including Rule 14e-l(c) under the
Exchange Act (relating to Acquisition's obligation to pay for or return
tendered Shares promptly after termination or withdrawal of the Offer), pay
for, and may delay the acceptance for payment of or, subject to the
restrictions referred to above, the payment for, any tendered Shares, if (w)
any waiting periods applicable to the Offer under the HSR Act shall not have
been terminated or shall not have expired and any required approvals or notices
under the Bank Act, the Bank Holding Company Act and required approvals from
state Governmental Entities responsible for regulating, in the aggregate,
ninety percent (90%) of the Company's and its subsidiary's average mortgage
origination volume for the period 1998 and 1999 shall not have been obtained,
and, in the case of any approval, authorization or consent, shall not be in full
force and effect and all conditions applicable thereto shall not have been
satisfied; (x) any of the consents or approvals of any Person other than a
Governmental Entity, in connection with the execution, delivery and performance
of this Agreement shall not have been obtained; except where the failure to
have obtained any such consent or approval would not have a Material Adverse
Effect; (y) the Minimum Condition shall not have been satisfied or (z) at any
time on or after the date of this Agreement and before the time of acceptance
of such Shares for payment pursuant to the Offer, any of the following events
shall occur:
(i) [reserved];
39
(ii) from the date of this Agreement until the Tender
Offer Purchase Time, any Governmental Entity or court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, executive order, decree, injunction or
other order which is in effect at the Tender Offer Purchase Time and
which (A) makes the acceptance for payment of, or the payment for, some
or all of the Shares illegal or otherwise prohibits consummation of the
Offer, the Merger or any of the other transactions contemplated hereby,
or (B) prohibits Acquisition from operating or deriving benefits from the
majority of the value of the operations of the Company and its
subsidiaries taken as a whole to operate the Company; provided, however,
that the parties shall use reasonable efforts (subject to the proviso in
Section 5.6(b)) to cause any such decree, judgment or other order to be
vacated or lifted prior to September 30, 2000;
(iii) [reserved];
(iv) the representations and warranties of the Company
set forth in this Agreement shall not be true and correct on the date of
this Agreement or the Company shall have breached or failed in any
respect to perform or comply with any material obligation, agreement or
covenant required by this Agreement to be performed or complied with by
it at or prior to such time except, where the failure of representations
and warranties (without regard to materiality qualifications therein
contained) to be true and correct, or the performance or compliance with
such obligations, agreements or covenants, would not, individually or in
the aggregate, have a Material Adverse Effect;
(v) this Agreement shall have been terminated in
accordance with its terms;
(vi) there shall have occurred an acceptance by the
Company of a Superior Proposal;
(vii) [reserved];
(viii) the Board shall have withdrawn or modified in a
manner adverse to Parent its approval or recommendation of the Offer,
shall have recommended to the Company's stockholders a Third Party
Acquisition or shall have adopted any resolution to effect any of the
foregoing;
40
(ix) [reserved];
(x) [reserved];
(xi) [reserved];
(xii) from the date of this Agreement until the Tender
Offer Purchase Time, there shall have occurred the commencement of a war
having a Material Adverse Effect on the Company;
which, in the reasonable judgment of Parent and Acquisition, in any such case,
and regardless of the circumstances giving rise to any such condition, makes it
inadvisable to proceed with the Offer and/or with such acceptance for payment or
payments.
(b) The conditions set forth in Section 6.1(a) (other than the
Minimum Condition) are for the sole benefit of Acquisition and may be asserted
by Acquisition regardless of any circumstances giving rise to any condition and
may be waived (other than the Minimum Condition) by Acquisition, in whole or in
part, at any time and from time to time, in the sole discretion of Acquisition.
The failure by Parent or Acquisition (or any affiliate of Acquisition) at any
time to exercise any of the foregoing rights will not be deemed a waiver of any
right and each right will be deemed an ongoing right which may be asserted at
any time and from time to time.
ARTICLE 7
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.1. Conditions to Each Party's Obligations to Effect the
Merger. The respective obligations of each party hereto to effect the Merger are
subject to the satisfaction at or prior to the Closing Time of the following
conditions:
(a) this Agreement, the Merger and the other transactions
contemplated hereby shall have been approved by all necessary corporate action
of the Company, including, if necessary, adoption by vote of the stockholders of
the Company provided that Parent and Acquisition shall have complied with their
obligations in respect of the voting of Shares set forth in Section 5.2(a)(iii);
(b) no Governmental Entity or court of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, executive order, decree, injunction or other order which is in
effect and which makes the payment of the Cash Merger Consideration illegal or
otherwise prohibits the Merger; and
(c) [reserved]
41
(d) Acquisition shall have purchased Shares pursuant to the
Offer in accordance with the terms of this Agreement and the Offer; provided,
that neither Parent nor Acquisition may invoke this condition if Acquisition
shall have failed to purchase, in violation of the terms of this Agreement or
the Offer, Shares validly tendered and not withdrawn pursuant to the Offer.
ARTICLE 8
TERMINATION; AMENDMENT; WAIVER
SECTION 8.1. Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Closing Time whether before or
after approval and adoption of this Agreement by the Company's stockholders:
(a) by mutual written consent of Parent, Acquisition and the
Company;
(b) by Parent or the Company if (i) any Governmental Entity or
court of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, executive order, decree,
injunction or other order which is in effect and which makes payment of the Per
Share Amount or the Cash Merger Consideration illegal or otherwise prohibits
the Offer or the Merger or (ii) Acquisition shall not have purchased Shares
pursuant to the Offer or the Merger shall not have occurred on or prior to
September 30, 2000, provided, that the right to terminate this Agreement
pursuant to this Section 8.1(b) shall not be available to any party whose
failure to fulfill any of its obligations under this Agreement results in such
failure to purchase;
(c) by Parent and Acquisition prior to the Tender Offer
Purchase Time if there shall have been a breach of any covenant or agreement on
the part of the Company resulting in a Material Adverse Effect or a Parent
Material Adverse Effect which shall not have been cured prior to the earlier of
(A) 10 days following notice of such breach and (B) two business days prior to
the date on which the Offer expires as such date may be extended;
(d) by the Company prior to the Tender Offer Purchase Time if
(i) the Company shall have received a Superior Proposal, shall have furnished
Parent a reasonable written notice advising Parent that the Board has received a
Superior Proposal, specifying the material terms and conditions of such Superior
Proposal and identifying the Person making such Superior Proposal and Parent
shall not, within three business days of Parent's receipt of the Notice of
Superior Proposal, have made an offer which the Company Board, by a majority
vote, determines in its good faith judgment (consistent with the advice of a
financial advisor of nationally recognized reputation) to be as favorable to the
Company's stockholders as such Superior Proposal, provided, however, that such
termination under this clause (i) shall not be effective until payment of the
fee required by Section 8.3(b); (ii) there shall have been a breach of any
representation or warranty on the part of Parent or Acquisition which materially
adversely affects (or materially delays) the
42
consummation of the Offer or (iii) there shall have been a material breach of
any covenant or agreement on the part of Parent or Acquisition and which
materially adversely affects (or materially delays) the consummation of the
Offer which shall not have been cured prior to the earlier of (A) 10 days
following notice of such breach and (B) two business days prior to the date on
which the Offer expires.
SECTION 8.2. Effect of Termination. In the event of the
termination and abandonment of this Agreement pursuant to Section 8.1, this
Agreement shall forthwith become void and have no effect without any liability
on the part of any party hereto or its affiliates, directors, officers or
stockholders other than the provisions of this Section 8.2 and the last sentence
of Sections 5.5 and Sections 8.3, and 9.1 through 9.12 hereof. Nothing contained
in this Section 8.2 shall relieve any party from liability for any willful
breach of this Agreement.
SECTION 8.3. Fees and Expenses.
(a) In the event this Agreement is terminated pursuant to
certain provisions, as set forth in Section 8.3(b) below, subject to the
provisions of Section 8.3(c), the Company shall pay to Acquisition the amount of
$3,500,000 (the "Breakup Fee") immediately upon such a termination.
(b) Subject to the provisions of Section 8.3(c), the Breakup
Fee shall be payable
(i) if the Offer is terminated pursuant to Section
6.1(a)(viii) and within one year after such termination either (x)the
Company enters into an agreement to merge with another company (other
than a merger pursuant to which the stockholders of the Company will
acquire more than fifty percent (50%) of the voting securities of such
surviving corporation) or enters into an agreement pursuant to which more
than 50% of the issued and outstanding Shares are acquired by another
person or pursuant to which new voting securities are issued to another
person or to the stockholders of another company which will aggregate
more than fifty percent (50%) of the outstanding voting securities of the
Company after such issuance or (y) another person acquires more than
fifty percent (50%) of the issued and outstanding Shares, in which case
the Company shall promptly, but in no event later than two days after the
date of any of the events in (x) or (y), pay Parent the Breakup Fee; or
(ii) the Company shall have terminated this Agreement
pursuant to Section 8.1(d)(i).
(c) Notwithstanding the provisions of subsections (a) and (b)
above, Acquisition may, at its sole option, but subject to Section 8.3(d), waive
payment of the Breakup Fee in order to exercise its options to purchase certain
Shares pursuant to Section 3 of the Stockholders' Agreement (the "Options"). In
the event of such exercise, the Breakup Fee shall no longer be payable.
(d) Notwithstanding anything to the contrary contained herein,
in the event that the Company gives Parent the notice specified in Section
8.1(d) (the "Superior Proposal Notice") and Acquisition or its designee
exercises its Options under Section 3 of the Stockholders' Agreement within the
applicable three-day period, then at Acquisition's or such designee's election
(made in writing within such three-day exercise period) (i) the Agreement shall
not be terminated
43
and Parent shall purchase or cause to be purchased the Shares not subject to
the Option ("Remaining Shares") at a per Share price in cash equal to the per
Share value of the consideration payable pursuant to the applicable Superior
Proposal, or (ii) the Agreement shall be terminated and Parent shall sell or
cause Acquisition or its designee to sell the Shares acquired pursuant to the
exercise of the Option or shall assign its right to acquire such Shares
pursuant to the Stockholders' Agreement on the terms and conditions and to the
person specified in the Superior Proposal pursuant to the related agreement;
provided that neither Parent nor Acquisition shall have the right to make the
election specified above in the event that either Parent or Acquisition accepts
the Breakup Fee. The acquisition of the Remaining Shares shall be made pursuant
to a merger conducted in accordance with Article 2 and Section 5.2 as if the
exercise of the Option constituted the closing of the Offer after satisfaction
of the applicable conditions. The Parent and Acquisition shall take all actions
necessary to effect such acquisition, including without limitation, causing
their Shares to be voted in favor of such merger.
SECTION 8.4. Amendment. This Agreement may be amended by action
taken by the Board subject to Section 1.3(c), and by the parties hereto at any
time before or after approval, if necessary, of the Merger by the stockholders
of the Company but, after any such approval, no amendment shall be made which
requires the approval of such stockholders under applicable law without such
approval. This Agreement may not be amended except by an instrument in writing
signed on behalf of the parties hereto.
SECTION 8.5. Extension; Waiver. At any time prior to the Closing
Time, each party hereto may (i) extend the time for the performance of any of
the obligations or other acts of the other party, (ii) waive any inaccuracies in
the representations and warranties of the other party contained herein or in any
document certificate or writing delivered pursuant hereto or (iii) waive
compliance by the other party with any of the agreements or conditions contained
herein. Any agreement on the part of any party hereto to any such extension or
waiver shall be valid only if set forth in an instrument, in writing, signed on
behalf of such party. The failure of any party hereto to assert any of its
rights hereunder shall not constitute a waiver of such rights.
ARTICLE 9
MISCELLANEOUS
SECTION 9.1. Entire Agreement; Assignment. This Agreement, the
Confidentiality Agreement and the Stockholders' Agreement together (a)
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof and supersedes all other prior agreements and
understandings both written and oral among the parties or any of them with
respect to the subject matter hereof and (b) shall not be assigned by operation
of law or otherwise.
SECTION 9.2. Survival of Representations and Warranties. The
representations and warranties made herein shall not survive beyond the earlier
of (i) termination of this Agreement or (ii) the Tender Offer Purchase Time, in
the case of the representations and warranties of Parent or Acquisition or the
purchase of Shares by Acquisition pursuant to the Offer, in the case of the
representations and warranties of the Company. This Section 9.2 shall not limit
any covenant or agreement of the parties
44
hereto which by its terms contemplates performance after the Tender Offer
Purchase Time.
SECTION 9.3. Validity. If any provision of this Agreement or the
application thereof to any Person or circumstance is held invalid or
unenforceable the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected thereby and to
such end the provisions of this Agreement are agreed to be severable.
SECTION 9.4. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in person, by
facsimile or by registered or certified mail (postage prepaid, return receipt
requested) to each other party as follows:
if to Parent or Acquisition: ROYAL BANK OF CANADA
000 Xxx Xxxxxx,
00xx Xxxxx, Xxxxx Xxxxx
Xxxxxxx, Xxxxxxx
X0X0X0 Xxxxxx
Telecopier: 000-000-0000
Attention: Xxxxxx X. Xxxxxx
Senior Vice President, Strategic Initiatives
with copies to: RBC Head Office Law Department
1 Place Ville Xxxxx
0xx Xxxxx, Xxxx Xxxx
Xxxxxxxx, Xxxxxx
X0X0X0 Xxxxxx
Telecopier (000) 000-0000
Attention: Xxxxx X. Xxxxxxxxx
Vice President and Associate General Counsel
Xxxxxx, Xxxx & Xxxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Telecopier: (000) 000-0000
Attention: Xxxxxxxx X. Xxxxx, Esq.
if to the Company to: PRISM FINANCIAL CORPORATION
000 X. Xxxxxxx
Xxxxxxx, XX 00000
Telecopier (000) 000-0000
Attention: Xxxx X. Filler
President
45
with a copy to: Skadden, Arps, Slate, Xxxxxxx & Xxxx
(Illinois)
000 Xxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Telecopier: (000) 000-0000
Attention: Xxxx X. Xxxxxxxxx, Esq.
or to such other address as the Person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
SECTION 9.5. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware without
regard to the principles of conflicts of law thereof.
SECTION 9.6. Descriptive Headings. The descriptive headings herein
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
SECTION 9.7. Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto and its successors and
permitted assigns and nothing in this Agreement express or implied is intended
to or shall confer upon any other Person any rights, benefits or remedies of any
nature whatsoever under or by reason of this Agreement; provided, however, that
the provisions of Section 5.12 shall inure to the benefit of and be enforceable
by the Indemnified Parties.
SECTION 9.8. Certain Definitions. For the purposes of this
Agreement the term:
(a) "affiliate" means a Person that, directly or indirectly,
through one or more intermediaries controls, is controlled by or is under common
control with the first-mentioned Person;
(b) "business day" means any day other than a day on which the
New York Stock Exchange is closed;
(c) "stock" means common stock, preferred stock, partnership
interests, limited liability company interests or other ownership interests
entitling the holder thereof to vote with respect to matters involving the
issuer thereof;
(d) "Person" means an individual, corporation, partnership,
limited liability company, association, trust, unincorporated organization or
other legal entity; and
(e) "subsidiary" or "subsidiaries" of the Company, Parent, the
Surviving Corporation or any other Person means any corporation, partnership,
limited liability company, association, trust, unincorporated association or
other legal entity of which the Company, Parent, the Surviving Corporation or
any such other Person, as the case may be, (either alone or through or together
with any other subsidiary) (i) owns, directly or indirectly, 25% or more of the
capital stock the holders of which are generally
46
entitled to vote for the election of the board of directors or other governing
body of such corporation or other legal entity, (ii) has the right to appoint a
majority of the board of directors or other governing body of such corporation
or other legal entity or (iii) otherwise controls.
SECTION 9.9. Personal Liability. This Agreement shall not create
or be deemed to create or permit any personal liability or obligation on the
part of any direct or indirect stockholder of the Company or Parent or any
officer, director, employee, agent or representative of any party hereto.
SECTION 9.10. Specific Performance. The parties hereby acknowledge
and agree that the failure of any party to perform its agreements and covenants
hereunder, including its failure to take all actions as are necessary on its
part to the consummation of the Merger, will cause irreparable injury to the
other parties for which damages, even if available, will not be an adequate
remedy. Accordingly, each party hereby consents to the issuance of injunctive
relief by any court of competent jurisdiction to compel performance of such
party's obligations and to the granting by any court of the remedy of specific
performance of its obligations hereunder; provided, however, that if Parent
receives the Breakup Fee pursuant to Section 8.3 it shall not also be entitled
to specific performance to compel the consummation of the Merger.
SECTION 9.11. Waiver of Conditions. The conditions to each of the
parties' obligations to consummate the Merger are for the benefit of such party
and may be waived by such party in whole or in part to the extent permitted by
applicable law.
SECTION 9.12. Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed to be an original but all of
which shall constitute one and the same agreement.
47
IN WITNESS WHEREOF, each of the parties has caused this Merger
Agreement to be duly executed on its behalf as of the day and year first above
written.
ROYAL BANK OF CANADA
By: /s/ XXXXXX X. XXXXXX
------------------------------------------
Name: Xxxxxx X. Xxxxxx
----------------------------------------
Title: Senior Vice President
---------------------------------------
By: /s/ XXXXX X. XXXXX
------------------------------------------
Name: Xxxxx X. Xxxxx
----------------------------------------
Title: Vice Chairman
---------------------------------------
PRISM FINANCIAL CORPORATION
By: /s/ XXXX X. FILLER
------------------------------------------
Name: Xxxx X. Filler
----------------------------------------
Title: President and Chief Executive Officer
---------------------------------------
RAINBOW ACQUISITION SUBSIDIARY, INC.
By: /s/ XXXXXX X. XXXXXX
------------------------------------------
Name: Xxxxxx X. Xxxxxx
----------------------------------------
Title: Senior Vice President, Strategic
---------------------------------------
Initiatives
48
EXHIBIT A
FORM OF STOCKHOLDERS' AGREEMENT
(SEE EXHIBIT 12(d)(3))
49
EXHIBIT B
KNOWLEDGE GROUP
XXXX XXXXXX
XXXXX XXXXXX
XXXXX XXXX
XXXX XXXXX
XXXXX XXXXXX
50
EXHIBIT C
PLAN AND AGREEMENT OF MERGER
51
PLAN AND AGREEMENT OF MERGER
THIS PLAN AND AGREEMENT OF MERGER, dated as of ______________ , 2000
("Agreement"), is entered into by and between Prism Financial Corporation
("Prism") and Prism Acquisition Subsidiary, Inc. ("Acquisition"), each a
Delaware corporation. Prism and Acquisition are hereinafter sometimes
collectively referred to as the "Constituent Corporations."
W I T N E S S E T H:
WHEREAS, each of Prism and Acquisition is a corporation duly organized
and existing under the laws of the State of Delaware;
WHEREAS, on the date of this Agreement, Prism has authority to issue
110,000,000 shares of capital stock, consisting of 100,000,000 shares of common
stock, par value $.01 per share (the "Shares"), of which, as of January 31,
2000, 14,670,560 Shares were issued and outstanding, and of these ______________
are owned by Acquisition; and 10,000,000 shares of preferred stock, par value
$.01 per share, no shares of which are outstanding;
WHEREAS, on the date of this Agreement, Acquisition has authority to
issue 1000 shares of common stock, par value $.01 per share ("Acquisition Common
Stock"), of which 100 shares are issued and outstanding and owned by RBC
Holdings (Delaware) Inc., a Delaware corporation ("Parent");
WHEREAS, the respective Boards of Directors of Prism and Acquisition have
determined that it is advisable and in the best interests of each of such
corporations that Acquisition be merged with and into Prism upon the terms and
subject to the conditions set forth in the Merger Agreement dated as of March
10, 2000 among Royal Bank of Canada, a Canadian commercial bank and the indirect
parent of Acquisition, Prism and Acquisition (the "Merger Agreement") and this
Agreement for the purpose of completing the acquisition of Prism by Parent;
WHEREAS, the Board of Directors of Acquisition has, by resolutions duly
adopted, approved, certified, executed and acknowledged this Agreement;
WHEREAS, Parent has approved this Agreement as the sole stockholder of
Acquisition; and
WHEREAS, the Board of Directors of Prism has approved this Agreement, and
directed that this Agreement be submitted to a vote of its stockholders, if such
a vote is necessary under Delaware law. Capitalized terms used and not defined
herein shall have the meanings ascribed to them in the Merger Agreement.
NOW, THEREFORE, in consideration of the mutual agreements and covenants
set forth herein, Prism and Acquisition hereby agree as follows:
1. Merger. Acquisition shall be merged with and into Prism (the
"Merger"), and Prism shall be the surviving corporation (hereinafter sometimes
referred to as the "Surviving Corporation"). The Merger shall become effective
at such time as a properly executed and certified copy of the Merger Certificate
is duly accepted for record by the Secretary of State of the State of Delaware
for filing pursuant to the Delaware General Corporation Law, or such later time
as Acquisition and Prism may agree upon and set forth in the Merger Certificate
(not exceeding 30 days after the Merger Certificate is accepted for record; the
time the Merger becomes effective being referred to herein as the "Effective
Time").
2. Governing Documents. The Certificate of Incorporation of Acquisition
in effect at the Effective Time shall be the Certificate of Incorporation of the
Surviving Corporation until amended in accordance with applicable law. The
Bylaws of Acquisition in effect at the Effective Time shall be the Bylaws of the
Surviving Corporation until amended in accordance with applicable law.
3. Succession. At the Effective Time, the separate corporate existence of
Acquisition shall cease, and Prism shall possess all the assets, rights,
privileges, powers and franchises, of a public and private nature and be subject
to all the restrictions, disabilities and duties of each of the Constituent
Corporations, and all and singular, the assets, rights, privileges, powers and
franchises of each of the Constituent Corporations, and all property, real,
personal and mixed, and all debts due to each of the Constituent Corporations on
whatever account, shall be transferred to, vested in and devolved on the
Surviving Corporation; and all property, rights, privileges, powers and
franchises, and all and every other interest shall be thereafter as effectually
the property of the Surviving Corporation as they were of the respective
Constituent Corporations, and the title to any real estate vested by deed or
otherwise, in either of such Constituent Corporations shall not revert or be in
any way impaired by reason of the Merger; but all rights of creditors and all
liens upon any property of Acquisition shall be preserved unimpaired. To the
extent permitted by law, any claim existing or action or proceeding pending by
or against either of the Constituent Corporations may be prosecuted as if the
Merger had not taken place. All debts, liabilities and duties of the respective
Constituent Corporations shall thenceforth attach to the Surviving Corporation
and may be enforced against it to the same extent as if such debts, liabilities
and duties had been incurred or contracted by it.
4. Directors and Officers. The directors and officers of Acquisition at
the Effective Time shall be the initial directors and officers, holding the same
titles and positions, of the Surviving Corporation, and after the Effective Time
shall serve in accordance with the Certificate of Incorporation and Bylaws of
the Surviving Corporation.
5. Further Assurances. From time to time, as and when required by the
Surviving Corporation or by its successors or assigns, there shall be executed
and delivered on behalf of Acquisition such deeds and other instruments, and
there shall be taken or caused to be taken by it all such further and other
action, as shall be appropriate, advisable or necessary in order to vest,
perfect or confirm, of record or otherwise, in the Surviving Corporation the
title to and possession of all property, interests, assets, rights, privileges,
immunities, powers, franchises and authority of Acquisition, and otherwise to
carry out the purposes of this Agreement, and the officers and directors of the
Surviving Corporation are fully authorized in the name and on
2
behalf of Acquisition or otherwise, to take any and all such action and to
execute and deliver any and all such deeds and other instruments.
6. Conversion of Shares. At the Effective Time, each Share (together with
any associated rights to purchase preferred stock issued pursuant to the Rights
Agreement dated as of January 27, 2000 between the Company and LaSalle Bank
National Association) issued and outstanding immediately prior to the Effective
Time (excluding (i) Shares held by any of Prism's subsidiaries and (ii) Shares
held by Parent, Acquisition or any other subsidiary of Parent) shall, by virtue
of the Merger and without any action on the part of Acquisition, Prism or the
holder thereof, be converted into and shall become the right to receive [$7.50]
in cash, without interest (the "Cash Merger Consideration"), provided, however,
that each such Share held by Parent, Acquisition or any subsidiary of Parent,
Acquisition or Prism immediately prior to the Effective Time shall, by virtue of
the Merger and without any action on the part of Acquisition, Prism or the
holder thereof, be canceled and retired and will cease to exist and no payment
shall be made with respect thereto. At the Effective Time, each share of
Acquisition Common Stock issued and outstanding immediately prior to the
Effective Time shall be converted into and shall become one validly issued,
fully paid and nonassessable share of common stock of the Surviving Corporation.
7. Conditions to Merger. The Merger shall have received the approval, if
such is required by law, of the holders of Shares pursuant to the Delaware
General Corporation Law and to the other conditions set forth in Article 7 of
the Merger Agreement.
8. Stock Certificates. At and after the Effective Time, all of the
outstanding certificates which, immediately prior to the Effective Time,
represented Shares shall, respectively, without further action by any party, be
deemed for all purposes to evidence the right to receive the Cash Merger
Consideration as herein provided. The registered owner on the books and records
of the Surviving Corporation or its transfer agents of any such outstanding
stock certificate shall not have exercised nor be entitled to exercise any
voting or other rights with respect to, or to receive any dividends or other
distributions upon, the shares of Acquisition Common Stock or any other
securities whatsoever.
9. Options. At the Effective Time, each outstanding option to purchase
Shares issued pursuant to Prism's 1999 Omnibus Stock Incentive Plan (the "1999
Option Plan"), Prism's 2000 Stock Option Plan or any other stock option plan,
program, arrangement or agreement to which Prism is a party shall be treated as
set forth in the Merger Agreement. The 1999 Option Plan shall terminate as of
the Effective Time.
10. Amendment. Subject to applicable law, this Agreement may be amended,
modified or supplemented by written agreement of the parties hereto at any time
prior to the Effective Time with respect to any of the terms contained herein.
11. Abandonment. At any time prior to the Effective Time, this Agreement
may be terminated and the Merger may be abandoned by the Board of Directors of
Prism, notwithstanding approval of this Agreement by the stockholder of
Acquisition or, if such was required, by the stockholders of Prism, or both, (a)
if the conditions to consummation of the Merger set forth in Article 7 of the
Merger Agreement are not satisfied or waived or (b) by mutual agreement of the
Boards of Directors of the parties.
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11. Amendment. At any time prior to the Effective Time, this Agreement
may be amended by the Boards of Directors of the parties hereto to the extent
permitted by applicable law, notwithstanding approval of this Agreement by the
stockholder of Acquisition or, if such was required, by the stockholders of
Prism, or both.
12. Counterparts. In order to facilitate the filing and recording of this
Agreement, the same may be executed in two or more counterparts, each of which
shall be deemed to be an original and the same agreement.
IN WITNESS WHEREOF, Prism and Acquisition have caused this Agreement to
be signed by their respective duly authorized officers as of the date first
above written.
PRISM FINANCIAL CORPORATION
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
PRISM ACQUISITION SUBSIDIARY, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
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CERTIFICATE OF THE SECRETARY
OF
PRISM FINANCIAL CORPORATION
I, the Secretary of Prism Financial Corporation, hereby certify that the
Plan and Agreement of Merger to which this certificate is attached, after having
been first duly signed on behalf of the corporation by the President and
Secretary under the corporate seal of the corporation, was duly approved and
adopted.
WITNESS my hand and seal of Prism Financial Corporation this ____ day of
________ 2000.
---------------------------
Secretary
CERTIFICATE OF THE SECRETARY
OF
PRISM ACQUISITION SUBSIDIARY, INC.
I, the Secretary of Prism Acquisition Subsidiary, Inc., hereby certify
that the Plan and Agreement of Merger to which this certificate is attached,
after having been first duly signed on behalf of the corporation by the
President and Secretary under the corporate seal of the corporation, was duly
approved and adopted by written consent of the sole stockholder of the
corporation, dated ________, 2000.
WITNESS my hand and seal of Prism Acquisition Subsidiary, Inc. this
____ day of ________ 2000.
---------------------------
Secretary
