EXHIBIT 1
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AGREEMENT AND PLAN OF MERGER
AMONG
PRUDENTIAL MORTGAGE CAPITAL COMPANY, LLC
PRUDENTIAL MORTGAGE CAPITAL ACQUISITION CORP.
AND
THE WMF GROUP, LTD.
Dated as of May 10, 2000
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AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
(Not Part of the Agreement)
Page
ARTICLE I
THE TENDER OFFER .............................................................. 2
1.1. The Offer........................................................... 2
1.2. Company Action...................................................... 3
1.3. Board of Directors.................................................. 4
ARTICLE II
THE MERGER..................................................................... 6
2.1. The Merger.......................................................... 6
2.2. Certificate of Incorporation........................................ 6
2.3. By-Laws............................................................. 6
2.4. Directors and Officers.............................................. 7
2.5. Effective Time...................................................... 7
ARTICLE III
CONVERSION OF SHARES........................................................... 7
3.1. Company Common Stock................................................ 7
3.2. Dissenting Shares................................................... 8
3.3. Purchaser Common Stock.............................................. 9
3.4. Exchange of Shares.................................................. 9
3.5. Employee Stock Options.............................................. 11
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................. 13
4.1. Organization........................................................ 13
4.2. Capitalization...................................................... 13
4.3. Authorization of this Agreement; Recommendation of Merger........... 15
4.4. Consents and Approvals.............................................. 15
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4.5. No Conflicts....................................................... 16
4.6. Compliance......................................................... 17
4.7. Financial Statements and SEC Reports; No Undisclosed Liabilities... 18
4.8. Certain Contracts and Arrangements................................. 18
4.9. Offer Documents; Proxy/Information Statement; Other Information;
Schedule 14D-9..................................................... 19
4.10. Title to Property.................................................. 20
4.11. Intellectual Property.............................................. 20
4.12. Labor Relations; Employees......................................... 22
4.13. Employee Agreements and Plans...................................... 23
4.14. Mortgage Business.................................................. 26
4.15. Absence of Certain Changes......................................... 33
4.16. Litigation......................................................... 34
4.17. Taxes.............................................................. 34
4.18. Environmental Matters.............................................. 35
4.19. Board Approval; State Takeover Statutes; Stockholder Vote.......... 36
4.20. Rights Agreement................................................... 36
4.21. Finders and Investment Bankers..................................... 37
4.22. Transaction Costs.................................................. 37
4.23. Opinion of Financial Advisor....................................... 37
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE PURCHASER................. 37
5.1. Organization....................................................... 37
5.2. Authorization of this Agreement.................................... 38
5.3. Consents and Approvals; No Violations.............................. 38
5.4. Offer Documents.................................................... 39
5.5. Proxy/Information Statement; Other Information..................... 39
5.6. Financial Ability to Perform....................................... 40
5.7. Finders and Investment Bankers..................................... 40
ARTICLE VI
COVENANTS...................................................................... 40
6.1. Conduct of the Business of the Company............................. 40
6.2. Access to Information.............................................. 43
6.3. Stockholder Approval............................................... 44
6.4. Reasonable Best Efforts............................................ 45
6.5. Consents........................................................... 45
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6.6. Public Announcements............................................... 46
6.7. Consent of the Parent.............................................. 46
6.8. No Solicitation.................................................... 46
6.9. Indemnification; Insurance......................................... 48
6.10. Employment and Benefit Plans....................................... 50
6.11. Stock Options; Stock Plans......................................... 50
6.12. Transfer Taxes..................................................... 51
6.13. Anti-takeover Statutes............................................. 51
6.14. Notification of Certain Matters.................................... 51
6.15. Amendment to Schedule TO, Proxy/Information Statement and
Schedule 14D-9..................................................... 52
6.16. Continuing Services with Respect to Tax Matters.................... 52
6.17. Supplemental Schedules............................................. 53
ARTICLE VII
CLOSING CONDITIONS............................................................. 53
7.1. Conditions to the Obligations of the Parent, the Purchaser and the
Company............................................................ 53
ARTICLE VIII
CLOSING........................................................................ 54
8.1. Time and Place..................................................... 54
8.2. Filings at the Closing............................................. 54
ARTICLE IX
TERMINATION AND ABANDONMENT.................................................... 54
9.1. Termination........................................................ 54
9.2. Procedure and Effect of Termination................................ 56
9.3. Fees and Expenses.................................................. 57
ARTICLE X
MISCELLANEOUS.................................................................. 58
10.1. Amendment and Modification......................................... 58
10.2. Waiver of Compliance; Consents..................................... 58
10.3. Survival of Warranties............................................. 59
10.4. Notices............................................................ 59
10.5. Assignment; Parties in Interest.................................... 60
10.6. Specific Performance............................................... 61
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10.7. Governing Law...................................................... 61
10.8. Counterparts....................................................... 61
10.9. Interpretation..................................................... 61
10.10. Entire Agreement.................................................. 62
10.11. Jurisdiction...................................................... 62
ANNEX A............................................................................. 1
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AGREEMENT AND PLAN OF MERGER
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AGREEMENT AND PLAN OF MERGER, dated as of May 10, 2000, among
Prudential Mortgage Capital Company, LLC, a Delaware limited liability company
(the "Parent"), Prudential Mortgage Capital Acquisition Corp., a Delaware
corporation that is a wholly-owned subsidiary of Parent (the "Purchaser"), and
The WMF Group, Ltd., a Delaware corporation (the "Company") (the "Agreement" or
the "Merger Agreement").
WHEREAS, the sole member or the respective Boards of Directors of the
Parent, the Purchaser and the Company, as the case may be, have approved the
acquisition of the Company;
WHEREAS, in contemplation thereof it is proposed that the Purchaser
will make a tender offer (the "Offer") to purchase for cash all of the issued
and outstanding shares (the "Shares") of common stock, $.01 par value per share,
of the Company (the "Company Common Stock"), subject to the terms and conditions
of this Agreement, at a price of $8.90 per share net to the seller in cash (such
price, or such higher price per share as may be paid in the Offer, being
referred to herein as the "Offer Price");
WHEREAS, to complete such acquisition, the sole member or the
respective Boards of Directors of the Parent, the Purchaser and the Company, as
the case may be, have approved the merger of the Purchaser into the Company (the
"Merger"), pursuant to and subject to the terms and conditions of this
Agreement;
WHEREAS, the Board of Directors of the Company has unanimously
determined that each of the Offer and the Merger are advisable, fair to, and in
the best interests of, the holders of the Shares, approved the Offer and the
Merger and recommended the acceptance of the Offer and approval and adoption of
this Agreement by the stockholders of the Company; and
WHEREAS, certain principal stockholders of the Company (the
"Stockholders") are entering contemporaneously herewith into a Stockholders
Agreement dated the date hereof (the "Stockholders Agreement") providing that,
among other things, each such Stockholder will tender all shares of Company
Common Stock owned by such Stockholder at the Offer Price pursuant to the Offer.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements herein contained, the
parties hereto agree as follows:
ARTICLE I
THE TENDER OFFER
1.1 The Offer. (a) Provided that this Agreement shall not have been
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terminated in accordance with Article IX hereof and no event shall have occurred
which would result in a failure to satisfy any of the conditions set forth in
Annex A hereto (the "Offer Conditions") within a reasonable time (but not more
than ten business days) after the public announcement of the execution of this
Agreement, the Purchaser shall, and the Parent shall cause the Purchaser to,
commence the Offer. The Offer shall be made by means of an offer to purchase
(the "Offer to Purchase") containing the terms set forth in this Agreement and
the conditions set forth in Annex A hereto. The obligations of the Purchaser
and the Parent to consummate the Offer and to accept for payment and purchase
the Shares tendered shall be subject only to the Offer Conditions. The initial
expiration date of the Offer shall be the 20th business day following
commencement of the Offer. The Purchaser expressly reserves the right to modify
the terms of the Offer, provided, however, that without the consent of the
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Company, the Purchaser shall not, and the Parent shall not permit the Purchaser
to (i) reduce the number of shares of Company Common Stock to be purchased in
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the Offer, (ii) reduce the Offer Price, (iii) materially modify or add to the
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Offer Conditions, including any change to the Minimum Condition (as defined in
Annex A), (iv) change the form of consideration payable in the Offer, (v) except
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as provided below, or as may be required by any rule, regulation, interpretation
or position of the United States Securities and Exchange Commission (the "SEC"),
change the expiration date of the Offer or (vi) amend any other condition of the
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Offer in any material respect in a manner adverse to the holders of the Shares.
Notwithstanding anything in this Agreement to the contrary, the Purchaser shall
have the right, without the prior consent of the Company, to extend the offer
beyond its scheduled expiration date in the following events: (x) if at any
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expiration date, any of the conditions to the Offer shall not have been
satisfied or waived, until such conditions are satisfied or waived; (y) for any
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period required by applicable law; and (z) if all of the conditions to the Offer
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are satisfied or waived, but the number of Shares validly tendered and not
withdrawn is less than the amount necessary to effect a parent-subsidiary merger
pursuant to Section 252 of the Delaware General Corporation, for a period not to
exceed twenty days following the initial expiration date of the Offer. The
Offer Conditions are for the sole benefit of the Parent and the Purchaser and
may be asserted by the Parent and the Purchaser regardless of the circumstances
giving rise to any such Offer Conditions and, subject to the preceding sentence,
may be waived by the Purchaser in whole or in part. Subject only to the Offer
Conditions, the Purchaser shall, and the Parent shall cause the Purchaser to,
pay for all of the Shares validly tendered and not withdrawn pursuant to the
Offer (including any subsequent offering period) as soon as legally permissible.
In the event that (i) the Minimum Condition (as defined in Annex A) has not been
satisfied or (ii) any condition set forth in paragraph (a), (d) or (e) of Annex
A is not satisfied or waived at the scheduled
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expiration date of the Offer, at the reasonable request of the Company,
Purchaser shall, and Parent shall cause Purchaser to, extend the expiration date
of the Offer in increments of five business days each until the earliest to
occur of (1) the satisfaction or waiver of such condition, (2) Parent
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reasonably determining that such condition to the Offer is not capable of being
satisfied on or prior to the thirtieth day following the initial expiration date
of the Offer, (3) the termination of this Agreement in accordance with its terms
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and (4) the thirtieth day following the initial expiration date of the Offer.
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(b) Provided that this Agreement shall not have been terminated in
accordance with Article IX hereof and no event shall have occurred which would
result in a failure to satisfy any of the Offer Conditions, the Parent and the
Purchaser will file with the SEC, as soon as practicable after the date hereof,
a Tender Offer Statement on Schedule TO (together with all supplements or
amendments thereto, and including all exhibits, the "Offer Documents"). Each of
Parent, Purchaser and the Company shall promptly correct any information
provided by it for use, or incorporated by reference, in the Offer Documents if
and to the extent that such information shall have become false or misleading in
any material respect, and each of Parent and Purchaser shall take all steps
necessary to amend or supplement the Offer Documents and to cause the Offer
Documents as so amended or supplemented to be filed with the SEC and to be
disseminated to the Company's shareholders, in each case as and to the extent
required by applicable Federal securities laws. The Parent and the Purchaser
shall give the Company and its counsel a reasonable opportunity to review and
comment on the Offer Documents prior to their being filed with the SEC or
disseminated to the stockholders of the Company. The Parent and the Purchaser
will furnish the Company and its counsel in writing with any comments that the
Parent, the Purchaser or their counsel may receive from the SEC or its staff
with respect to the Offer Documents, promptly after receipt of such comments and
shall provide the Company and its counsel with a reasonable opportunity to
participate in the response of the Parent or the Purchaser to such comments.
1.2 Company Action. (a) In connection with the Offer, the Company
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shall cause its transfer agent as promptly as reasonably possible to furnish the
Purchaser with mailing labels, security position listings and any available
listings or computer files containing the names and addresses of record holders
of the Shares as of a recent date, and shall furnish the Purchaser with such
additional information (including, but not limited to, updated lists of holders
of Company Common Stock and their addresses, mailing labels and lists of
security positions) and offer such other assistance as the Parent or the
Purchaser may reasonably request in communicating the Offer to the Company's
stockholders. The information contained in any such labels, listings and files
shall be used solely for the purpose of communicating the Offer or disseminating
any other documents necessary to consummate the Merger as contemplated by the
Offer and shall otherwise be subject to the Confidentiality Agreement, dated
November 15, 1999, between the
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Company and the Parent (the "Confidentiality Agreement"). If this Agreement
shall be terminated, the Purchaser will deliver to the Company all copies of
information provided to it hereunder that remain in its possession at such time.
(b) The Company hereby consents to the Offer and the Merger, and
represents and warrants to the Parent and the Purchaser that (i) the Board of
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Directors of the Company (at a meeting duly called and held at which a quorum
was present) as part of its approval of this Agreement has unanimously (1)
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approved the Offer and the Merger, (2) determined that each of the Offer and the
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Merger is advisable, fair to and in the best interests of the stockholders of
the Company and (3) resolved to recommend acceptance of the Offer and approval
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and adoption of this Agreement by the stockholders of the Company and (ii)
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Credit Suisse First Boston Incorporated ("CSFB") has delivered to the Board of
Directors of the Company its opinion that the consideration to be received by
the holders of Company Common Stock pursuant to the Offer and the Merger is fair
to the holders of Company Common Stock from a financial point of view, subject
to the assumptions and qualifications contained in such opinion. Concurrently
with the commencement of the Offer, the Company shall file a Tender Offer
Solicitation/Recommendation Statement on Schedule 14D-9 (together with any
amendments or supplements thereto, and including all exhibits, the "Schedule
14D-9") with respect to the Offer which shall contain (subject to the conditions
specified in Section 6.8(d)) the recommendations of the Board of Directors
referred to in clause (i) of the preceding sentence. The Board of Directors of
the Company will not withdraw, modify or amend such recommendations, unless the
conditions specified in Section 6.8(d) have been satisfied. The Parent, the
Purchaser and their counsel will be given a reasonable opportunity to review the
Schedule 14D-9 and all amendments or supplements thereto prior to their filing
with the SEC or dissemination to the holders of Shares. The Company shall
furnish to the Parent and the Purchaser a copy of the resolutions referred to in
the first sentence of this subsection (b), certified by an appropriate officer
of the Company.
1.3 Board of Directors. (a) In the event that the Purchaser
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acquires at least a majority of the outstanding Shares pursuant to the Offer, if
requested by the Parent, following the acceptance for payment of shares of
Company Common Stock and payment by the Purchaser for such shares in accordance
with the Offer, the Company shall take all actions necessary to entitle the
Purchaser to designate such number of directors on the Board of Directors of the
Company, rounded up to the next whole number, as will give the Purchaser
representation on such Board of Directors equal to at least that number of
directors which equals the product of the total number of directors on the Board
of Directors (giving effect to the directors elected pursuant to this sentence)
multiplied by the percentage that such number of shares of Company Common Stock
so accepted for payment and paid for, purchased or otherwise acquired or owned
by the Purchaser or the Parent bears to the number of shares of Company Common
Stock
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outstanding and the Company and its Board of Directors shall, at such time, take
any and all such action needed to cause the Purchaser's designees to be
appointed to the Company's Board of Directors (including increasing the size of
the Board of Directors and/or causing directors to resign). In addition, at the
same time that the Purchaser is entitled to representation on the Board of
Directors pursuant to the preceding provisions, the Company, if so requested,
will cause persons designated by the Purchaser to constitute the same percentage
of each committee of the Board of Directors, each board of directors of each
subsidiary of the Company and each committee of each such board.
(b) The Company's obligations with respect to the election of the
Purchaser's designees to the Board of Directors of the Company shall be subject
to Section 14(f) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and Rule 14f-1 promulgated thereunder. The Company shall
promptly take all actions required pursuant to Section 14(f) and Rule 14f-1 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 Section 14(f) and Rule 14f-1. The Parent and the
Purchaser will supply to the Company in writing and shall be solely responsible
for any information with respect to any of them and their nominees,
officers, directors and affiliates required by Section 14(f) and Rule 14f-1.
(c) Notwithstanding any other provision of this Section 1.3, the
Parent, the Purchaser and the Company shall cause two members of the Company's
Board of Directors to be persons who were members of the Company's Board of
Directors on the date hereof, and who shall initially be Xxxx X. Xxxxxx and
Xxxxxx Xxxxxxxxxx (the "Continuing Directors") so long as there are at least two
such persons who are willing to serve as Continuing Directors; provided, that
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subsequent to the acceptance, purchase and payment for shares of Company Common
Stock representing greater than 50% of the voting power represented by the
outstanding shares of Company Common Stock pursuant to the Offer, the Parent
shall always have its designees represent at least a majority of the entire
Board of Directors. In the event that any Continuing Director(s) resign(s) from
the Board of Directors, the Parent, the Purchaser and the Company shall permit
the remaining Continuing Director(s) to appoint his or their successors in his
or their reasonable discretion. Following the election or appointment of the
Purchaser's designees pursuant to this Section 1.3 and prior to the Effective
Time, any amendment to this Agreement, any termination of this Agreement by the
Company, any extension by the Company of the time for the performance of any of
the obligations or other acts of the Parent or the Purchaser and any waiver of
any of the Company's rights under this Agreement will require the concurrence of
each of the Continuing Directors or their appointees. If at any time the
Continuing Directors reasonably deem it necessary to consult with independent
counsel in connection with their duties as Continuing Directors or actions to be
taken by the Company, the Continuing Directors may retain counsel for such
purpose and the Company will pay the reasonable fees and expenses incurred in
connection therewith.
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ARTICLE II
THE MERGER
2.1 The Merger. (a) Upon the terms and subject to the satisfaction
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or waiver, if permissible, of the conditions set forth in Article VII hereof, as
promptly as practicable following the consummation of the Offer, in accordance
with the provisions of this Agreement and the General Corporation Law of the
State of Delaware, as amended (the "GCL"), the parties hereto shall cause the
Purchaser to be merged with and into the Company, and the Company shall be the
surviving corporation (hereinafter sometimes called the "Surviving Corporation")
and shall continue its corporate existence under the laws of the State of
Delaware. At the Effective Time, the separate existence of the Purchaser shall
cease.
(b) The name of the Surviving Corporation shall be Prudential
Mortgage Capital Holding Corp. The Surviving Corporation shall possess all the
rights, privileges, immunities, powers and franchises of the Purchaser and the
Company and shall by operation of law become liable for all the debts,
liabilities and duties of the Company and the Purchaser. The Merger shall have
the other effects provided for in the applicable provisions of the GCL.
2.2 Certificate of Incorporation. At the Effective Time, the
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certificate of incorporation of the Company shall be amended and restated to
conform to the certificate of incorporation of the Purchaser, as in effect
immediately prior to the Effective Time except as qualified by Section 6.9(a),
and shall become the certificate of incorporation of the Surviving Corporation
(the "Certificate of Incorporation").
2.3 By-Laws. At the Effective Time, the by-laws of the Company shall
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be amended and restated to conform to the by-laws of the Purchaser, as in effect
immediately prior to the Effective Time except as qualified by Section 6.9(a),
and shall become the by-laws of the Surviving Corporation (the "By-Laws") until
thereafter amended, altered or repealed as provided therein and by law.
2.4 Directors and Officers. At the Effective Time, the directors of
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the Purchaser immediately prior to the Effective Time shall be appointed the
directors of the Surviving Corporation, each of such directors to hold office,
subject to the applicable provisions of the Certificate of Incorporation and By-
Laws of the Surviving Corporation, until the next annual stockholders' meeting
of the Surviving Corporation and until their respective successors shall be duly
elected or appointed and qualified.
2.5 Effective Time. The Merger shall become effective at the date
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and time when a properly executed certificate of merger or certificate of
ownership and
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merger (either such document being referred to hereinafter as the "Delaware
Certificate of Merger"), together with any other documents required by law to
effectuate the Merger, shall be filed with the Secretary of State of the State
of Delaware in accordance with the GCL, or such other date and time as shall be
designated in the Delaware Certificate of Merger. The Delaware Certificate of
Merger shall be filed in Delaware in accordance with the GCL as soon as
practicable after the Closing. The date and time when the Merger shall become
effective is herein referred to as the "Effective Time."
ARTICLE III
CONVERSION OF SHARES
3.1 Company Common Stock. (a) Each Share issued and outstanding
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immediately prior to the Effective Time (except for Shares then owned
beneficially or of record by the Parent or the Purchaser or any other subsidiary
of the Parent and except for Dissenting Shares (as defined in Section 3.2)),
shall, by virtue of the Merger and without any action on the part of the holder
thereof, be converted into the right to receive the Offer Price (referred to
hereinafter as the "Merger Consideration") in cash payable to the holder
thereof, without interest thereon and net of applicable withholding taxes, upon
surrender of the certificate representing such Share.
(b) Each Share issued and outstanding immediately prior to the
Effective Time which is then owned beneficially or of record by the Parent or
the Purchaser or any other subsidiary of the Parent shall, by virtue of the
Merger and without any action on the part of the holder thereof, be cancelled
and retired and cease to exist, without any conversion thereof.
(c) Each Share issued and held in the Company's treasury immediately
prior to the Effective Time shall, by virtue of the Merger, be cancelled and
retired and cease to exist, without any conversion thereof.
(d) At the Effective Time the holders of certificates representing
Shares (including restricted Shares) shall cease to have any rights as
stockholders of the Company and, except as aforesaid, their sole right shall be
the right to surrender any such certificate in exchange for payment of the
Merger Consideration or, in the case of a Dissenting Stockholder (as defined
below), to perfect his or her right to receive payment for Shares pursuant to
the law of the State of Delaware if such holder has validly perfected and not
withdrawn the right to receive payment for his or her shares.
3.2 Dissenting Shares. Notwithstanding anything in this Agreement to
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the contrary but only to the extent required by the GCL, shares of Company
Common Stock that are issued and outstanding immediately prior to the Effective
Time and are
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held by holders of Company Common Stock who comply with all the provisions of
law of the State of Delaware concerning the right of holders of Company Common
Stock to dissent from the Merger ("Dissenting Stockholders") and require
appraisal of their shares of Company Common Stock ("Dissenting Shares") shall
not be converted into the right to receive the Merger Consideration but shall
become the right to receive such consideration as may be determined to be due
such Dissenting Stockholder pursuant to the law of the State of Delaware;
provided, however, that (i) if any Dissenting Stockholder shall subsequently
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deliver a written withdrawal of his or her demand for appraisal (with the
written approval of the Surviving Corporation, if such withdrawal is not
tendered within 60 days after the Effective Time), or (ii) if any Dissenting
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Stockholder fails to establish and perfect his or her entitlement to appraisal
rights as provided by applicable law, or (iii) if within 120 days of the
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Effective Time neither any Dissenting Stockholders nor the Surviving Corporation
has filed a petition demanding a determination of the value of all shares of
Company Common Stock outstanding at the Effective Time and held by Dissenting
Stockholders in accordance with applicable law, then such Dissenting Stockholder
or Stockholders, as the case may be, shall forfeit the right to appraisal of
such shares and such shares shall thereupon be deemed to have been converted
into the right to receive, as of the Effective Time, the Merger Consideration
less any applicable withholding tax, without interest. The Company shall give
the Parent and the Purchaser (A) prompt notice of any written demands for
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appraisal, withdrawals of demands for appraisal and any other related
instruments received by the Company, and (B) the opportunity to direct all
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negotiations and proceedings with respect to demands for appraisal. The Company
will not voluntarily make any payment with respect to any demands for appraisal
and will not, except with the prior written consent of the Parent, settle or
offer to settle any demand.
3.3 Purchaser Common Stock. Each share of common stock, par value
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$.01 per share of the Purchaser ("Purchaser Common Stock") issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into and exchangeable for one fully paid and non-assessable share of common
stock, par value $.01 per share of the Surviving Corporation ("Surviving
Corporation Common Stock"). From and after the Effective Time, each outstanding
certificate theretofore representing shares of Purchaser Common Stock shall be
deemed for all purposes to evidence ownership of and to represent the same
number of shares of Surviving Corporation Common Stock.
3.4 Exchange of Shares. (a) Prior to the Effective Time, the
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Purchaser shall, and the Parent shall cause the Purchaser to, deposit in trust
with the depositary for the Offer, or with a bank or trust company in the United
States, designated by the Purchaser and reasonably acceptable to the Company
(the "Exchange Agent"), cash in an aggregate amount equal to the product of (i)
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the number of Shares issued and outstanding immediately prior to the Effective
Time (other than any such Shares owned beneficially or of record by the Parent
or the Purchaser or any other subsidiary of the Parent and other
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than Dissenting Shares), and (ii) the Merger Consideration (such amount being
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hereinafter referred to as the "Exchange Fund"). The Exchange Agent shall,
pursuant to irrevocable instructions, make the payments provided for in Section
3.1(a) of this Agreement out of the Exchange Fund. The Exchange Agent shall
invest the Exchange Fund as the Parent directs, in direct obligations of the
United States of America, obligations for which the full faith and credit of
the United States of America is pledged to provide for the payment of all
principal and interest, commercial paper obligations receiving the highest
rating from either Xxxxx'x Investors Services, Inc. or Standard & Poor's
Corporation, or certificates of deposit, bank repurchase agreements or banker's
acceptances of commercial banks with capital exceeding $10,000,000,000. If for
any reason (including losses) the Exchange Fund is inadequate to pay the amounts
to which holders of shares of Company Common Stock shall be entitled under this
Section 3.4, Parent shall take all steps necessary to enable or cause the
Surviving Corporation promptly to deposit in trust additional cash with the
Exchange Agent sufficient to make all payments required under this Agreement,
and Parent and the Surviving Corporation shall in any event be liable for
payment thereof. The Exchange Fund shall not be used for any purpose except as
expressly provided in this Agreement.
(b) Promptly after the Effective Time, but in no event later than
five (5) business days following such date, the Surviving Corporation shall
cause the Exchange Agent to mail to each record holder (other than the Parent,
the Purchaser or any other subsidiary of the Parent) as of the Effective Time of
an outstanding certificate or certificates which immediately prior to the
Effective Time represented Shares (the "Certificates"), a form letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent) and instructions for use in effecting the
surrender of the Certificates for payment therefor. Upon surrender to the
Exchange Agent of a Certificate, together with such letter of transmittal duly
executed and completed in accordance with the instructions thereon, and any
other items specified by the letter of transmittal, the holder of such
Certificate shall be entitled to receive in exchange therefor cash in an amount
equal to the product of the number of Shares represented by such Certificate and
the Merger Consideration, less any applicable withholding tax, and such
Certificate shall forthwith be cancelled. No interest shall be paid or accrued
on the cash payable upon the surrender of the Certificates. If payment is to be
made to a person other than the person in whose name the Certificate surrendered
is registered, it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed or otherwise in proper form for transfer
and that the person requesting such payment shall pay any tax required by reason
of the payment to a person other than the registered holder of the Certificate
surrendered or establish to the satisfaction of the Exchange Agent and the
Surviving Corporation that such tax has been paid or is not applicable. Until
surrendered in accordance with the provisions of this Section 3.4, each
Certificate (other than Certificates representing Shares owned beneficially or
of record by
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the Parent, the Purchaser or any other subsidiary of the Parent and other than
Certificates representing Dissenting Shares in respect of which appraisal rights
are perfected) shall be deemed to represent, for all purposes, only the right to
receive the Merger Consideration in cash multiplied by the number of Shares
evidenced by such Certificate less any applicable withholding tax, without any
interest thereon. If any holder of Shares shall be unable to surrender such
holder's Certificates because such Certificates have been lost, mutilated or
destroyed, such holder may deliver in lieu thereof an affidavit and indemnity
bond in form and substance and with surety reasonably satisfactory to the
Surviving Corporation. If payment is to be made to a person other than the
person in whose name the surrendered Certificate is registered, it shall be a
condition of payment that the Certificate so surrendered shall be properly
endorsed or otherwise in proper form for transfer and that the person requesting
such payment shall pay any transfer or other taxes required by reason of the
payment to a person other than the registered holder of the surrendered
Certificate or establish to the satisfaction of the Surviving Corporation that
such tax has been paid or is not applicable.
(c) After the Effective Time, there shall be no 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 (other than Certificates representing Shares owned
beneficially or of record by the Parent, the Purchaser or any other subsidiary
of the Parent and other than Dissenting Shares) are presented to the Surviving
Corporation, they shall be delivered to the Exchange Agent and cancelled and
exchanged for cash as provided in this Article III. At the close of business on
the day of the Effective Time the stock ledger of the Company with respect to
Company Common Stock shall be closed.
(d) All cash, certificates and other instruments in the possession of
the Exchange Agent that constitute any portion of the Exchange Fund (other than
net earnings on the Exchange Fund which shall be paid to the Parent) which
remains unclaimed by the stockholders of the Company for six (6) months after
the Effective Time (including any interest received with respect thereto) shall
be repaid promptly to the Surviving Corporation, upon demand. Any stockholders
of the Company who have not theretofore complied with Section 3.4(b) shall
thereafter look only to the Surviving Corporation (subject to applicable
abandoned property, escheat or other similar laws) for payment of their claim
for the Merger Consideration, without any interest thereon and less any
applicable withholding taxes, but shall have no greater rights against the
Surviving Corporation than may be accorded to general creditors of the Surviving
Corporation under applicable law. Notwithstanding the foregoing, neither the
Exchange Agent nor any party hereto shall be liable to a holder of shares of
Company Common Stock for any Merger Consideration delivered to a public official
pursuant to applicable abandoned property, escheat and similar laws.
10
(e) The Surviving Corporation shall pay all charges and expenses,
including those of the Exchange Agent, in connection with the exchange of cash
for Shares.
3.5 Employee Stock Options. (a) Following the acquisition of Shares
----------------------
pursuant to the Offer and prior to the Effective Time, the Board of Directors of
the Company (or, if appropriate, any committee thereof) shall adopt appropriate
resolutions and take all other actions reasonably necessary, in the opinion of
the Purchaser, to provide for the cancellation, effective at the Effective Time,
subject to the payment provided for in the next sentence being made, of all the
outstanding stock options to purchase the Company Common Stock (the "Options")
heretofore granted under any stock option plan or stock incentive plan,
including, but not limited to, the Key Employee Incentive Plan (the "XXXX"), of
the Company (the "Stock Plans") and all rights (including but not limited to
rights to severance payments) ancillary to any such Option. As of the Effective
Time, each Option, whether or not then vested or exercisable, shall no longer be
exercisable for the purchase of shares of Company Common Stock but shall entitle
each holder thereof, in cancellation and full settlement therefor, to a payment
in cash (subject to any applicable withholding taxes, the "Cash Payment"), as
soon as practicable after the Effective Time, equal to the product of (x) the
-
total number of shares of Company Common Stock subject to such Option, whether
or not then vested or exercisable, and (y) the excess of the Merger
-
Consideration, if any, over the exercise price per share of the Company Common
Stock subject to such Option. Following the acquisition of Shares pursuant to
the Offer and prior to the Effective Time, except to the extent provided in
Section 3.5(c) in respect of the Performance Shares (as defined in Section
3.5(c)), the Company will take all steps to ensure that neither the Company nor
any of its subsidiaries is or will be bound by, or have any further obligation
(including but not limited to the obligation to pay severance amounts)
whatsoever in respect of, any Options or any other options, warrants, rights
(including without limitation stock appreciation rights) or agreements which
would entitle any person, other than the Parent or its affiliates, to own any
capital stock of the Surviving Corporation or any of its subsidiaries or to
receive any payment in respect thereof or related thereto.
(b) All Stock Plans and any other plan, program or arrangement
providing for the issuance or grant or any other interest in respect of the
capital stock of the Company or any subsidiary shall terminate as of the
Effective Time and the provisions in any other Benefit Plan (as defined in
Section 4.13) providing for the issuance, transfer or grant of any capital stock
of the Company or any interest in any capital stock of the Company shall be
amended following the acquisition of Shares pursuant to the Offer and prior to
the Effective Time to provide that, at the Effective Time, no participant or
beneficiary thereunder shall have any continuing rights to acquire, hold,
transfer or grant any capital stock of the Company or any interest in capital
stock of the Company (other than in respect of cash payments through the Offer
or the Merger), and, during such
11
period, the Company shall take all necessary action to ensure that following the
Effective Time no holder of an Option or of restricted Shares of the Company or
any participant in any Stock Plans shall have any right thereunder to acquire
any capital stock of the Company, the Parent or the Surviving Corporation or,
except to the extent provided in Schedule 3.5(c), any rights (including but not
limited to rights to severance payments) ancillary to any such right or award,
subject in each case to the receipt of the cash payment provided for herein
being made.
(c) Subject to the following sentence, awards of restricted Shares
(other than awards of restricted Shares granted to Xxxxxx Xxxxxxxxxx, Xxxxxxxx
X. Xxxxxxxxx and Xxxxx X. Xxxxxxxxxx (the "Performance Shares")) granted prior
to the Effective Time shall become fully vested as of the Effective Time and the
Shares underlying such awards shall then be surrendered in exchange for the
Merger Consideration in accordance with Section 3.1(d). The Performance Shares
may be surrendered for the Merger Consideration in accordance with Section
3.1(d) only if such Performance Shares have vested on or before June 30, 2000 in
accordance with the terms thereof; provided, that, if the Performance Shares do
-------- ----
not vest on or before June 30, 2000, such Performance Shares shall be forfeited
and shall not be exchanged for the Merger Consideration.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in a letter from the Company delivered to the
Parent prior to execution of this Agreement (which letter contains appropriate
references to identify the representations and warranties herein to which the
information in such letter relates) (the "Company Disclosure Letter") or in the
sections headed "Business," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Financial Statements and Supplementary
Data" of the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999, the Company represents and warrants to the Parent and the
Purchaser as follows:
4.1 Organization. (a) Each of the Company and its subsidiaries is a
------------
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite corporate power
and authority to own, lease and operate its properties and to conduct its
business as now being conducted, except where the failure to be so organized,
existing and in good standing or to have such power and authority would not,
individually or in the aggregate, have a material adverse effect on the
business, financial condition, results of operations or prospects of the Company
or of either of the Federal National Mortgage Association ("Xxxxxx Mae")
origination and servicing business or the Federal Housing Administration ("FHA")
origination and servicing business of the Company and its subsidiaries, or on
the
12
Company's ability to perform its obligations or to consummate the transactions
under this Agreement (a "Material Adverse Effect"). Each of the Company and its
subsidiaries is duly qualified or licensed and in good standing to do business
as a foreign corporation in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification necessary, except where the failure to be so qualified or
licensed and in good standing would not, individually or in the aggregate, have
a Material Adverse Effect.
(b) Each of the organizational documents of each of the Company and
its subsidiaries is in full force and effect and neither the Company nor any of
its subsidiaries is in violation of any of the provisions of its organizational
documents. The respective certificates of incorporation and by-laws or other
organizational documents of the subsidiaries of the Company do not contain any
provision limiting or otherwise restricting the ability of the Company to
control such subsidiaries.
4.2 Capitalization. (a) The authorized capital stock of the Company
--------------
consists of 25,000,000 shares of Company Common Stock, par value $.01 and
12,500,000 shares of preferred stock, par value $.01 (the "Preferred Stock").
As of the date hereof there are (i) 10,958,302 shares of Company Common Stock
issued and outstanding (including 261,125 restricted shares which include 70,000
Performance Shares), (ii) 494,792 shares of Company Common Stock reserved for
--
issuance under future grants of options under the Company's Stock Plans, (iii)
---
1,035,496 shares of Company Common Stock subject to options outstanding under
the Company's Stock Plans, (iv) 250,000 shares, 100,000 shares, 150,000 shares
--
and 150,000 shares of Company Common Stock subject to outstanding warrants to
purchase such shares at a price of $6.25 per share, $5.90 per share, $9.70 per
share, and $7.00 per share, respectively, and (v) 342,215 shares of Company
-
Common Stock held in the Company's treasury. There are no shares of Preferred
Stock issued and outstanding. All issued and outstanding shares of capital
stock of the Company are duly authorized, validly issued, fully paid and
nonassessable and are not subject to, nor were they issued in violation of, any
preemptive rights. Except as set forth above or as contemplated by this
Agreement, there are not now any existing, authorized or outstanding options,
warrants, calls, subscriptions, claims of any character, preemptive rights or
other rights or other agreements, convertible or exchangeable securities, or
commitments, or obligations contingent or otherwise, whatsoever obligating the
Company or any of its subsidiaries to issue, transfer, deliver or sell or cause
to be issued, transferred, delivered or sold any additional shares of capital
stock of the Company or any of its subsidiaries, or obligating the Company or
any of its subsidiaries to issue shares of Company Common Stock, any other
shares of capital stock or any securities convertible into, exchangeable for, or
evidencing the right to subscribe for or otherwise to acquire, any shares of the
capital stock of the Company. The Company Disclosure Letter sets forth the
number of Options and the exercise price for each Option. The Company has no
authorized or outstanding bonds, debentures, notes, or other indebtedness the
holders
13
of which have the right to vote (or convertible or exchangeable into or
exercisable for securities having the right to vote) with the stockholders of
the Company or any of its subsidiaries on any matter. After the Effective Time
and subject to the payment provided for in Section 3.1(a) being made, the
Surviving Corporation will have no obligation to issue, transfer or sell any
shares of common stock of the Surviving Corporation pursuant to any Benefit Plan
(as defined in Section 6.10).
(b) All of the outstanding shares of capital stock of each of the
Company's subsidiaries have been duly authorized and validly issued, are fully
paid and non-assessable, are not subject to, nor were they issued in violation
of, any preemptive rights, and are owned, of record and beneficially, by the
Company, free and clear of any liens, encumbrances, options or claims
whatsoever. No shares of capital stock of any of the Company's subsidiaries are
reserved for issuance, except to the Company or another subsidiary of the
Company. There are no outstanding options, warrants, rights, subscriptions,
claims of any character, agreements, obligations, convertible or exchangeable
securities, or other commitments, contingent or otherwise, relating to the
capital stock of any subsidiary of the Company, pursuant to which such
subsidiary is or may become obligated to issue any shares of capital stock of
such subsidiary or any securities convertible into, exchangeable for, or
evidencing the right to subscribe for, any shares of such subsidiary, other than
such rights granted to the Company or a subsidiary of the Company. There are no
material restrictions of any kind which prevent the payment of dividends by any
of the Company's subsidiaries.
(c) There are no voting trusts or other agreements or understandings
to which the Company or any of its subsidiaries is a party with respect to the
voting of the capital stock of the Company or any of its subsidiaries. None of
the Company or its subsidiaries is or will be required to redeem, repurchase or
otherwise acquire shares of capital stock of the Company, or any of its
subsidiaries, respectively, as a result of the transactions contemplated by this
Agreement or the Stockholders Agreement.
4.3 Authorization of this Agreement; Recommendation of Merger. The
---------------------------------------------------------
Company has all requisite corporate power and authority to execute and deliver
this Agreement and, subject to approval by the stockholders of the Company to
the extent required by law, to perform its obligations hereunder 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 and approved by the Company's Board of
Directors and, except for the approval of this Agreement by the stockholders of
the Company to the extent required by law, no other corporate proceedings on the
part of the Company are necessary to authorize this Agreement or consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Company, and constitutes a valid and binding
agreement of the Company, subject to approval and adoption of this Agreement
14
by the Company's stockholders to the extent required by law, and (assuming due
and valid authorization, execution and delivery hereof by the other parties
thereto and the enforceability of this Agreement against them) is enforceable
against the Company in accordance with its terms, except to the extent that
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other similar laws of general applicability
relating to or affecting the enforcement of creditors' rights and by the effect
of general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law).
4.4 Consents and Approvals. Except for (i) filings required under
---------------------- -
the Exchange Act in connection with this Agreement and the transactions
contemplated hereby, (ii) the filing of a Pre-Merger Notification and Report
--
Form by the Company under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976 and the rules and regulations thereunder (together, the "HSR Act") with the
Federal Trade Commission (the "FTC") and the Antitrust Division of the
Department of Justice (the "Antitrust Division") and such filings as may be
required under any other Antitrust Laws, (iii) the filing and recordation of
---
appropriate merger documents as required by the GCL and, if applicable, the laws
of other states in which the Company is qualified to do business, (iv) filings
--
under the securities or blue sky laws or takeover statutes of the various
states, (v) filings with the Department of Housing and Urban Development, FHA
-
and the Government National Mortgage Association ("GNMA") as set forth in
Schedule 4.4 to the Company Disclosure Letter, (vi) filings with Xxxxxx Mae, the
--
Federal Home Loan Mortgage Corporation ("Xxxxxxx Mac") and the state regulatory
authorities set forth in Schedule 4.4 to the Company Disclosure Letter, and
(vii) filings in connection with any applicable transfer or other taxes in any
---
applicable jurisdiction, no filing with, and no permit, authorization, consent
or approval of, any court, arbitral tribunal, administrative commission,
governmental or regulatory body, agency or authority whether domestic or foreign
(each, a "Governmental Entity"), is necessary for the consummation by the
Company of the transactions contemplated by this Agreement, the failure to make
or obtain which would have a Material Adverse Effect or would prevent or
materially delay consummation of the transactions contemplated by this
Agreement. All filings with, or permits, authorizations, consents and approvals
of, any Governmental Entity (but not including, for the avoidance of doubt,
Xxxxxx Mae, FHA or GNMA, the approvals of which are addressed separately in
Section 4.14(a) and clause (f) of Annex A), in each case as necessary to conduct
the mortgage lending and servicing business of the Company and its subsidiaries
in all material respects as presently conducted will have been made or obtained
prior to the acceptance for payment of any Shares pursuant to the Offer.
"Antitrust Law" means the Xxxxxxx Act, as amended, the Xxxxxxx Act, as amended,
the HSR Act, the Federal Trade Commission Act, as amended, and all other federal
and state statutes, rules, regulations, orders, decrees, administrative and
judicial doctrines, and other laws, whether domestic or foreign, that are
designed or intended to prohibit, restrict or regulate actions having the
purpose or effect of monopolization or restraint of trade.
15
4.5 No Conflicts. Neither the execution and delivery of this
------------
Agreement nor the consummation of the transactions contemplated hereby nor
compliance by the Company with any of the provisions hereof will (i) conflict
-
with or result in any violation of any provision of the restated certificate of
incorporation of the Company (the "Company Certificate of Incorporation") or the
by-laws of the Company (the "Company By-Laws"), or the certificate of
incorporation or by-laws (or equivalent instruments) of any of its subsidiaries,
(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, cancellation or acceleration) under, or result in the creation of
any mortgage, lien, security interest, pledge, charge, encumbrance or other
adverse claim of any kind (collectively, "Liens") upon any of the properties or
assets of the Company or any of its subsidiaries under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
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 properties or
assets is bound or (iii) violate any statute, rule, regulation, order,
---
injunction, writ or decree of any Governmental Entity applicable to the Company
or any of its subsidiaries or by which the Company or any of its subsidiaries or
any of their respective assets or properties may be bound, excluding from the
foregoing clauses (ii) and (iii) conflicts, violations, breaches or defaults
which would not, either individually or in the aggregate, have a Material
Adverse Effect or prevent or materially delay consummation of the transactions
contemplated by this Agreement.
4.6 Compliance. (a) The Company and each of its subsidiaries are in
----------
compliance with all constitutions, treaties, statutes, laws (including common
laws), codes, rules, regulations, decisions, judgments, ordinances or orders,
whether domestic or foreign, (collectively, "Laws") of any Governmental Entity
applicable to the business and operations of the Company and its subsidiaries or
any of their respective properties or assets (other than Environmental Laws
which are covered in Section 4.18 and employment/labor laws which are covered in
Section 4.12), except for such non-compliance as would not have, individually or
in the aggregate, a Material Adverse Effect or prevent or materially delay
consummation of the transactions contemplated by this Agreement.
(b) Each of the Company and its subsidiaries has in effect all
federal, state and local governmental approvals, authorizations, certificates,
filings, franchises, licenses, notices, permits and rights ("Permits") necessary
for it to own, lease or operate its properties and assets and to carry on its
business as now conducted, and there has occurred no default under any such
Permit, except such as would not, individually or in the aggregate, have a
Material Adverse Effect or prevent or materially delay consummation of the
transactions contemplated by this Agreement.
16
(c) Except for any matters set forth in Schedule 4.5 to the Company
Disclosure Letter, neither the Company nor any of its subsidiaries is in default
or violation of, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or its or any of their respective properties are bound or
affected, except for any such defaults or violations which would not have a
Material Adverse Effect or prevent or materially delay consummation of the
transactions contemplated by this Agreement.
(d) Neither the Company nor any of its subsidiaries has been
convicted of any crime described in Section 411 of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or in Part I (g) of
Prohibited Transaction Class Exemption 84-14, 49 Fed. Reg. 9494 (1984), within
the thirteen years preceding the date of the Merger.
4.7 Financial Statements and SEC Reports; No Undisclosed Liabilities.
----------------------------------------------------------------
(a) The Company has timely filed all forms, reports and documents with the SEC
since August 14, 1997 required to be filed by it pursuant to the Securities Act
of 1933, as amended, and the rules and regulations promulgated thereunder (the
"Securities Act"), and the Exchange Act and the rules and regulations
promulgated thereunder, all of which have complied in all material respects with
all applicable requirements of the Securities Act and the Exchange Act and the
rules and regulations promulgated thereunder (such forms, reports, registration
statements and other filings and financials, together with any exhibits, any
amendments thereto and information incorporated by reference therein, filed with
the SEC prior to the date hereof, are sometimes collectively referred to as the
"Disclosure Statements"). None of the subsidiaries is required to file any
forms, reports or other documents with the SEC pursuant to Section 12 or 15 of
the Exchange Act. None of such Disclosure Statements, at the time filed,
contained any untrue statement of a material fact or omitted to state a 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. The consolidated balance sheets and the related consolidated
statements of income, cash flows and stockholder's equity (including the notes
thereto) of the Company and its subsidiaries contained or incorporated by
reference in the Disclosure Statements, were prepared from, and are in
accordance with, the books and records of the Company and its consolidated
subsidiaries, complied as of their respective dates in all material respects
with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, and presented fairly the
consolidated financial position of the Company and its subsidiaries as of their
respective dates, and the consolidated results of their income and their cash
flows for the periods presented therein, in conformity with United States
generally accepted accounting principles ("GAAP") applied on a consistent basis,
except as otherwise noted therein and, in the case of unaudited
17
quarterly financial statements, as permitted by Form 10-Q under the Exchange
Act, and subject in the case of quarterly financial statements to normal year-
end audit adjustments.
(b) Except for liabilities and obligations incurred in connection
with the consummation of the transactions contemplated hereby, there is no
liability of the Company or any subsidiary thereof of any nature, whether
direct, indirect, known, unknown, absolute, accrued, contingent or otherwise,
which, individually or in the aggregate, is material to the Company and its
subsidiaries, taken as a whole, other than liabilities (i) shown on the December
-
31, 1999 audited consolidated balance sheet (or the notes thereto) of the
Company and its subsidiaries included in the Company's Annual Report on Form 10-
K for the fiscal year ending December 31, 1999 or (ii) incurred in the ordinary
--
course of business consistent with past practice since December 31, 1999.
4.8 Certain Contracts and Arrangements. (a) The term "Company
----------------------------------
Contract" means each contract to which the Company or any of its subsidiaries is
a party or by which it is bound which: (i) has been or would be required to be
-
filed by the Company as an exhibit to a Disclosure Statement under Item 10 of
Rule 601 of Regulation S-K under the Exchange Act, or (ii) (x) the loss of which
-- -
would have a Material Adverse Effect, or (y) pursuant to which the Company or
-
any of its subsidiaries expects to or is scheduled to receive (assuming full
performance pursuant to the terms thereof) revenue of $500,000 or more during
the 12-month period following the date of this Agreement.
(b) Neither the Company nor any of its subsidiaries is a party to or
is bound by any contract which contains covenants limiting the freedom of the
Company or any of its subsidiaries to engage in any line of business in any
geographic area or to compete with any person or entity or restricting the
ability of the Company or any of its subsidiaries to acquire equity securities
of any person or entity.
(c) With respect to each of the Company Contracts, (i) the Company
-
(or any of its subsidiaries) is not in default, and to the knowledge of the
Company no other party thereto is in default or has made a claim of default
thereunder, and no event has occurred which, with the passage of time or the
giving of notice (or both), would constitute a default thereunder, or would
permit modification, acceleration or termination thereof, except such as would
not have a Material Adverse Effect and (ii) the consummation of the transactions
--
contemplated by this Agreement will not give rise to a right of the other party
or parties thereto to terminate such contract or impose liability under the
terms thereof on the Company or any of its subsidiaries.
(d) Neither the Company nor any of its subsidiaries is a party to any
swap, hedge or other derivative instrument or contract other than as set forth
in Schedule 4.8(d) to the Company Disclosure Letter.
18
4.9 Offer Documents; Proxy/Information Statement; Other Information;
----------------------------------------------------------------
Schedule 14D-9. None of the information supplied in writing by the Company
--------------
specifically for inclusion in the documents pursuant to which the Offer will be
made, including the Offer Documents will, at the respective times the Offer
Documents or any amendments or supplements thereto are filed with the SEC,
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. The Schedule 14D-9 on the date filed with the SEC will not 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; provided, however, that the foregoing shall not apply to the extent
-------- -------
that any such untrue statement of a material fact or omission to state a
material fact was made by the Company in reliance upon and in conformity with
written information furnished to the Company by the Parent or the Purchaser
specifically for use in the Schedule 14D-9. No proxy solicitation materials or
information statement distributed by the Company to its stockholders and/or
filed with the SEC in connection with the Merger, including any amendments or
supplements thereto (collectively, the "Proxy/Information Statement") will, at
the time the Proxy/Information Statement is mailed to the Company's
stockholders, 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 or, at the time of the meeting of stockholders to which the
Proxy/Information Statement, as then amended or supplemented, relates or at the
Effective Time omit to state any material fact necessary to correct any
statement which has become false or misleading in any earlier communication with
respect to the solicitation of any proxy for such meeting; except that no
representation is made by the Company with respect to information furnished in
writing to the Company by the Parent or the Purchaser specifically for use in
the Proxy/Information Statement. The Schedule 14D-9 and the Proxy/Information
Statement each will comply in all material respects, both as to form and
otherwise, with the requirements of the Exchange Act and the rules and
regulations thereunder.
4.10 Title to Property. Each of the Company and its subsidiaries
-----------------
owns, has valid leasehold interest in or valid contractual rights to use, all of
the assets, tangible and intangible, used by, or necessary for the conduct of,
its business, except where the failure to have such valid leasehold interests or
such valid contractual rights would not, individually or in the aggregate, have
a Material Adverse Effect and, in the case of owned assets, owns such assets
free and clear of any Liens, except for such Liens that would not, individually
or in the aggregate, have a Material Adverse Effect.
4.11 Intellectual Property. (a) Schedule 4.11(a) to the Company
---------------------
Disclosure Letter sets forth all trademark registrations and applications owned
by the
19
Company and its subsidiaries, and all material common law trademarks and trade
names used in the business of the Company and its subsidiaries as currently
conducted and as contemplated to be conducted (the "Business").
(b) The Company and its subsidiaries own all right, title and
interest in and to the trademarks set forth in Schedule 4.11(a) to the Company
Disclosure Letter as used in the Business (the "Company Marks"). No claim or
demand has been received by the Company or any of its subsidiaries from any
person, and to the knowledge of the Company no proceeding is pending or
threatened, which challenges the rights of the Company or any of the
subsidiaries in respect of the Company Marks or any other Intellectual Property
owned by the Company and its subsidiaries.
(c) Except as set forth in Schedule 4.11(c) to the Company Disclosure
Letter, neither the Company nor any of the subsidiaries has granted any license
or right to use, option, release or covenant not to xxx or non-assertion
assurance to any third person with respect to, or granted any outstanding lien
or security interest in, any of the Company Marks or other Intellectual Property
owned by the Company and any of its subsidiaries. Except as set forth in
Schedule 4.11(c) to the Company Disclosure Letter, there is no existing or
contemplated agreement, understanding, or grant of permission between the
Company or any of the subsidiaries and any third person that encumbers or
otherwise affects the Company's exclusive right to use the Company Marks or
other Intellectual Property owned by the Company and any of its subsidiaries.
(d) The Intellectual Property that is owned by the Company and its
subsidiaries and the Intellectual Property used pursuant to licenses,
sublicenses, agreements or permissions set forth in Schedule 4.11(d) to the
Company Disclosure Letter constitutes all of the Intellectual Property necessary
to the conduct of the Business; provided, however, that Schedule 4.11(d) need
not list individually commercially available software used pursuant to
shrinkwrap licenses so long as such software licenses continue to be in effect,
without change, after the Merger. Immediately after the Merger, the Surviving
Corporation shall own or have the right to use all of the Intellectual Property
currently used in the Business, in each case free from any Liens, except where
the existence of Liens would not have a Material Adverse Effect and, otherwise
on the same terms and conditions as in effect prior to the Merger.
(e) The conduct of the Business did not and does not infringe upon,
conflict in any material way with or misappropriate any Intellectual Property of
any third party. There are not any open claims known to the Company or any of
its subsidiaries from third parties that the Company and its subsidiaries
infringe their Intellectual Property rights.
20
(f) To the knowledge of the Company, none of the Intellectual
Property used in the Business is being infringed or used by any third party
without the permission of the Company.
(g) None of the material Intellectual Property (including the Company
Marks) owned by the Company or any subsidiary or used in the Business is subject
to any outstanding order, ruling, decree, judgment or stipulation by or with any
court or other Governmental Entity.
(h) Schedule 4.11(h) to the Company Disclosure Letter sets forth all
material worldwide trademark, copyright, and patent applications and
registrations owned by the Company and its subsidiaries, and the same are
validly subsisting in full force and effect and have not been adjudged invalid
or unenforceable, in whole or in part. The Company and its subsidiaries have
taken all reasonably necessary actions to ensure protection of the Intellectual
Property owned by the Company or any subsidiary or used in the Business
(including maintaining the secrecy of all confidential Intellectual Property).
As used herein, "Intellectual Property" shall mean all material
patents and applications, including all reissues, continuations, divisions,
continuations-in-part, renewals or extensions thereof; trademarks, service
marks, trade names, trade dress, domain names, logos, business and product
names, slogans, and registrations and applications for registration or renewal
thereof; copyrights and registrations or renewals thereof; Software; inventions,
processes, designs, formulae, trade secrets, know-how, confidential and
technical information; all other intellectual property and proprietary rights;
copies and tangible embodiments thereof (in whatever form or medium, including
electronic media); and licenses of any of the foregoing.
As used herein, "Software" shall mean all computer software, including
but not limited to, application software and system software, including all
source code and object code versions thereof, in any and all forms and media,
whether recorded on paper, magnetic media or other electronic or non-electronic
media (including data and related documentation, user manuals, training
materials, flow charts, diagrams, descriptive tests and programs, computer
print-outs, underlying tapes, computer databases and similar items), integrated
circuits, embedded systems, and other electro-mechanical or processor based
systems.
4.12 Labor Relations; Employees. (a) The Company and its
--------------------------
subsidiaries are not (either individually or jointly) parties to or bound by any
collective bargaining agreement and none of the employees of the Company or its
subsidiaries are represented by any labor organization and, to the knowledge of
the Company or its subsidiaries, no union claims to represent these employees
have been made. There have been no union
21
organizing activities or requests for union representation with respect to
employees of the Company or its subsidiaries within the past five years. Since
January 1, 1995, there has not occurred or been threatened any strike, slowdown,
picketing, work stoppage, concerted refusal to work overtime or other similar
labor activity with respect to employees of the Company or its subsidiaries.
There are no pending or, to the knowledge of the Company or its subsidiaries,
threatened unfair labor practice charges against the Company or its
subsidiaries.
(b) The Company and each of its subsidiaries have not during the past
two years effectuated a "plant closing" or "mass layoff" (as defined in the
Worker Adjustment and Retraining Notification Act) affecting any of their sites
of employment or one or more facilities or operating units within any site of
employment or facility, nor will the Company or its subsidiaries take any such
action within the 90 day period prior to the Effective Time.
(c) The Company and each of its subsidiaries have complied in all
material respects with all applicable laws pertaining to the employment or
termination of employment of their respective employees, including all such laws
relating to labor relations, equal employment opportunities, fair employment
practices, prohibited discrimination or distinction and other similar employment
activities.
(d) Except as set forth in Schedule 4.12(d) to the Company Disclosure
Letter, there is no pending or, to the knowledge of the Company or its
subsidiaries, threatened litigation by or on behalf of any present or former
employee (or independent contractor) of the Company the outcome of which would
reasonably be expected to, individually or in the aggregate, have a Material
Adverse Effect or any existing liability pertaining in any manner to the
employment (or in the case of an independent contractor, retention of services)
and/or termination of such employment (or in the case of an independent
contractor, termination of such services) by the Company of such present or
former employee (or independent contractor) which would reasonably be expected
to have a Material Adverse Effect.
(e) The Company has previously provided the Parent with a true,
correct and complete list, as of the date of this Agreement, of the name and
rate of base salary (or other form of base compensation) payable to each person
who, on the date hereof, is an employee of the Company and/or any subsidiary.
There is no individual who provides services to the Company or any subsidiary
who is classified as independent contractor who, under applicable Federal income
tax laws, rules or regulations, should be characterized as an employee.
4.13 Employee Agreements and Plans. (a) Except as set forth in
-----------------------------
Schedule 4.13(a) to the Company Disclosure Letter, there are no employee or
retiree
22
compensation or benefit plans, arrangements, contracts or agreements (including,
without limitation, stock option plans or other equity plans, employment
agreements, change of control, bonus, deferred compensation, retention,
severance and other similar arrangements or agreements) of any type (including
but not limited to plans described in Section 3(3) of ERISA), whether written or
unwritten, (i) maintained, or contributed to, by the Company, any of its
subsidiaries or any other trade or business, whether or not incorporated (an
"ERISA Affiliate"), that together with the Company or any of its subsidiaries
would be deemed a "single employer" within the meaning of Section 414 of the
Internal Revenue Code of 1986, as amended (the "Code") or Section 4001(b) of
ERISA for the benefit of any employee or former employee of the Company or any
of its subsidiaries, (ii) with respect to which the Company, any of its
--
subsidiaries or any ERISA Affiliate has or has had, within the preceding six
years, an obligation to contribute or (iii) with respect to which the Company or
---
any of its subsidiaries or any ERISA Affiliate has, has had or may have a
liability for the benefit of any employee or former employee of the Company or
any of its subsidiaries (a "Company Benefit Plan"). Neither the Company, any of
its subsidiaries nor any ERISA Affiliate has any formal plan or any commitment
or has communicated to any current or former employee any intention, whether
legally binding or not, to create or to modify in any material way any Company
Benefit Plan. Except as set forth in Schedule 4.13(a) to the Company Disclosure
Letter, the Company and its subsidiaries have the right to terminate any Company
Benefit Plan that is a welfare benefit plan within the meaning of Section 3(1)
of ERISA at any time, and following such termination shall have no liability or
obligation thereunder except to the extent that any claims related to events
occurring prior to such termination have not been paid.
(b) With respect to each Company Benefit Plan, the Company has
provided to the Parent accurate and complete copies of all written plans,
descriptions of unwritten plans, summary plan descriptions, summaries of
material modifications, trust agreements, insurance contracts or other funding
arrangements and other related agreements including all amendments to the
foregoing; the two most recent IRS Forms 5500 and Forms 990-T, annual reports,
including all Schedules and attachments thereto; the most recent annual and
periodic accounting of plan assets; the most recent determination letter
received from the United States Internal Revenue Service (the "Service"); all
material communications received from or sent to the Service, the Pension
Benefit Guaranty Corporation or the Department of Labor or any other
governmental agency or body having jurisdiction over any Company Benefit Plan
(including a written description of any oral communication); any actuarial study
of post-employment life or medical benefits provided under any such Company
Benefit Plan, if any; statements or other communications regarding withdrawal or
other multiemployer plan liabilities; and the two most recent actuarial reports,
to the extent any of the foregoing may be applicable to a particular Company
Benefit Plan.
23
(c) Except as set forth in Schedule 4.13(c) to the Company Disclosure
Letter, the consummation of the transactions contemplated by this Agreement,
whether alone or in combination with other events, will not entitle any present
or former employee of the Company or any of its subsidiaries (or any beneficiary
thereof) to severance pay or other termination benefits or accelerate the time
of payment or vesting, or increase the amount, of compensation or benefits due
to any individual and does not constitute, whether alone or in combination with
other events, a triggering event under any Company Benefit Plan, policy,
arrangement, statement, commitment or agreement, which will or may result in any
payment, acceleration, vesting or increase in benefits to any employee or former
employee or director of the Company or any of its subsidiaries.
(d) No Company Benefit Plan is a "multiemployer plan" within the
meaning of Section 4001(a)(3) of ERISA or a "multiple employer plan" within the
meaning of Section 4063 or 4064 of ERISA.
(e) Except as set forth in Schedule 4.13(e) to the Company Disclosure
Letter, (i) neither the Company nor any of its subsidiaries has incurred or
reasonably expects to incur (either directly or indirectly, including as a
result of any indemnification obligation) any liability or obligation under or
pursuant to Title I or IV of ERISA (or any comparable provision of the law of
any jurisdiction other than the United States) or the penalty, excise tax or
joint and several liability provisions of the Code relating to employee benefit
plans or the funding arrangements underlying such employee benefit plans, and no
event, transaction or condition has occurred or exists which could result in any
such liability of the Company or any of its subsidiaries or, following the
Closing, the Parent or the Surviving Corporation or any of their affiliates,
(ii) each Company Benefit Plan intended to be qualified under Section 401(a) of
--
the Code, the trust (if any) forming a part thereof, and each voluntary
employees' beneficiary association intended to be qualified under Section 501(a)
of the Code that is used as a funding vehicle for any Company Benefit Plan has
received a favorable determination letter from the Service as to its
qualification under the Code and no fact or condition exists or has occurred
which could reasonably be expected to result in the disqualification of any such
Company Benefit Plan or adversely affect the tax-exempt status of any such
trust, (iii) there are no pending or threatened claims by or on behalf of any of
---
the Company Benefit Plans, by or on behalf of any present or former employee of
the Company or any of its subsidiaries with respect to any of the Company
Benefit Plans or otherwise involving any such Company Benefit Plan or the assets
of any Company Benefit Plan (other than routine claims for benefits), (iv) all
--
contributions, premiums and benefit payments required to be made or paid by the
Company or any of its subsidiaries in respect of any Company Benefit Plan,
insurance contract or other funding arrangement, or pursuant to any applicable
law or collective bargaining agreement have been paid within the earliest time
prescribed by such Company Benefit Plan, funding arrangement or law and (v) no
-
Company Benefit Plan is subject to the minimum funding requirements of Section
412 of
24
the Code or Section 302 of ERISA or Title IV of ERISA. Each of the Company
Benefit Plans has been operated and administered in all respects in compliance
with its terms and all laws, including but not limited to ERISA and the Code.
(f) No employee is or may become entitled to post-employment benefits
under any Company Benefit Plan by reason of employment with the Company or any
of its subsidiaries, including, without limitation, death or medical benefits
(whether or not insured), other than (i) coverage provided pursuant to the terms
of any Company Benefit Plan specifically identified as providing such coverage
in Schedule 4.13(f) to the Company Disclosure Letter or (ii) benefits or
--
coverage required by law, including, without limitation, Section 4980B of the
Code and Sections 601 through 609 of ERISA.
(g) Neither the Company nor any of its subsidiaries has made any
payments, is obligated to make any payments, or is party to an agreement that
under certain circumstances could obligate it to make any payments which would
be nondeductible under Section 280G or 162(m) of the Code.
(h) There are no outstanding stock appreciation rights or limited
stock appreciation rights in respect of the Company Common Stock.
(i) Schedule 4.13(i) to the Company Disclosure Letter sets forth (i)
the names of each employee, consultant and other individual who received an
award under any of the Stock Plans and with whom the Company or any affiliate
has entered into any award agreement under any of the Stock Plans that also
provide, as part of the award, for severance payments or benefits upon the
termination of such employee's, consultant's or individual's employment or other
service relationship with the Company, and (ii) the amounts of severance
--
payments to which each such employee, consultant or other person would be
entitled under the terms of such award.
(j) Except as otherwise set forth in Schedule 4.13(j) to the Company
Disclosure Letter, no employee who is or may become entitled to severance
payments under any employment agreement entered into with the Company or any of
its subsidiaries shall be or become entitled to severance payments under any
other Company Benefit Plan.
(k) Except as otherwise set forth in Schedule 4.13(k) to the Company
Disclosure Letter, each Company Benefit Plan affecting the terms and conditions
of any employee's employment with the Company or any subsidiary may be amended
or terminated by the Company or a subsidiary at any time without notice or other
limitation, including following the consummation of the transactions
contemplated hereby.
25
4.14 Mortgage Business.
-----------------
(a) Each subsidiary of the Company that services or originates loans
(i) is and, after giving effect to the transactions contemplated by this
-
Agreement, will be, an approved and fully licensed either (1) FHA-approved
-
mortgagee and servicer for FHA-insured loans, (2) Delegated Underwriting and
-
Servicing ("DUS") seller/servicer of multi-family first and second mortgages for
Xxxxxx Xxx, or (3) GNMA issuer and servicer of GNMA-guaranteed mortgage-backed
-
securities, as the case may be, and (ii) is in good standing with each of the
--
FHA, Xxxxxx Mae and GNMA and all authorities and servicers for the state bond
programs in which it participates. Each subsidiary of the Company referred to
in clause (i)(2) of the preceding sentence meets, and giving effect to the
transactions contemplated by this Agreement, will meet, all applicable Xxxxxx
Xxx requirements so as to be able to originate, purchase, hold and service
mortgage loans to be sold to Xxxxxx Mae; and each subsidiary of the Company
referred to in clauses (i)(1) or (3) of the preceding sentence meets, and giving
effect to the transactions contemplated by this Agreement, will meet, all
requirements of law and governmental regulations so as to be eligible to
originate, purchase, hold and service FHA-insured mortgage loans and to issue
mortgage-backed securities guaranteed by GNMA, as the case may be, in each case
to the same extent that the Company currently originates, purchases, holds and
services loans and issues mortgage backed securities guaranteed by GNMA. There
is no pending or, to the Company's knowledge, threatened cancellation or
reduction of any loan purchase commitment or other loan sale contract to which
the Company or any of its subsidiaries is a party, and the obligations of the
Company and its subsidiaries under each such contract are being performed in
accordance with its terms. There is no prior consent required to be given by
GNMA or the FHA in connection with the Offer, the Merger or the other
transactions contemplated by this Agreement in order to continue in full force
and effect the respective licenses of the Company and its subsidiaries.
(b) All loans held for the account of the Company and its
subsidiaries, whether or not for future sale or delivery to an investor (the
"Owned Loans"), are owned by the Company or one of its subsidiaries free and
clear of any Lien, other than (i) Liens in favor of the Company's lender banks
-
pursuant to warehouse lines of credit as set forth in Schedule 4.14(b) to the
Company Disclosure Letter and (ii) forward sale commitments or similar
--
agreements to sell any such loans to investors as set forth in Schedule 4.14(b)
to the Company Disclosure Letter, and all Owned Loans meet all applicable
requirements for sale to any intended Investors (as defined below). Each
mortgage or deed of trust securing an Owned Loan, or an assignment thereof, if
applicable, has been duly recorded in the name of the Company or one of its
subsidiaries as mortgagee. Neither the Company nor any of its subsidiaries has
released any security for any Owned Loan, except upon receipt of reasonable
consideration for such release (as documented in the applicable Owned Loan
file), or accepted prepayment of any such Owned Loan which has not been promptly
applied to such Owned Loan.
26
(c) Each Owned Loan, each loan which was originated by the Company or
one of its subsidiaries and subsequently transferred to a third party (the
"Transferred Loans") and each loan which is being serviced by the Company or one
of its subsidiaries for the account of others (the "Serviced Loans", and
together with the Owned Loans and the Transferred Loans, the "Loans") was (i)
-
underwritten and originated (to the best knowledge of the Company in the case of
Loans not originally underwritten or originated by the Company or one of its
subsidiaries) and (ii) (in the case of Serviced Loans) is being serviced and the
--
loan documents and loan files maintained by the Company or one of its
subsidiaries with respect thereto are being maintained in each case materially
in compliance with all applicable laws and regulations and, if applicable, (1)
-
the requirements of the "Investor" (which term means (A) Xxxxxx Xxx, GNMA, the
-
trustee for any CMBS, or any other person, as the case may be, that owns any of
the Loans or holds beneficial title to the Loans, and (B) any person who owns
-
servicing rights for Loans serviced or master serviced by the Company or one of
its subsidiaries pursuant to a Loan Servicing Agreement, as defined below) which
originated or acquired or is expected to acquire such Loan (or, if there is no
such Investor, in accordance with underwriting, servicing and file maintenance
standards which are substantially comparable to those of Xxxxxx Mae), (2) the
-
requirements of each person who insures or guarantees all or any portion of the
risk of loss upon borrower default on any of the Loans, including, without
limitation, the FHA and any private mortgage insurer, and (3) the requirements
-
of all providers of life, hazard, flood, disability, environmental, title or
other insurance with respect to any of the Loans or the collateral therefor
(each, an "Insurer"). Neither the Company nor any of its subsidiaries has done
or failed to do, or caused to be done or omitted to be done, any act, the effect
of which would operate to invalidate or materially impair (aa) any approvals of
--
Xxxxxx Xxx, GNMA or any other agency or of the FHA to insure, (bb) any private
--
mortgage insurance or commitment of any private mortgage insurer to insure, (cc)
--
any title insurance policy, (dd) any hazard insurance policy, (ee) any
-- --
environmental insurance policy, (ff) any flood insurance policy, (gg) any
-- --
fidelity bond, direct surety bond, errors and omissions or other insurance
policy required by any of Xxxxxx Mae, the FHA or GNMA, Investor or Insurer, (hh)
--
any surety or guaranty agreement, (ii) any guaranty issued by GNMA, Xxxxxx Xxx
--
or Xxxxxxx Mac to the Company or any of its subsidiaries or to bond purchasers
respecting GNMA bonds or mortgage backed securities issued by the Company or any
of its subsidiaries and other like guaranties, (jj) the rights of the Company or
--
any of its subsidiaries under any Loan Servicing Agreement (as defined below) or
loan purchase commitment, (kk) the obligations of the mortgagor under the
--
mortgage document, or (ll) title priority of the mortgage. None of Xxxxxx Xxx,
--
GNMA the FHA or any other agency, nor any Investor or Insurer has (x) notified
-
the Company or any of its subsidiaries, or to the knowledge of the Company
claimed, that the Company or any of its subsidiaries has violated or has not
complied with the applicable underwriting or servicing standards with respect to
Loans sold or serviced by the Company or any of its subsidiaries or (y) imposed
-
restrictions on the activities (including commitment authority) of the Company
or any of its subsidiaries.
27
(d) The loan documents relating to a Loan maintained in the loan
files of the Company were materially in compliance with all applicable laws and
regulations at the time of the origination or modification of such Loan, as the
case may be. The loan files maintained by the Company contain originals (or,
where necessitated by the terms of the applicable mortgage servicing agreements,
contain true, correct and complete copies) of the documents relating to each
Loan and the information contained in such loan files with respect to each such
Loan is true, complete and accurate and in compliance with all applicable laws
and regulations. To the knowledge of the Company, the terms of the note, bond,
deed of trust and mortgage for each such Loan have not been impaired, waived,
altered or modified in any respect from the date of their origination except by
a written instrument which written instrument has been recorded if recordation
is necessary to protect the interests of the owner thereof and duly noted in the
loan file and on the Servicing Tape (as defined below).
(e) All of the contracts pursuant to which the Company or any of its
subsidiaries has the right and/or obligation to service Serviced Loans (each, a
"Loan Servicing Agreement") are (i) valid and binding obligations of the Company
-
or the relevant subsidiary, and to the knowledge of the Company, of all the
other parties thereto, (ii) in full force and effect, (iii) enforceable in
-- ---
accordance with their terms (except where enforcement thereof may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally and by general equity principles) and (iv) owned by
--
the Company or one of its subsidiaries free and clear of any Lien. The
aggregate principal balance of the Xxxxxx Mae, FHA and GNMA Serviced Loans at
December 31, 1999 was approximately $9.3 billion, and such balance will be no
less than $8.37 billion at the consummation of the Offer. Schedule 4.14(e) to
the Company Disclosure Letter sets forth a true and complete list of all such
Loan Servicing Agreements. There is no material default by the Company or any
of its subsidiaries or, to the knowledge of the Company, claim of default
against the Company or any of its subsidiaries by any party under any such Loan
Servicing Agreement, and to the knowledge of the Company no event has occurred
which with the passage of time or the giving of notice or both would constitute
a default by any party under any such Loan Servicing Agreement or would result
in any such mortgage servicing agreement being terminable by any party thereto.
There is no pending or, to the knowledge of the Company, threatened cancellation
of any Loan Servicing Agreement and the obligations of the Company and its
subsidiaries under each Loan Servicing Agreement are being performed by the
Company or the relevant subsidiary materially in accordance with the terms of
such Loan Servicing Agreement and applicable rules or regulations.
(f) None of the Company's or any of its subsidiaries' servicing
rights are subject to recourse against the Company or any of its subsidiaries
acting as a servicer, and neither the Company nor any of its subsidiaries is
subject to recourse in connection with
28
any Loans sold by it, in each case for losses on liquidation of a loan, borrower
defaults or repurchase obligations upon the occurrence of non-payment or other
events.
(g) Unless otherwise prohibited by law or an executed escrow waiver,
the Company or one of its subsidiaries collects all escrows related to the
Loans, and all escrow accounts have been maintained by the Company or one of its
subsidiaries and, to the Company's knowledge, all prior servicers materially in
accordance with the related loan documents, all applicable laws, rules,
regulations, and requirements of Investors, Insurers and governmental
authorities, and in accordance with the applicable Loan Servicing Agreements.
Schedule 4.14(g) to the Company Disclosure Letter sets forth the current balance
of all escrow accounts, which balances are at least equal to the amount required
under the relevant Loan documents and the respective Loan Servicing Agreements.
The Company or one of its subsidiaries has credited to the account of borrowers
all interest required to be paid on any escrow account in accordance with
applicable law and the terms of such agreements and loan documents. All escrow,
custodial, and suspense accounts related to the Loans are held in the name of
the Company or one of its subsidiaries or in the Investor's name.
(h) There are no servicing or other contracts to which the Company or
any of its subsidiaries is a party which obligates it to make servicing advances
for principal and interest payments with respect to defaulted or delinquent
Loans other than in a manner as provided in standard and customary agreements
with Xxxxxx Xxx or GNMA. To the extent made, any such advances are valid and
subsisting amounts owing to the Company or one of its subsidiaries, subject to
the terms of the applicable Loan Servicing Agreement.
(i) All of the Loans are secured by multifamily (i.e., more than four
family) residential real property or commercial real property.
(j) With respect to each Loan, the Company has, since the date it
commenced servicing such loan and, to the Company's knowledge, all prior
servicers have (i) properly and accurately entered into its system all data
-
required to service the loan materially in accordance with the related loan
documents and all regulations, (ii) properly and accurately adjusted the monthly
--
payment on each payment adjustment date (for those Loans for which the interest
rate is not fixed for the entire term of the loan), (iii) properly and
---
accurately calculated the amortization of principal and interest on each payment
adjustment date (for those Loans for which the interest rate is not fixed for
the entire term of the loan), in each case materially in compliance with all
applicable laws, rules and regulations and the related loan documents, and (iv)
--
executed and delivered any and all necessary notices required under, and in a
form that complies materially with, all applicable laws, rules and regulations
and the terms of the related loan documents.
29
(k) There are no agreements or understandings of any nature with any
third party that obligate the Company or any of its subsidiaries to offer
conduit originations or any other Loan origination opportunity to such third
party.
(l) (i) The Company and its relevant subsidiary, as servicer under the
-
applicable Loan Servicing Agreement (the "Securitization Servicer") of each
outstanding transaction under which the Company or any of its subsidiaries has
sold or pledged Loans in a securitization, whether sold under the Securities Act
or otherwise (a "Securitization Transaction"), have complied in all material
respects with all contracts, including the Loan Servicing Agreements, and all
material conditions to be performed or satisfied by them with respect to all
agreements and arrangements pursuant to which such person is bound under such
Securitization Transaction (collectively, "Securitization Instruments"). (ii) No
--
Securitization Servicer or, to the Company's knowledge, no trustee or issuer
with respect to any securitization, has taken any action which would reasonably
be expected to adversely affect the characterization or tax treatment for
federal, state or local income or franchise tax purposes of the issuer or any
securities issued in a Securitization Transaction, and all required federal,
state and local tax and information returns, if any, relating to any
Securitization Transaction required to be filed by the Securitization Servicer
have been properly filed by it. (iii) Each material representation and warranty
---
made by the Company or its subsidiaries in each "Purchase Agreement," "Pooling
and Servicing Agreement,""Placement Agency Agreement," "Servicer's
Indemnification Agreement" and any other Securitization Instrument to which any
of them was a party in any Securitization Transaction was true and correct in
all material respects whenever made or reaffirmed by any of them and the Company
and its subsidiaries have each fully performed and carried out each material
covenant and agreement made by any of them in any such Securitization
Instrument. (iv) No rating agency has downgraded, or given the Company or its
--
subsidiaries any written indication that it is considering a downgrading of any
securities issued in any Securitization Transaction, or of its rating of any
Securitization Servicer.
(m) Each Loan which is indicated in the related loan documents to
have FHA insurance is insured under the National Housing Act or qualifies for
such insurance. As to each FHA insured loan and each Loan which is indicated in
the related loan file to be insured by private mortgage insurance, the Company
or one of its subsidiaries has complied in all material respects with applicable
provisions of the insurance or guaranty contract and applicable laws and
regulations, the insurance or guaranty is in full force and effect with respect
to each such Loan, and to the knowledge of the Company, there does not exist any
event or condition which, but for the passage of time or the giving of notice or
both, can result in a revocation of any such insurance or guaranty or constitute
adequate grounds for the applicable Insurer to refuse to provide insurance or
guaranty payments thereunder.
30
(n) Security for each Loan has been covered by a policy of hazard
insurance and flood insurance, to the extent required by the Loan Servicing
Agreements relating thereto or any laws, rules, regulations or Investor or
Insurer requirements applicable to such Loan, all in a form usual and customary
in the industry and each of which is in full force and effect and all amounts
due and payable under each policy have been paid prior to the date such payments
were due; and all taxes, assessments, ground rents or other applicable charges
or fees due and payable as to each Loan have been paid prior to the date such
payments were due. Any and all claims under such insurance policies have been
submitted and processed in accordance with the applicable Investor's and
Insurer's requirements, and all outstanding claims in excess of $100,000 are set
forth in Schedule 4.14(n) to the Company Disclosure Letter. Such insurance
policies name the Company and its successors and assigns as mortgagee under
standard BFU 438 mortgage protection endorsements or their equivalent.
(o) Each Loan is covered by an ALTA lender's title insurance policy
or other generally acceptable form of policy of insurance or opinion of title
acceptable to the relevant Investor, and each such title insurance policy is
issued by an Insurer acceptable to the applicable Investor and qualified to do
business in the jurisdiction where the collateral securing such Loan is located,
and insures the originator and its successors and assigns as to the first
priority lien of the mortgage in the original principal amount of the Loan (or,
in the case of a second mortgage, the second priority lien). All outstanding
claims are set forth in Schedule 4.14(o) to the Company Disclosure Letter. The
applicable Investor, as assignee of the originator's rights, is an insured of
such lender's title insurance policy, and such lender's policy is in full force
and effect. Neither the Company nor any of its subsidiaries has, nor, to the
Company's knowledge, has any prior servicer, performed any act or omission which
would impair the coverage of such lender's policy.
(p) Neither the Company nor any of its subsidiaries has received
written notice of or has knowledge of any damage or destruction for which
insurance has been denied or is insufficient in respect of, or any proceeding
pending or threatened for the partial or total condemnation of, any of the
collateral securing any of the Loans, and neither the Company nor any of its
subsidiaries has received written notice or has knowledge that all or any part
of such collateral has been or will be condemned.
(q) The Company has previously delivered to the Parent a tape
(magnetic media) ("Servicing Tape") on which certain information regarding the
servicing portfolio of the Company and its subsidiaries as of December 31, 1999
is recorded. Such tape accurately contains the list of Serviced Loans as of such
date. The information contained on such tape is true, correct, accurate and
complete in all material respects.
(r) To the knowledge of the Company, (i) there have been no actions
-
taken by the Company or any of its subsidiaries as originator or servicer of any
Loans, (ii) there
--
31
are no circumstances or conditions involving any of the Loans, and (iii) there
---
are no inquiries, investigations or abatement activities that could reasonably
be expected to result in any claims, liability, investigations, costs or
restrictions on the ownership, use, or transfer of any property of the Company
pursuant to any Environmental Law.
(s) (i) There are no Loans in the DUS portfolio with a greater risk
level than Xxxxxx Xxx Risk Level I other than as set forth in Schedule 4.14(s)
to the Company Disclosure Letter, and (ii) the credit quality of the Loan
portfolio has not suffered any material adverse change since December 31, 1999.
(t) Except as set forth in Schedule 4.14 (t) to the Company
Disclosure Letter, (i) the Company has not incurred any obligation or
commitment, whether conditional, contingent or otherwise, to fund, invest, loan
or disburse any funds to or on behalf of WMF Carbon Mesa Advisors, Inc. ("WMF-
CMA"), Commercial Mortgage Investment Trust, Inc. ("COMIT"), Carbon Capital
Mortgage Partners I, L.P. ("CCMP"), or Commercial Asset Purchase Fund LLC ("CAP
I"); (ii) WMF-CMA has not incurred any obligation or commitment, whether
conditional, contingent or otherwise, to fund, invest, loan or disburse any
funds to or on behalf of COMIT, CCMP, CAP I or any other party; (iii) none of
the Company nor any of its subsidiaries has guaranteed or otherwise agreed to
pay, whether conditional, contingent or otherwise, any obligation or commitment
of COMIT, CCMP or CAP I; and (iv) neither COMIT, CCMP nor CAP I has incurred any
obligation or commitment, whether conditional, contingent or otherwise, to fund,
invest, loan or disburse any funds to or on behalf of any party.
(u) To the extent any of the Schedules to the Company Disclosure
Letter relating to this Section 4.14 contains information that is as of the
month-end prior to the date of this Agreement, the Company (i) represents that
there has been no material adverse change in the information set forth on such
Schedules and (ii) undertakes to update such Schedules as promptly as
practicable after the end of each calendar month occurring between the date of
this Agreement and the Effective Time.
4.15 Absence of Certain Changes. Since December 31, 1999, except for
--------------------------
the negotiation and execution of this Agreement, the Company and its
subsidiaries have conducted their respective businesses and operations
consistent with past practice only in the ordinary and usual course and there
have not occurred (i) any events, changes, or effects (including the incurrence
-
of any liabilities or obligations of any nature, whether accrued, contingent or
otherwise) having, or which would reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect; (ii) any material adverse change
--
in the availability of capital for the commercial or multi-family mortgage
markets; (iii) any declaration, setting aside or payment of any dividend or
---
other distribution (whether in cash, stock or property) with respect to the
equity interests of the Company or of any of its subsidiaries (except for cash
dividends paid to the Company by its wholly
32
owned subsidiaries); (iv) any change by the Company or any of its subsidiaries
--
in accounting principles, practices or methods, except insofar as may be
required by a change in GAAP; (v) any grant of Options or stock appreciation
-
rights under any Company Benefit Plan; (vi) any increase in the compensation of
--
any officer or grant of any general salary or benefits increase to the employees
of the Company other than in the ordinary course of business consistent with
past practice; (vii) any adoption, amendment or execution (or any
---
representation regarding the adoption, amendment or execution) of any
employment, consulting, retention, change of control, collective bargaining,
bonus or other incentive compensation, profit sharing, health or other welfare,
stock option or other equity, pension, retirement, vacation, severance, deferred
compensation plan or arrangement for the benefit of any employee, consultant or
director of the Company; (viii) any entry by the Company into any agreement,
----
commitment or transaction or any incurrence of any liability (direct, contingent
or otherwise) that is material to the Company and its subsidiaries, taken as a
whole, other than in the ordinary course of business; or (ix) any other action
--
or failure to act by the Company which, if occurring after the date of this
Agreement, would constitute a breach of Section 6.1 hereof.
4.16 Litigation. There is no suit, action, proceeding or
----------
investigation (whether at law or equity, before or by any federal, state or
foreign court, tribunal, commission, board, agency or instrumentality, or before
any arbitrator) pending or, to the knowledge of the Company, threatened against
or affecting the Company or any of its subsidiaries, the outcome of which would
reasonably be expected to, individually or in the aggregate, have a Material
Adverse Effect, nor is there any judgment, decree, injunction, rule or order of
any court, governmental department, commission, agency, instrumentality or
arbitrator outstanding against the Company or any of its subsidiaries having, or
which would reasonably be expected to have, a Material Adverse Effect.
4.17 Taxes. (a) The Company, its subsidiaries and all affiliated,
-----
combined or consolidated tax groups of which the Company or any of its
subsidiaries is or has been a member (each an "Affiliated Group") (i) have duly
-
filed all Tax Returns (as hereinafter defined) required to be filed by them on
or prior to the date hereof, and will duly file all material Tax Returns
required to be filed by them on or before the Effective Time, and (ii) have duly
--
paid in full, or made provision for the payment of, all Taxes (as hereinafter
defined) for all periods through the Closing Date. Such Tax Returns are and
will be true, complete and correct in all material respects.
(b) No audits or other proceedings are presently pending with regard
to any Taxes or Tax Returns of the Company, any of its subsidiaries or any
Affiliated Group in which the Company or any of its subsidiaries is or has been
a member, (i) for periods including only days after May 9, 1997 or, (ii) to the
- --
knowledge of the Company, for periods including days on or before May 9, 1997,
in all cases which proceedings would individually or in the aggregate result in
a Material Adverse Effect.
33
(c) No material deficiencies for Taxes were asserted against the
Company, any of its subsidiaries or any Affiliated Group in which the Company or
any of its subsidiaries is or has been a member (i) for periods including only
-
days after May 9, 1997 or (ii) to the knowledge of the Company, for periods
--
including days on or before May 9, 1997, in all cases which have not been
resolved and fully paid or which are not adequately reserved for.
(d) Schedule 4.17 to the Company Disclosure Letter sets forth the net
operating loss and net capital loss carryovers of the Company and its
subsidiaries for United States federal, state and local Tax purposes (identified
by jurisdiction) to the Tax year beginning January 1, 2000, or such other Tax
year identified therein. All net operating loss and net capital loss carryovers
of the Company and its subsidiaries have arisen with respect to periods
beginning on or after May 9, 1997. Since May 9, 1997, there has been no
"ownership change," as defined in Section 382 of the Internal Revenue Code of
1986, with respect to the Company or any of its subsidiaries prior to the
Closing Date.
(e) "Taxes" shall mean all federal, state, local and foreign taxes,
and other assessments of a similar nature (including, without limitation, any
payroll or employment taxes), whether imposed directly or through withholding
and including any interest and penalties thereon and additions thereto. "Tax
Returns" shall mean all federal, state, local and foreign tax returns,
declarations, statements, reports, schedules, forms and information returns.
4.18 Environmental Matters. Except for such matters as would not,
---------------------
individually or in the aggregate, have a Material Adverse Effect: (i) the
-
Company and each of its subsidiaries are, and at all times have been, in
compliance with all applicable Environmental Laws; (ii) the Company and each of
--
its subsidiaries have at all times been in possession of, and compliance with,
all permits, authorizations and approvals required under applicable
Environmental Laws; (iii) the Company has no knowledge of or reason to know that
---
the properties currently owned or operated by the Company (including soils,
groundwater, surface water, buildings or other structures) are contaminated with
any Hazardous Substances; (iv) the Company has no knowledge of or reason to know
--
that the properties formerly owned or operated by the Company or any of its
subsidiaries were contaminated with Hazardous Substances during the period of
ownership or operation by the Company or any of its subsidiaries; (v) neither
-
the Company nor any of its subsidiaries is subject to liability for any
Hazardous Substance disposal or contamination on any third party property; (vi)
--
neither the Company nor any of its subsidiaries has been associated with any
release or threat of release of any Hazardous Substance; (vii) neither the
---
Company nor any of its subsidiaries has received any notice, demand, letter,
claim or request for information alleging that the Company or any of its
subsidiaries may be in violation of or liable under any Environmental Law;
(viii) neither the Company nor any of
----
34
its subsidiaries is subject to any orders, decrees, injunctions or other
arrangements with any Governmental Entity or any other person or is subject to
any indemnity or other agreement with any third party relating to liability
under any Environmental Law or relating to Hazardous Substances; and (ix) there
--
are no circumstances or conditions involving the Company or any of its
subsidiaries that could reasonably be expected to result in any claims,
liability, investigations, costs or restrictions on the ownership, use, or
transfer of any property of the Company pursuant to any Environmental Law. The
Company has made available to the Purchaser all site assessments, audits and
studies in its possession, custody and control relating to environmental
conditions at any property or assets currently or formerly owned, leased or
used.
As used herein, the term "Environmental Law" means any federal, state,
local or foreign law, statute, ordinance, regulation, rule, judgment, order,
decree, arbitration award, agency requirement, license, permit, authorization or
opinion or any other requirement of law (including common law), relating to: (A)
-
the protection, investigation or restoration of the environment, health and
safety, or natural resources, (B) the handling, use, presence, disposal, release
-
or threatened release of any Hazardous Substance or (C) noise, odor, wetlands,
-
pollution, contamination or any injury or threat of injury to persons or
property.
As used herein, the term "Hazardous Substance" means any substance or
material that is (A) listed, classified or regulated pursuant to any
-
Environmental Law; (B) any petroleum product or by-product, asbestos-containing
-
material, lead-containing paint, polychlorinated biphenyls, radioactive
materials, radon or urea-formaldehyde insulation; or (C) any other substance or
-
material which may be the subject of regulatory action by any Government Entity
pursuant to any Environmental Law.
4.19 Board Approval; State Takeover Statutes; Stockholder Vote. (a)
---------------------------------------------------------
The Board of Directors of the Company has approved the Offer, the Merger and
this Agreement, and the consummation of all transactions contemplated by this
Agreement, and such approval is sufficient to render inapplicable to the Merger
and the other transactions contemplated by this Agreement the provisions of
Section 203 of the GCL.
(b) Unless the Merger is consummated in accordance with the
provisions of Section 253 of the GCL, the affirmative vote of a number of shares
representing a majority of the total voting power represented by the Company
Common Stock entitled to be cast approving this Agreement is the only vote of
the holders of any class or series of the Company's capital stock necessary to
approve this Agreement and the transactions contemplated by this Agreement.
4.20 Rights Agreement. The Company does not have any continuing
----------------
obligations under the Rights Agreement, dated as of April 21, 1997, by and
between NHP
35
Incorporated, NHP Financial Services, Ltd. and The First National Bank of Boston
as Rights Agent, and is not a party to any other agreement giving rise to
stockholder rights as a result of the announcement, commencement or consummation
of the Offer, the execution or delivery of this Agreement or any amendment
hereto or the consummation of the other transactions contemplated by this
Agreement.
4.21 Finders and Investment Bankers. No agent, broker, person or firm
------------------------------
acting on behalf of the Company is, or will be, entitled to any fee, commission
or broker's or finder's fees from any of the parties hereto, or from any person
controlling, controlled by, or under common control with any of the parties
hereto, in connection with this Agreement or any of the transactions
contemplated hereby, except for CSFB, whose fees (which are limited to those set
forth in Schedule 4.22 to the Company Disclosure Letter), to the extent payable,
shall be paid by the Company.
4.22 Transaction Costs. Schedule 4.22 to the Company Disclosure
-----------------
Letter sets forth a true and complete list of all transaction-related expenses
and change of control payments for which the Company has become liable, or will
become liable, through the Closing Date (other than premium to be paid for any
Representations and Warranties Insurance Policy) ("Transaction Costs"). The
Company's aggregate pre-tax liability for all such Transaction Costs up to and
including the Closing Date will in no event exceed the limits set forth in
Schedule 4.22. The Company has a written commitment or oral understanding with
each service provider or other creditor whose fees, expenses or charges are
reflected in Schedule 4.22 to the effect that such party will not submit an
invoice to, or otherwise seek payment from, the Company in connection with the
transactions contemplated by this Agreement in an amount that exceeds that set
forth in Schedule 4.22. For purposes of determining whether the Offer Condition
set forth in paragraph (d) of Annex A has been satisfied, the failure of any
representation or warranty contained in this Section 4.22 to be true and correct
shall be deemed "material."
4.23 Opinion of Financial Advisor. The Company has received the
----------------------------
opinion of CSFB to the effect that, as of the date of this Agreement, the
consideration to be received in the Offer and the Merger by the Company's
stockholders is fair to the Company's stockholders from a financial point of
view, and a complete and correct signed copy of such opinion has been, or
promptly upon receipt thereof will be, delivered to the Parent.
36
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND THE PURCHASER
Each of the Parent and the Purchaser jointly and severally represents
and warrants to the Company as follows:
5.1 Organization. Each of the Parent and the Purchaser is a limited
------------
liability company or a corporation, as the case may be, 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 conduct its business
as now being conducted. The Purchaser is a wholly-owned subsidiary of the
Parent.
5.2 Authorization of this Agreement. Each of the Parent and the
-------------------------------
Purchaser has all requisite 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 and approved by the
sole member or the Board of Directors, as the case may be, of the Parent and the
Purchaser and by the Parent as the sole stockholder of the Purchaser, and no
other proceedings on the part of the Parent or the Purchaser are necessary to
authorize this Agreement or consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by each of the
Parent and the Purchaser and this Agreement (assuming the due and valid
authorization, execution and delivery of this Agreement by the Company and the
enforceability of this Agreement against it) constitutes a valid and binding
agreement of the Parent and the Purchaser and is enforceable against each of
them in accordance with its terms, except to the extent that enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or other similar laws of general applicability relating to or affecting
the enforcement of creditors' rights and by the effect of general principles of
equity (regardless of whether enforceability is considered in a proceeding in
equity or at law).
5.3 Consents and Approvals; No Violations. Except for (i) filings
------------------------------------- -
required under the Exchange Act in connection with this Agreement and the
transactions contemplated hereby, including the Tender Offer Statement on
Schedule TO ("Schedule TO"), (ii) the filing of a Pre-Merger Notification and
--
Report Form by the Parent under the HSR Act, and such filings as may be required
under any other Antitrust Laws, (iii) the filing and recordation of appropriate
---
merger documents as required by the GCL, (iv) filings under the securities or
--
blue sky laws or takeover statutes of the various states, (v) filings in
-
connection with any applicable transfer or other taxes in any applicable
jurisdiction and (vi) such filings as are disclosed in the Company Disclosure
--
Letter, no
37
filing with, and no permit, authorization, consent or approval of, any
Governmental Entity is necessary for the consummation by the Parent and the
Purchaser of the transactions contemplated by this Agreement, the failure to
make or obtain which would materially impair the ability of the Parent or the
Purchaser to perform their respective obligations hereunder or to consummate the
transactions contemplated hereby. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby nor
compliance by the Parent or the Purchaser with any of the provisions hereof will
(i) conflict with or result in any violation of any provision of the
-
organizational documents of the Parent or the certificate of incorporation or
by-laws of the Purchaser, (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, cancellation or acceleration) under, or result in the
creation of any Liens upon any of the properties or assets of the Parent or the
Purchaser or any of their subsidiaries under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, agreement or other
instrument or obligation to which the Parent or the Purchaser or any of their
subsidiaries is a party, or by which any of them or any of their respective
properties or assets is bound, or (iii) violate any statute, rule, regulation,
---
order, injunction, writ or decree of any Governmental Entity applicable to the
Parent or the Purchaser or any of their subsidiaries or by which any of their
respective properties or assets may be bound, excluding from the foregoing
clauses (ii) and (iii) conflicts, violations, breaches or defaults which would
-- ---
not, either individually or in the aggregate, prevent or materially delay
consummation of the transactions contemplated by this Agreement.
5.4 Offer Documents. The Offer Documents will comply in all material
---------------
respects, both as to form and otherwise, with the requirements of the Exchange
Act and the rules and regulations thereunder. The Offer Documents, all written
communications by the Parent or Purchaser relating to the transactions
contemplated by this Agreement as filed with the SEC, and all amendments and
supplements thereto, will, when filed with the SEC and when published, sent or
given to holders of Company common stock, comply as to form in all material
respects with the Exchange Act and will not 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 is made by the Parent or Purchaser with respect to information
supplied by or on behalf of the Company for inclusion therein.
5.5 Proxy/Information Statement; Other Information. None of the
----------------------------------------------
information supplied or to be supplied in writing by the Parent or the Purchaser
specifically for inclusion in the Schedule 14D-9 or in the Proxy/Information
Statement will, (i) at the time the Schedule 14D-9 or the Proxy/Information
-
Statement is filed with the SEC, at any time it is amended or supplemented or at
the time it is first published, given or mailed to the Company's stockholders,
as the case may be, contain any untrue statement of a material
38
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 or, (ii) in the case of the
--
Proxy/Information Statement, at the time of the meeting of stockholders to which
such Proxy/Information Statement, as then amended or supplemented, relates, or
at the Effective Time, omit to state any material fact necessary to correct any
statement which has become false or misleading in any earlier communication with
respect to the solicitation of any proxy for such meeting. Notwithstanding the
foregoing, no representation or warranty is made with respect to any information
with respect to the Company or its officers, directors and affiliates provided
to the Parent or the Purchaser by the Company in writing for inclusion in the
Offer Documents or amendments or supplements thereto.
5.6 Financial Ability to Perform. The Parent and the Purchaser, at
----------------------------
the expiration of the Offer and the Effective Time, will have cash funds
sufficient to pay all cash payments for Shares in the Offer and the Merger and,
to pay all related fees and expenses.
5.7 Finders and Investment Bankers No agent, broker, person or firm
------------------------------
acting on behalf of the Parent or the Purchaser is, or will be, entitled to any
fee, commission or broker's or finder's fees from any of the parties hereto, or
from any person controlling, controlled by, or under common control with any of
the parties hereto, in connection with this Agreement or any of the transactions
contemplated hereby, except for Prudential Securities Incorporated whose fees,
to the extent payable, shall be paid by the Parent.
ARTICLE VI
COVENANTS
6.1 Conduct of the Business of the Company. Except as contemplated
--------------------------------------
by this Agreement, agreed to in writing by the Parent or as set forth in the
Company Disclosure Letter, during the period from the date of this Agreement and
prior to its termination or the time the directors designated by the Purchaser
have been elected to, and shall constitute a majority of, the Board of Directors
of the Company, the Company and its subsidiaries will each conduct its
operations (i) according to its ordinary course of business consistent with past
practice or (ii) within the scope of the authority given management by the Board
of Directors of the Company in the corporate policies as set forth in and
modified pursuant to a facsimile transmission, dated May 8, 2000, Re: Corporate
Policies from Xxxxxxx X. Xxxxxxx, Senior Vice President of Parent to the
Chairman and Chief Executive Officer of the Company (the "Corporate Policies").
Without limiting the generality of the foregoing, and except as otherwise
expressly permitted by the Corporate Policies, contemplated by this Agreement or
set forth in the
39
Company Disclosure Letter, prior to the Effective Time, neither the Company nor
any of its subsidiaries will, without the prior written consent of the Parent
(which consent shall be solicited from Parent by notice given pursuant to
Section 10.4, upon receipt of which Parent shall respond within 10 days):
(a) amend its certificate of incorporation or by-laws (or equivalent
instruments);
(b) authorize for issuance, issue, sell, deliver or agree or commit
to issue, sell or deliver (whether through the issuance or granting of
additional options, warrants, commitments, subscriptions, rights to
purchase or otherwise) any shares of capital stock of any class or any
securities convertible into shares of capital stock of any class, except as
required by any stock option plan or agreement existing as of the date
hereof;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock, redeem or otherwise acquire any shares of its capital stock,
or alter in any respect the ownership structure of the Company and its
subsidiaries;
(d) (i) pledge or otherwise encumber shares of capital stock of the
-
Company or any of its subsidiaries; (ii) create, incur, assume, maintain,
--
prepay, or permit to exist any long-term debt (including obligations in
respect of capital leases) or obligations with respect to letters of credit
or any material short-term debt, other than indebtedness that is
mandatorily prepayable in accordance with its terms and short-term
borrowings incurred in the ordinary course of business consistent with past
practice; (iii) assume, guarantee, endorse or otherwise become liable or
---
responsible (whether directly, contingently or otherwise) for the
obligations of any person other than any subsidiary of the Company; or (iv)
--
make any loans, advances or capital contributions to, or investments in,
any person other than any of the subsidiaries of the Company (other than de
--
minimis amounts advanced to employees for travel, meal and other similar
-------
business-related expenses or the advances it has committed to make on co-
investments in COMIT);
(e) (i) sell, transfer, mortgage or otherwise dispose of or encumber,
any business, subsidiary, assets of the Company and its subsidiaries, or,
other than in the ordinary course of business consistent with past
practice, fixed assets, (ii) sell, assign or otherwise transfer any rights
to service loans, (iii) except in the ordinary course of business and in a
manner consistent with past practice and, in the case of encumbrances,
pursuant only to existing conduit agreements that have been
40
previously disclosed to the Parent, sell, transfer or encumber any loan or
(iv) cancel any correspondent relationships;
(f) amend, default under or terminate any Company Contracts, waive,
release or assign any material right or claim, or modify, or enter into any
new, intra-company agreements or arrangements;
(g) originate any DUS Loans with a greater risk level than Xxxxxx Mae
Risk Level I or originate or underwrite any Loans under origination and
underwriting standards other than those in place on the date of this
Agreement;
(h) permit any material insurance policy naming it as a beneficiary
or a loss payable payee to be cancelled or terminated;
(i) grant any increase in the compensation payable or to become
payable to any of its officers or employees except in the ordinary course
of business consistent with past practice to employees who are not officers
and except to the extent required under employment or consulting contracts
in effect on the date of this Agreement, copies of which have been
delivered to the Purchaser or increase the total number of employees
employed by the Company or any subsidiary or take any other action that has
the effect of increasing the aggregate payroll obligations of the Company
or any subsidiary in any material fashion, or establish, adopt, enter into,
make any new grants or awards under, be obligated to grant any awards
under, terminate, amend, or make any representations regarding, any Company
Benefit Plan or any collective bargaining (except as required by law),
bonus, profit sharing, thrift, compensation, stock option or other equity,
pension, retirement, incentive or deferred compensation, employment,
retention, termination, severance, health, life or other welfare, fringe or
other plan, agreement, trust, fund, policy or arrangement for the benefit
of any current or former directors, officers or employees of the Company or
any of its subsidiaries, or grant or pay any benefit not required by any
existing plan or arrangement (including, without limitation, the granting
of stock options, stock appreciation rights, shares of restricted stock or
performance units) or amend any annual return or other filing required with
respect to any Company Benefit Plan by the Service, the Pension Benefit
Guaranty Corporation, the Department of Labor or any other governmental
agency or body having jurisdiction over any Company Benefits Plan;
(j) change in any material respect any of the accounting principles
used by it, unless required by GAAP or deplete the reserves or cash
balances of the Company or any of the subsidiaries, other than in the
ordinary course of business consistent with past practices;
41
(k) (i) enter into any material commitment or transaction with respect
-
to the Company or its subsidiaries outside the ordinary course of business,
(ii) transfer any business or material portion thereof, (iii) make any
-- ---
further investment in WMF Carbon Mesa Advisors, Inc. or (iv) enter into any
--
new line of business;
(l) (i) acquire or agree to acquire, by merging or consolidating with,
-
by purchasing an equity interest in or a portion of the assets of, or by
any other manner, any business or any corporation, partnership, association
or other business organization or division thereof, or otherwise acquire or
agree to acquire any assets of any other person (other than the purchase of
assets in the ordinary course of business and consistent with past
practice), or (ii) acquire any servicing right in a "bulk" transaction;
--
(m) (i) take any action, engage in any transaction or enter into any
-
agreement which would cause any of the representations or warranties set
forth in Article IV hereof to be untrue as of the Closing Date or (ii)
--
purchase or acquire, or offer to purchase or acquire, any shares of capital
stock of the Company;
(n) take any action, including without limitation, any amendments to
the Company Certificate of Incorporation, which would, directly or
indirectly, restrict or impair the ability of the Parent to vote, or
otherwise to exercise the rights and receive the benefits of a stockholder
with respect to, securities of the Company that may be acquired or
controlled by the Parent or the Purchaser or permit any stockholder to
acquire securities of the Company on a basis not available to the Parent in
the event that the Parent were to acquire securities of the Company;
(o) terminate the employment of any production or management personnel
identified by the Parent to the Company in a facsimile communication from
Xxxxxxx X. Xxxxxxx, Senior Vice President of Parent to the Chairman and
Chief Executive Officer of the Company dated May 8, 2000;
(p) amend any Tax Return previously filed or agree to settle or
compromise any government audit, assessment, dispute or other proceedings with
respect to Taxes;
and
(q) agree to do any of the foregoing actions.
6.2 Access to Information. From the date hereof to the Effective
---------------------
Time, the Company shall, and shall cause its subsidiaries, officers, directors,
employees, auditors and other agents to, afford the officers, employees,
auditors and other agents of the Parent reasonable access to its officers,
employees, agents, properties, offices, plants and other
42
facilities and to all books, records and contracts, and shall furnish the Parent
with all financial, operating and other data and information as the Parent,
through its officers, employees or agents, may from time to time reasonably
request. The Company will promptly furnish to the Parent a copy of each material
document filed or received by it pursuant to the Federal securities laws or
Federal, state, local or foreign tax laws or any Environmental Laws, and of such
other documents as the Parent may reasonably request. The Confidentiality
Agreement shall apply with respect to information furnished hereunder.
6.3 Stockholder Approval. (a) If required by applicable law in
--------------------
order to consummate the Merger, as soon as practicable following the purchase of
the Shares pursuant to the Offer, the Company, acting through its Board of
Directors, shall in accordance with applicable law, take all steps necessary
duly to call, set a record date for, give notice of, convene and hold a meeting
of its stockholders for the purpose of voting on the adoption and approval of
this Agreement and the transactions contemplated hereby. At such meeting, the
Parent and the Purchaser will each vote, or cause to be voted, all Shares
acquired in the Offer or otherwise beneficially owned by it or any of its
subsidiaries on the record date for such meeting, in favor of the approval and
adoption of this Agreement and the transactions contemplated hereby. Subject to
the rights of the Board of Directors as set forth in Section 6.8(d), the Company
shall use its reasonable best efforts to solicit from its stockholders written
consents and proxies, and shall take all other action necessary and advisable,
to secure the vote of stockholders required by applicable law to obtain the
approval for this Agreement.
(b) The Company will, as promptly as practicable, if required by law
for the consummation of the Merger and upon the request of the Parent or the
Purchaser, prepare and file a Proxy/Information Statement with the SEC, and
shall use best efforts to obtain and furnish the information required to be
included by it in the Proxy/Information Statement and, after consultation with
the Parent, to respond promptly to any comments made by the SEC with respect to
the Proxy/Information Statement and any preliminary version thereof, to furnish
all information required to prepare the definitive Proxy/Information Statement
(including, without limitation, financial statements and supporting schedules
and certificates and reports of independent public accountants) and cause the
Proxy/Information Statement to be mailed to its stockholders at the earliest
practicable time following the purchase of the Shares pursuant to the Offer. If
necessary, after the definitive Proxy/Information Statement shall have been so
mailed, the Company will promptly circulate amended, supplemental or
supplemented proxy material and, if required in connection therewith, resolicit
proxies. The Company will not use any proxy material in connection with the
meeting of its stockholders without the Parent's prior approval, such consent
not to be unreasonably delayed or withheld, and subject to the rights of the
Board of Directors as set forth in Section 6.8(d). The Board of Directors of the
Company, the sole member of the Parent and the Board of Directors of the
Purchaser have each deter-
43
mined that the Merger is advisable, fair to and in the best interests of the
stockholders or the members, as the case may be, of their respective companies
and, except to the extent that the conditions set forth in Section 6.8(d) have
been satisfied, the Board of Directors of the Company will (i) recommend to the
-
stockholders of the Company the adoption and approval of this Agreement and the
transactions contemplated hereby and the other matters to be submitted to such
stockholders in connection therewith and (ii) use its best efforts to obtain
--
the necessary approval by the stockholders of the Company of this Agreement and
the transactions contemplated hereby. The Parent shall provide the Company with
the information concerning the Parent and the Purchaser required to be included
in the Proxy/Information Statement. The Company agrees that it will include in
the Proxy/Information Statement the recommendation of its Board of Directors
that holders of Company Common Stock approve and adopt this Agreement and
approve the Merger, unless the Board of Directors of the Company has exercised
its rights pursuant to, and in accordance with, Section 6.8(d) of this
Agreement.
(c) Notwithstanding the foregoing, in the event that after the
closing of the Offer the Purchaser or its affiliates shall be the owner of at
least 90 percent of the outstanding Shares, the parties hereto shall take all
necessary and appropriate action to cause the Merger to become effective as soon
as practicable after the expiration of the Offer and in compliance with any
applicable rules of the SEC, without a meeting of stockholders of the Company,
in accordance with Section 253 of the GCL.
6.4 Reasonable Best Efforts. Subject to the terms and conditions
-----------------------
herein provided, and except to the extent expressly permitted in Section 6.3(b),
each of the parties hereto agrees to cooperate and use their respective
reasonable best efforts consistent with applicable legal requirements to take,
or cause to be taken, all action, and to do, or cause to be done, all things
necessary or proper and advisable under applicable laws and regulations to
ensure that the conditions set forth in Annex A hereto and Article VII hereof
are satisfied and to consummate and make effective, in the most expeditious
manner practicable, the transactions contemplated by this Agreement. The Company
agrees to pay the non-refundable deposit and the premium payable under, and in
accordance with the terms of, that certain Representations and Warranties
Insurance Policy, effective on the date of this Agreement, between The Reliance
Insurance Company of Illinois, as Insurer, and the insured named therein.
6.5 Consents. The Parent and the Company each shall use its
--------
commercially reasonable efforts to obtain all material consents of third parties
and governmental authorities, and to make all filings (including, without
limitation, under any applicable Antitrust Laws) with all Governmental Entities
and with Xxxxxx Mae, FHA and GNMA, necessary to the consummation of the
transactions contemplated by this Agreement. The Company, the Parent and the
Purchaser shall as soon as practicable file Pre-Merger Notification and Report
Forms under the HSR Act with the FTC and the
44
Antitrust Division, and shall use their commercially reasonable efforts to
respond as promptly as practicable to all inquiries received from the FTC or the
Antitrust Division for additional information or documentation. Each of the
parties shall use reasonable efforts (but neither the Parent, the Purchaser nor
the Company nor any of its respective subsidiaries shall have any obligation to
pay any material fees or incur any material expenses) to secure required written
consents or waivers. In addition, the Parent shall provide publicly available
financial information, and such other information, about itself as may be
reasonably requested by the person from whom a consent or waiver is sought in
connection with obtaining any such consents or waivers.
6.6 Public Announcements. The Parent and the Company will consult
--------------------
with each other before issuing any press release or otherwise making any public
statements with respect to the Offer, the Merger or the transactions
contemplated by this Agreement and neither the Parent nor the Company shall
issue any such press release or make any such public statement without the prior
approval of the other party, which approval will not be unreasonably delayed or
withheld, except as may be required by applicable laws or court process.
6.7 Consent of the Parent. The Parent, as the sole stockholder of
---------------------
the Purchaser, by executing this Agreement consents to the execution and
delivery of this Agreement by the Purchaser and the consummation of the Merger
and the other transactions contemplated hereby and such consent shall be treated
for all purposes as a vote duly cast at a meeting of the stockholders of the
Purchaser held for such purpose.
6.8 No Solicitation. (a) Neither the Company nor any of its
---------------
subsidiaries nor any of their respective officers, directors, employees, agents
or representatives (including, without limitation, investment bankers, attorneys
and accountants) shall, directly or indirectly, (i) solicit, initiate or
-
encourage or (ii) enter into any discussions or negotiations with, in any way
--
continue any discussions or negotiations commenced before the date of this
Merger Agreement with, or disclose directly or indirectly any information not
customarily disclosed concerning its business and properties to, or afford any
access to its properties, books and records to, any corporation, partnership or
other person or group in connection with any inquiry or proposal (an
"Acquisition Proposal") regarding a sale of any shares of the capital stock of
the Company or any of its subsidiaries or a merger, consolidation or sale or
spin-off of all or a substantial portion of the assets of the Company or any
subsidiary of the Company, or a liquidation or a recapitalization of the Company
or any of its subsidiaries, or any similar transaction. The Company will notify
the Parent immediately, orally and in writing, if any discussions or
negotiations are sought to be initiated, any inquiry or proposal is made, or any
such information is requested, with respect to an Acquisition Proposal or
potential Acquisition Proposal or if any Acquisition Proposal is received or if
the Company has been informed that an Acquisition Proposal is forthcoming, and
will include in such notification the identity of the other party or parties
45
and the material terms and conditions of any such request, inquiry or
Acquisition Proposal. Except as expressly provided below, the Board of Directors
of the Company shall not take any action to withdraw or modify in a manner
adverse to the Parent or the Purchaser, or take a public position inconsistent
with, its approvals or recommendation of the Offer, the Merger, this Agreement
or the Stockholders Agreement or to recommend another Acquisition Proposal and
shall not resolve to do any of the foregoing. The Company will keep the Parent
informed in reasonable detail of the status (including amendments or proposed
amendments) of any such request, inquiry or Acquisition Proposal. Immediately
following the execution of this Agreement, the Company will cease any existing
discussions or negotiations with any parties conducted heretofore with respect
to any Acquisition Proposal and request each person which has heretofore
executed a confidentiality agreement in connection with its consideration of
acquiring the Company or any of its subsidiaries or any portion thereof to
return all confidential information heretofore furnished to such person by or on
behalf of the Company.
(b) Notwithstanding anything to the contrary contained in this
Agreement, the Company and its Board of Directors (i) may participate in
-
discussions or negotiations with or furnish information to any third party that
has made an unsolicited Acquisition Proposal in writing after the date hereof (a
"Potential Acquiror") if the Board reasonably determines in good faith (A) that
-
such Acquisition Proposal is reasonably likely to result in a Superior Proposal
and (B) after receiving advice of its independent legal counsel, that
-
participation in such discussions or negotiations or furnishing such information
is consistent with its fiduciary duties to the Company's stockholders under
applicable law, and (ii) shall be permitted to take and disclose to the
--
Company's stockholders a position with respect to any tender or exchange offer
by a third party, or amend or withdraw such position, pursuant to Rules 14d-9
and 14e-2 of the Exchange Act or make any other disclosure to the Company's
shareholders as the Board determines in good faith, after receiving advice of
its independent legal counsel, is consistent with its fiduciary duties to the
Company's stockholders under applicable law.
(c) Any non-public information furnished to a Potential Acquiror
shall be pursuant to a confidentiality agreement containing standard terms for
confidentiality agreements entered into in such circumstances, which terms shall
be no more favorable to the Potential Acquiror than the terms of the
Confidentiality Agreement are to the Parent.
(d) Except as provided in the following sentence, the Board of
Directors of the Company shall not (i) withdraw or modify or propose to withdraw
-
or modify, in any manner adverse to Parent, the approval or recommendation of
such Board of Directors of this Agreement, the Offer or the Merger or (ii)
--
approve or recommend, or propose to approve or recommend, any Acquisition
Proposal. In the event that, after the Company has received a bona fide
Superior Proposal not solicited in violation of this Agreement, the Board
determines (after receiving the advice of its independent counsel) prior to the
46
consummation of the Offer (or, if the Offer is consummated and extended, the
initial consummation of the Offer) that to do so is consistent with its
fiduciary duties, the Board may (x) withdraw or modify its approval or
-
recommendation of this Agreement, the Offer and the Merger, and (y) approve or
-
recommend such a Superior Proposal.
(e) The term "Superior Proposal" means any proposal to acquire,
directly or indirectly, for consideration consisting of cash and/or securities,
more than a majority of the Shares then outstanding or all or substantially all
the assets of the Company, and otherwise on terms which the Board of Directors
of the Company in good faith concludes (after receiving the advice of its
financial advisors and independent counsel), taking into account, among other
things, all legal, financial, regulatory and other aspects of the proposal and
the person making the proposal, (i) would, if consummated, result in a
-
transaction that is more favorable to its stockholders (in their capacity as
stockholders), from a financial point of view, than the Offer and the Merger and
the other transactions contemplated by this Agreement (taking into account, at
the time of determination, any changes to the terms of this Agreement which as
of that time had been proposed in writing, in good faith, by the Parent) and
(ii) that the person making the Acquisition Proposal is capable of consummating
--
such Acquisition Proposal.
6.9 Indemnification; Insurance. (a) For a period of six years after
--------------------------
the Effective Time, the Parent shall, and shall cause the Surviving Corporation
to, indemnify, defend and hold harmless the present and former officers,
directors, employees and agents of the Company and its subsidiaries
(collectively, the "Indemnified Parties") from and against, and pay or reimburse
the Indemnified Parties for, all losses, obligations, expenses, claims, damages
or liabilities (whether or not resulting from third-party claims and including
interest, penalties, out-of-pocket expenses and attorneys' fees incurred in the
investigation or defense of any of the same or in asserting any of their rights
hereunder) with respect to actions or omissions arising out of such individuals'
services as officers, directors, employees or agents of the Company or any of
its subsidiaries or as trustees or fiduciaries of any plan for the benefit of
employees of the Company or any of its subsidiaries occurring on or prior to the
Effective Time (including, without limitation, the transactions contemplated by
this Agreement) to the full extent permitted or required under applicable law
and, in the case of indemnification by the Surviving Corporation, to the extent
permitted under the provisions of the Company Certificate of Incorporation and
the Company By-Laws, each as in effect at the date hereof (which provisions
shall not be amended in any manner which adversely affects any Indemnified
Party, for a period of six years), including provisions relating to advances of
expenses incurred in the defense of any action or suit; provided that in the
--------
event any claim or claims are asserted or made within such six-year period, all
rights to indemnification in respect of each such claim shall continue until
final disposition of such claim. Without limiting the foregoing, in any case in
which approval by the Surviving Corporation is required to effectuate any
indemnification, the Parent shall cause the Surviving Corporation to direct, at
the election
47
of the Indemnified Party, that the determination of any such approval shall be
made by independent counsel selected by the Indemnified Party.
(b) Any Indemnified Party wishing to claim indemnification under
Section 6.9(a) shall provide notice to the Parent promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and the Indemnified Party shall permit the Parent (at the Parent's
expense) to assume the defense of any claim or any litigation resulting
therefrom; provided that (i) counsel for the Parent who shall conduct the
-------- -
defense of such claim or litigation shall be reasonably satisfactory to the
Indemnified Party, and the Indemnified Party may participate in such defense at
such Indemnified Party's expense, and (ii) the omission by any Indemnified Party
--
to give notice as provided herein shall not relieve the Parent of its
indemnification obligation under this Agreement except to the extent that such
omission results in a failure of actual notice to the Parent and the Parent is
materially damaged as a result of such failure to give notice. The Parent shall
not, in the defense of any such claim or litigation, except with the consent of
the Indemnified Party, consent to entry of any judgment or enter into any
settlement that provides for injunctive or other nonmonetary relief affecting
the Indemnified Party or that does not include as an unconditional term thereof
the giving by the claimant or plaintiff to such Indemnified Party of a release
from all liability with respect to such claim or litigation. In the event that
the Parent does not accept the defense of any matter as above provided, or
counsel for the Parent advises that there are issues which raise conflicts of
interest between the Parent or the Surviving Corporation and the Indemnified
Parties, the Indemnified Parties may retain counsel satisfactory to them, and
the Parent or the Surviving Corporation shall pay all reasonable fees and
expenses of such counsel for the Indemnified Parties promptly as statements
therefor are received; provided that the Parent shall not be liable for any
--------
settlement effected without its prior written consent. In any event, the Parent
and the Indemnified Parties shall cooperate in the defense of any action or
claim subject to this Section 6.9 and, subject to the Confidentiality Agreement,
the records of each shall be available to the other with respect to such
defense.
(c) The Parent will cause to be maintained for a period of not less
than six (6) years from the Effective Time the Company's current directors' and
officers' insurance and indemnification policy to the extent that it provides
coverage for events occurring prior to the Effective Time ("D&O Insurance") for
all persons who are directors and officers of the Company on the date of this
Agreement, so long as the annual premium therefor would not be in excess of 150%
of the last annual premium paid prior to the date of this Agreement (the
"Maximum Premium"); provided, however, that if the annual premium therefor would
-------- -------
exceed the Maximum Premium, the Parent shall purchase as much coverage as is
available for the Maximum Premium; provided, further, that the Parent may, in
-------- -------
lieu of maintaining such existing D&O Insurance as provided above, cause
coverage to be provided under any policy maintained for the benefit of the
Parent or any of its subsidiaries or any policy specifically obtained for this
purpose, so long as the terms
48
thereof are no less advantageous to the intended beneficiaries thereof than the
existing D&O Insurance for a period of not less than six (6) years from the
Effective Time. If the existing D&O Insurance expires, is terminated or canceled
during such six (6) year period, the Parent will obtain as much D&O Insurance as
can be obtained for the remainder of such period for an annualized premium equal
to the Maximum Premium, on terms and conditions no less advantageous to the
covered persons than the existing D&O Insurance.
6.10 Employment and Benefit Plans. (a) Following the Effective Time,
----------------------------
the Parent shall cause the Company and/or The Prudential Insurance Company of
America ("PICA") to provide each then current employee of the Company who was an
employee of the Company as of the Effective Time ("Company Employee") with
benefits under employee benefit plans (as such term is defined in Section 3(3)
of ERISA ("Benefit Plans")), that are similar to the benefits received by (i)
similarly situated Company Employees under Benefit Plans sponsored by the
Company immediately prior to the Effective Time subject to the terms and
conditions of such Company Benefit Plans, as in effect from time to time, or
(ii) similarly situated employees of the Parent under Benefit Plans sponsored by
PICA on or after the Effective Time, subject to the terms and conditions of such
PICA Benefit Plans, as in effect from time to time. Active service with the
Company prior to the Effective Time shall be recognized for purposes of
determining eligibility to participate in and vesting of benefits under (but not
for purposes of determining benefit accrual under or eligibility to receive
post-retirement welfare benefits under) the Benefit Plans of the Company or PICA
on or after the Effective Time; provided, that active service with the Company
--------
prior to the Effective Time shall not be recognized if such recognition of
service would result in a duplication of benefits under the Benefit Plans of the
Company or PICA. Nothing in this Agreement shall be construed as limiting in
any way (i) the right of the Parent or the Company (as the case may be) to
-
terminate the employment of any Company Employee after the Effective Time or
(ii) the right of PICA or the Company (as the case may be) to amend or terminate
--
any Benefit Plan of PICA or the Company (including, without limitation, to
change the level of benefits provided thereunder or the requirements for
eligibility to participate thereunder) in accordance with the terms thereunder.
(b) Following the acquisition of Shares pursuant to the Offer, and
prior to the Effective Time, the Company shall take, by action of the Company's
Board of Directors (or an appropriate committee thereof), all actions reasonably
necessary and appropriate, in the opinion of the Purchaser, to ensure that any
Company Employee who commences participation, on or after the Effective Time, in
any Benefit Plan of PICA does not receive duplicate benefits under any Benefit
Plan of the Company.
6.11 Stock Options; Stock Plans. Following the acquisition of Shares
--------------------------
pursuant to the Offer and prior to the Effective Time, the Company shall take,
by action of the Company's Board of Directors (or an appropriate committee
thereof), all necessary
49
and appropriate actions, in the reasonable opinion of the Purchaser, to cancel,
and shall use all reasonable efforts to obtain all necessary consents with
respect to such cancellation of, all of the Company's Options (and all ancillary
rights attached thereto, including but not limited to the obligation to pay
severance amounts) and to terminate each of the Stock Plans, all as of the
Effective Time, as provided in Section 3.5 hereof. Notwithstanding the
cancellation and settlement of the rights of such former XXXX participants as
provided in Section 3.5, solely for a period of 180 days after the Effective
Time, the Company shall make available to former participants in the XXXX who
are employed by the Company as of the time of cancellation and settlement of
such rights under Section 3.5 severance benefits that are no less favorable than
those to which such former XXXX participants would have been entitled (under
their respective XXXX award agreements) if the Company had terminated the
employment of such XXXX participants within 180 days following a "transfer of
control" as defined in such award agreements.
6.12 Transfer Taxes. Except as otherwise provided in Article III, the
--------------
Purchaser shall pay any stock transfer, real estate transfer, documentary,
stamp, recording and similar Taxes payable in connection with the Offer and the
Merger and shall be responsible for the preparation and filing of any required
Tax Returns with respect to such Taxes.
6.13 Anti-takeover Statutes. If any "fair price," "moratorium,"
----------------------
"control share acquisition" or other form of anti-takeover statute is or shall
become applicable to the Offer, Merger or other transactions contemplated
hereby, the Company and the members of the Board of Directors of the Company
shall grant such approvals and take such actions as are necessary so that the
Offer, Merger and other transactions contemplated hereby may be consummated as
promptly as practicable on the terms contemplated hereby and otherwise act to
eliminate or minimize the effects of any such anti-takeover statute on the
transactions contemplated hereby.
6.14 Notification of Certain Matters. Each of the Company, the Parent
-------------------------------
and the Purchaser shall give prompt notice to each other party of any notice of,
or other communication relating to, a material default or event that, with
notice or lapse of time or both, would become a material default, received by
such party subsequent to the date of this Agreement and prior to the Effective
Time, under any material contract to which such party is a party or is subject.
Each of the Company and the Parent shall give prompt notice to the other party
of (a) any notice or other communication from any third party alleging that the
-
consent of such third party is or may be required in connection with the
transactions contemplated by this Agreement and (b) the occurrence, or non-
-
occurrence, of any events the occurrence, or non-occurrence, of which would
cause either (i) a representation or warranty contained in this Agreement to be
-
untrue or inaccurate in any material respect at any time from the date hereof to
the date Shares are accepted for payment pursuant to the Offer or (ii) any of
--
the conditions set forth in Annex A or any
50
covenant, condition or agreement to be complied with or satisfied under this
Agreement to be unsatisfied in any material respect at any time from the date
hereof to the date Shares are purchased pursuant to the Offer; provided,
--------
however, that the delivery of any notice pursuant to this Section 6.14 will not
-------
limit or otherwise affect the remedies available under this Agreement to the
party receiving such notice.
6.15 Amendment to Schedule TO, Proxy/Information Statement and
---------------------------------------------------------
Schedule 14D-9. (a) If at any time prior to the expiration or termination of
--------------
the Offer any event occurs which is required by the Exchange Act to be described
in an amendment or supplement to the Schedule TO or any amendment or supplement
thereto, the Purchaser will file and disseminate, as required, an amendment or
supplement which complies in all material respects with the Exchange Act and the
rules and regulations thereunder and any other applicable laws. Prior to or
contemporaneously with its filing with the SEC, the amendment or supplement
shall be delivered to the Company and its counsel.
(b) If at any time prior to the expiration or termination of the
Offer any event occurs which is required by the Exchange Act to be described in
an amendment or supplement to the Schedule 14D-9 or any amendment or supplement
thereto, the Company will file and disseminate, as required, an amendment or
supplement which complies in all material respects with the Exchange Act and the
rules and regulations thereunder and any other applicable laws. Prior to its
filing with the SEC, the amendment or supplement shall be delivered to the
Parent and the Purchaser and their counsel, and any such amendment or supplement
shall be subject to the approval of the Parent and the Purchaser, which approval
(i) shall not be unreasonably withheld or delayed, and (ii) shall be consistent
- --
with the terms and conditions of this Agreement, including, but not limited to,
the rights of the Board of Directors of the Company as set forth in Section
6.8(d).
(c) If at any time prior to the Effective Time any event with respect
to the Company or any it its subsidiaries, or with respect to information
supplied by the Company for inclusion in the Proxy/Information Statement, occurs
which is required by the Exchange Act to be described in an amendment or
supplement to the Proxy/Information Statement, the Company will file and
disseminate, as required, an amendment or supplement which complies in all
material respects with the Exchange Act and the rules and regulations thereunder
and any other applicable laws. Prior to its filing with the SEC, the amendment
or supplement shall be delivered to the Parent and the Purchaser and their
counsel, and any such amendment or supplement shall be subject to the approval
of the Parent and the Purchaser, which approval (i) shall not be unreasonably
-
withheld or delayed, and (ii) shall be consistent with the terms and conditions
--
of this Agreement, including, but not limited to, the rights of the Board of
Directors of the Company as set forth in Section 6.8(d).
51
6.16 Continuing Services with Respect to Tax Matters. The Company
-----------------------------------------------
will not terminate its existing arrangements with KPMG with respect to the
preparation of Tax Returns and the performance of related Tax services for the
Company and its subsidiaries prior to the Closing Date and will, upon the
request and subject to the consent of the Parent, enter into reasonable
arrangements with KPMG to continue to provide such services to the Company and
its subsidiaries, at prevailing markets rates, for an interim period following
the Closing Date. The Company is not required to make any payment to KPMG in
order to comply with the foregoing covenant unless the Parent agrees to
reimburse the Company for such payment.
6.17 Supplemental Schedules. The Company may, from time to time prior
----------------------
to the consummation of the Offer, by notice given in accordance with this
Agreement, supplement or amend the Company Disclosure Letter to reflect any
development (other than a development intentionally caused by the Company, a
Stockholder or any of their respective affiliates), but only to the extent such
development arises after the date of this Agreement, the non-disclosure of which
may otherwise give rise to a breach of any representation or warranty of the
Company contained in Article IV of this Agreement. The representations and
warranties of the Company contained in Article IV of this Agreement shall not be
deemed to be modified by any such supplement or amendment for purposes of
determining whether the condition set forth in clause (d) of Annex A to this
Agreement is satisfied.
ARTICLE VII
CLOSING CONDITIONS
7.1 Conditions to the Obligations of the Parent, the Purchaser and
--------------------------------------------------------------
the Company. The respective obligations of each party to effect the Merger
-----------
shall be subject to the fulfillment at or prior to the Effective Time of the
following conditions:
(a) The Purchaser shall have purchased all Shares duly tendered and
not withdrawn pursuant to the terms of the Offer and subject to the terms
thereof; provided that the obligation of the Parent and the Purchaser to
--------
effect the Merger shall not be conditioned on the fulfillment of the
condition set forth in this subsection (a) if the failure of the Purchaser
to purchase the Shares pursuant to the Offer shall have constituted a
breach of the Offer or of this Agreement;
(b) There shall not be in effect any statute, rule or regulation
enacted, promulgated or deemed applicable by any Governmental Entity of
competent jurisdiction that makes consummation of the Merger illegal and no
temporary restraining order, preliminary or permanent injunction or other
order issued by any
52
court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect; provided,
--------
however, that each of the parties shall use its best efforts to prevent the
-------
entry of any such injunction or other order and to appeal as promptly as
possible any injunction or other order that may be entered;
(c) If required by applicable law, this Agreement shall have been
approved and adopted by the affirmative vote of the holders of the
requisite number of shares of Company Common Stock in accordance with
applicable law; and
(d) Any waiting period (and any extension thereof) under the HSR Act
applicable to the Merger shall have expired or been terminated.
ARTICLE VIII
CLOSING
8.1 Time and Place. The closing of the Merger (the "Closing") shall
--------------
take place at the offices of Debevoise & Xxxxxxxx, 000 Xxxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx, as soon as practicable following satisfaction or waiver, if
permissible, of the conditions set forth in Article VII. The date on which the
Closing actually occurs is herein referred to as the "Closing Date."
8.2 Filings at the Closing. At the Closing, the Parent, the
----------------------
Purchaser and the Company shall cause the Delaware Certificate of Merger,
together with any other documents required by law to effectuate the Merger, to
be filed with the Secretary of State of the State of Delaware in accordance with
the provisions of the GCL, and shall take any and all other lawful actions and
do any and all other lawful things necessary to cause the Merger to become
effective.
ARTICLE IX
TERMINATION AND ABANDONMENT
9.1 Termination. This Agreement may be terminated at any time prior
-----------
to the Effective Time, whether before or after approval by the stockholders of
the Company:
(a) by mutual consent of the sole member of the Parent and the Board
of Directors of the Company;
(b) by either the Parent or the Company if (i) the Offer shall have
-
not been consummated by 12:00 p.m. midnight on July 31, 2000 (the "Offer
53
Termination Date"), or (ii) the Effective Time shall not have occurred by
--
October 31, 2000 (the earlier of such date and the Offer Termination Date,
the "Termination Date"); provided, however, that (A) the passage of such
-------- -------
period shall be tolled for any part thereof during which any party shall be
subject to a nonfinal order, decree, ruling or action restraining,
enjoining or otherwise prohibiting the consummation of the Merger or Offer
and (B) such July 31 date may be extended to a date not later than August
31, 2000, by Parent or the Company prior to termination of this Agreement,
by notice in writing to the other, if on July 31, 2000, the Offer has not
been consummated because of the failure of the condition in clause (i) of
the lead-in paragraph in Annex A or the condition in paragraph (a) in Annex
A or the absence of third party consents which can reasonably be expected
to be obtained within 30 days, provided, further, that a party may not
-------- -------
terminate this Agreement pursuant to this Section 9.1(b) if such party has
committed a breach of any representation, warranty, covenant or agreement
set forth in this Agreement, which has been the cause of or resulted in the
failure of the Offer to be consummated or the Effective Time to occur;
(c) by the Parent or the Company, if the Offer shall expire or
terminate in accordance with its terms without any Shares having been
purchased thereunder due to a failure of any of the conditions set forth in
Annex A to be satisfied, provided that neither the Parent nor the Company
may terminate this Agreement pursuant to this Section 9.1(c) if such
termination or expiration has been caused or resulted from the failure by
the Parent or the Company, respectively, to perform in any material respect
any of its covenants or agreements contained in this Agreement;
(d) by the Company, if the Parent or the Purchaser shall have failed
to commence the Offer within the period set forth in Section 1.1 of this
Agreement; provided, that the Company may not terminate this Agreement
--------
pursuant to this Section 9.1(d) if the Company has failed to perform in any
material respect any of its covenants or agreements contained in this
Agreement which has been the cause or resulted in the failure of the Parent
or the Purchaser to commence the Offer;
(e) by the Company, if Parent or the Purchaser breaches or fails to
perform in any material respect any of its representations, warranties or
covenants contained in this Agreement, which breach or failure to perform
cannot be or has not been cured within 10 business days after the giving of
notice to the Parent of such breach, except such failures which are not
reasonably likely to materially and adversely affect the Parent, or the
Purchaser's ability to complete the Offer or the Merger;
54
(f) by either the Parent, the Purchaser or the Company, if any court
of competent jurisdiction in the United States or other governmental agency
of competent jurisdiction shall have issued an order, decree or ruling or
taken any other action (which order, decree, ruling or other action the
parties hereto shall use their respective reasonable best efforts to lift)
restraining, permanently enjoining or otherwise prohibiting the
consummation of the Offer or the Merger, and such order, decree, ruling or
other action has become final and non-appealable;
(g) by the Parent or the Purchaser if, prior to the purchase of
shares of Company Common Stock pursuant to the Offer, the Board of
Directors of the Company shall have withdrawn, or modified or changed in a
manner adverse to the Parent or the Purchaser, its approval or
recommendation of the Offer, this Agreement or the Merger or shall have
publicly recommended a Superior Proposal or shall have resolved to do
either of the foregoing;
(h) by the Company, if, prior to the purchase of Shares pursuant to
the Offer, (i) the Board of Directors of the Company shall have determined
-
in good faith, after receiving advice of its independent legal counsel,
that it is consistent with its fiduciary duties to the Company's
stockholders under applicable law, to terminate this Agreement in order to
enter into an agreement with respect to or to consummate a transaction
constituting a Superior Proposal, (ii) the Company shall have given notice
--
to the Purchaser advising the Purchaser that the Company has received a
Superior Proposal from a third party, specifying the material terms and
conditions (including the identity of the third party), and that the
Company intends to terminate this Agreement in accordance with this Section
9.1(h), (iii) either (A) the Purchaser shall not have revised its proposal
--- -
for the Offer and the Merger within five (5) business days from the time on
which such notice is deemed to have been given to Parent or (B) if the
-
Purchaser within such period shall have revised its proposal for the Offer
and the Merger, the Board of Directors of the Company, after receiving
advice from CSFB, shall have determined that the third party's Acquisition
Proposal remains a Superior Proposal, and (iv) the Company, at the time of
--
such termination, has complied in all respects with the provisions of
Section 6.8 and pays the Expenses and the Termination Fee in accordance
with Section 9.3(b); or
(i) if approval by the Company stockholders is required by law, by
either the Purchaser or the Company if, upon a vote at a duly held Company
stockholders meeting or any adjournment thereof at which such Company
stockholder approval shall have been voted upon, such approval shall not
have been obtained.
9.2 Procedure and Effect of Termination. In the event of termination
-----------------------------------
and abandonment of the Merger by the Parent, the Purchaser or the Company
pursuant to Sec-
55
tion 9.1, written notice thereof shall forthwith be given to the other party or
parties specifying the provision hereof pursuant to which such termination is
made and this Agreement shall terminate and the Merger shall be abandoned,
without further action by any of the parties hereto. The Purchaser agrees that
any termination by the Parent shall be conclusively binding upon it, whether
given expressly on its behalf or not, and the Company shall have no further
obligation with respect to it. If this Agreement is terminated as provided
herein, no party hereto shall have any liability or further obligation to any
other party to this Agreement, provided that any termination shall be without
--------
prejudice to the rights of any party hereto arising out of breach by any other
party of any covenant or agreement contained in this Agreement, and provided,
--------
further, that the obligations set forth in the second sentence of Section
-------
1.2(a) and Sections 4.21, 5.7, 9.3, 10.7 and 10.11 and in the Confidentiality
Agreement shall in any event survive any termination.
9.3 Fees and Expenses. (a) Except as otherwise provided for in this
-----------------
Agreement, all costs and expenses incurred in connection with this Agreement and
the Offer, the Merger and any transactions contemplated thereby shall be paid by
the party incurring such expenses, whether or not any transaction is
consummated.
(b) The Company shall pay, or cause to be paid, in same day funds to
Parent the sum of (i) Parent's Expenses (as defined below) and (ii) $3,075,000
- --
(the "Termination Fee") upon demand if (A) the Company terminates this Agreement
-
pursuant to Section 9.1(h), (B) the Parent or the Purchaser terminates this
-
Agreement pursuant to Section 9.1(g), or (C) the Parent or the Company
-
terminates this Agreement pursuant to Section 9.1(c) (other than as a result of
a failure of any of the conditions set forth in clause (i) of the introductory
paragraph of Annex A or in any of clauses (a), (b), (c)(i), (f) or (g) of Annex
A, or clause (d) of Annex A if the breach of representation or warranty giving
rise to the failure of the condition set forth in clause (d) of Annex A would
also give rise to a failure of the condition set forth in clause (f) of Annex A
or in the ability of the Parent or the Purchaser to terminate this Agreement
under Section 9.1(f)), and, within nine (9) months after any termination
referred to in the immediately preceding clause (C), any person publicly
announces (x) a merger, consolidation or other business combination with the
-
Company or a subsidiary of the Company, or (y) the purchase of 50% or more (in
-
voting power) of the voting securities of the Company or of 50% or more (in
market value) of the assets of the Company and its subsidiaries, on a
consolidated basis, and such transaction shall within twelve months following
such announcement be consummated on substantially the terms theretofore
announced. "Expenses" shall mean all out-of-pocket fees and expenses incurred
or paid by or on behalf of the Parent or any of its affiliates in connection
with the Offer and Merger or the consummation of any of the transactions
contemplated by this Agreement (including, without limitation, fees and expenses
of counsel, commercial banks, investment banking firms, accountants, experts and
consultants to Parent and any of its affiliates) in an amount not to exceed
$1,000,000.
56
(c) The Company shall pay, or cause to be paid, in same day funds to
Parent Parent's Expenses upon demand if (i) the Parent or the Purchaser or the
-
Company terminates this Agreement pursuant to Section 9.1(f) at any time after
any third-party Acquisition Proposal has been made, (ii) the Parent or the
--
Company terminates this Agreement pursuant to Section 9.1(c) as a result of a
failure of any of the conditions set forth in clause (i) of the introductory
paragraph of Annex A or in any of clauses (a), (b), (c)(i), (f) or (g) of Annex
A, or clause (d) of Annex A if the breach of representation or warranty giving
rise to the failure of the condition set forth in clause (d) of Annex A would
also give rise to a failure of the condition set forth in clause (f) of Annex A
or in the ability of the Parent or the Purchaser to terminate this Agreement
under Section 9.1(f) or (iii) the Parent or the Company terminates this
---
Agreement pursuant to Section 9.1(b), and, within nine (9) months after any
termination referred to in the immediately preceding clauses (i), (ii) or (iii),
any person publicly announces (x) a merger, consolidation or other business
-
combination with the Company or a subsidiary of the Company, or (y) the purchase
-
of 50% or more (in voting power) of the voting securities of the Company or of
50% or more (in market value) of the assets of the Company and its subsidiaries,
on a consolidated basis, and such transaction shall within twelve months
following such announcement be consummated on substantially the terms
theretofore announced.
ARTICLE X
MISCELLANEOUS
10.1 Amendment and Modification. This Agreement may be amended,
--------------------------
modified or supplemented only by written agreement of the Parent, the Purchaser
and the Company at any time prior to the Effective Time with respect to any of
the terms contained herein, provided, that after this Agreement is adopted by
--------
the Company's stockholders pursuant to Section 6.3, no such amendment or
modification shall be made that reduces the amount or changes the form of the
Merger Consideration or otherwise materially and adversely affects the rights of
the Company's stockholders hereunder, without the further approval of such
stockholders.
10.2 Waiver of Compliance; Consents. Any failure of the Parent or the
------------------------------
Purchaser, on the one hand, or the Company, on the other hand, to comply with
any obligation, covenant, agreement or condition herein may be waived by the
Company or the Parent, respectively, only by a written instrument signed by the
party granting such waiver (and, in the case of the Company, approved in
accordance with the provisions of Section 1.3(c) if applicable), but such waiver
or failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. Whenever this Agreement requires
or permits consent by or on behalf of any party hereto, such consent shall be
given in writing in a manner consistent with the requirements for a waiver of
compliance as set forth in
57
this Section 10.2. The Purchaser hereby agrees that any consent or waiver of
compliance given by the Parent hereunder shall be conclusively binding upon it,
whether given expressly on its behalf or not.
10.3 Survival of Warranties. Each and every representation and
----------------------
warranty made in Article IV, other than Section 4.21 (if this Agreement is
terminated before consummation of the Offer), and Article V, other than Section
5.7 (if this Agreement is terminated before consummation of the Offer), of this
Agreement shall expire with, and be terminated and extinguished by, the Merger,
or the termination of this Agreement pursuant to Section 9.1. This Section 10.3
shall have no effect upon any other obligation of the parties hereto, whether to
be performed before or after the Closing.
10.4 Notices. All notices and other communications hereunder shall be
-------
in writing and shall be deemed given if (a) delivered personally or by overnight
-
courier, (b) mailed by registered or certified mail, return receipt requested,
-
postage prepaid, or (c) transmitted by telecopier, and in each case, addressed
-
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice; provided that notices of a change of
--------
address shall be effective only upon receipt thereof):
(a) if to the Parent or the Purchaser, to
Prudential Mortgage Capital Company, LLC
Four Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000-0000
Telephone: 000-000-0000
Telecopy: 000-000-0000
Attention: Xxxxxxx X. Xxxxxxx
---------
with copies to:
The Prudential Insurance Company of America
000 Xxxxx Xxxxxx, 0/xx/ Xxxxx
Xxxxxx, Xxx Xxxxxx 00000-0000
Telephone: 000-000-0000
Telecopy: 000-000-0000
Attention: Xxxxxxx X. Xxxxxxx
---------
58
Prudential Mortgage Capital Company, LLC
Four Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000-0000
Telephone: 000-000-0000
Telecopy: 000-000-0000
Attention: Xxxxx X. Xxxxx
---------
and:
Debevoise & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
Telecopy: 000-000-0000
Attention: Xxxxxxx X. Xxxxxxxx
---------
(b) if to the Company, to
The WMF Group, Ltd.
0000 Xxxxxx Xxxx Xxxx
Xxxxx 000
Xxxxxx, XX 00000-0000
Telephone: 000-000-0000
Telecopy: 000-000-0000
Attention: Xxxxxx Xxxxxxxxxx
---------
with copies to:
Hunton & Xxxxxxxx
000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, XX 00000-0000
Telephone: 000-000-0000
Telecopy: 804-788-8218
Attention: Xxxxxxx X. Xxxxx
---------
Ropes & Xxxx
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Telephone: 000-000-0000
Telecopy: 000-000-0000
Attention: Xxxx X. Xxxxxxxxx
---------
59
Any notice so addressed shall be deemed to be given upon delivery, if
transmitted by hand delivery, overnight courier or telecopier.
10.5 Assignment; Parties in Interest. This Agreement and all of the
-------------------------------
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto without the prior written consent of the
other parties (except that the Purchaser may assign to the Parent or any other
direct or indirect wholly-owned subsidiary of The Prudential Insurance Company
of America any and all rights and obligations of the Purchaser under this
Agreement and/or the Purchaser's right to purchase Shares transferred pursuant
to the Offer, provided that any such assignment will not relieve the Parent or
the Purchaser from any of its obligations under this Agreement). Except for
Section 6.9, which is intended for the benefit of the Company's directors,
officers, employees and agents, this Agreement is not intended to confer upon
any other person except the parties any rights or remedies under or by reason of
this Agreement.
10.6 Specific Performance. The parties hereto agree that irreparable
--------------------
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
10.7 Governing Law. This Agreement shall be governed by the laws of
-------------
the State of Delaware (regardless of the laws that might otherwise govern under
applicable principles of conflicts of law) as to all matters, including but not
limited to matters of validity, construction, effect, performance and remedies.
10.8 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.9 Interpretation. The article and section headings contained in
--------------
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement. As used in this Agreement, (i) the term
-
"person" shall mean and include an individual, a partnership, a joint venture, a
corporation, a trust, a limited liability company, an unincorporated
organization and a government or any department or agency thereof; (ii) the
--
terms "affiliate" and "associate" shall have the meanings set forth in Rule l2b-
2 of the General Rules and Regulations promulgated under the Exchange Act; and
(iii) the
----
60
term "subsidiary" shall mean as to any person, (x) any corporation 50% or more
-
of whose stock of any class or classes having by the terms thereof ordinary
voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such person and/or one or
more subsidiaries of such person and (y) any partnership, association, joint
-
venture, limited liability company or other entity in which such person and/or
one or more subsidiaries of such person has a 50% or more equity interest at the
time; and (iv) the phrase "to the knowledge" of any specified corporation shall
--
refer only to the actual knowledge of the directors, officers or management of
such corporation.
10.10 Entire Agreement. This Agreement, including the Confidentiality
----------------
Agreement, the Company Disclosure Letter and Annex A hereto, embody the entire
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and supersedes all prior agreements and the
understandings between the parties with respect to such subject matter.
10.11 Jurisdiction. Each party hereby irrevocably submits to the
------------
exclusive jurisdiction of the United States District Court for the Southern
District of New York or any court of the State of New York located in the City
of New York in any action, suit or proceeding arising in connection with this
Agreement, and agrees that any such action, suit or proceeding shall be brought
only in such court (and waives any objection based on forum non conveniens or
any other objection to venue therein); provided, however, that such consent to
--------
jurisdiction is solely for the purpose referred to in this Section 10.11 and
shall not be deemed to be a general submission to the jurisdiction of said
courts or in the State of New York other than for such purposes. Each party
hereto hereby waives any right to a trial by jury in connection with any such
action, suit or proceeding.
61
IN WITNESS WHEREOF, the Parent, the Purchaser and the Company have
caused this Agreement to be signed by their respective duly authorized officers
as of the date first above written.
PRUDENTIAL MORTGAGE CAPITAL COMPANY, LLC
By /s/ Xxxxxxx X. Xxxxxxx
-----------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Senior Vice President
PRUDENTIAL MORTGAGE CAPITAL
ACQUISITION CORP.
By /s/ Xxxxxxx X. Xxxxxxx
-----------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Vice President
THE WMF GROUP, LTD.
By /s/ Xxxxxx Xxxxxxxxxx
-----------------------------
Name: Xxxxxx Xxxxxxxxxx
Title: Chairman and Chief Executive Officer
ANNEX A
-------
Conditions to the Offer. Notwithstanding any other provision of the
-----------------------
Offer, the Purchaser shall not be required to accept for payment, or, subject to
any applicable rules and regulations of the SEC, including Rule 14e-1(c) under
the Exchange Act (relating to the Purchaser's obligation to pay for or return
tendered shares after the termination or withdrawal of the Offer), to pay for
any Shares not theretofore accepted for payment or paid for, and the Purchaser
may (subject to the terms of the Merger Agreement) amend or terminate the Offer
as to, and may postpone the acceptance of, and payment for, such Shares not
theretofore accepted for payment or paid for (subject to any such applicable
rules and regulations of the SEC) unless (i) any applicable waiting period under
-
the Antitrust Laws shall have expired or been terminated, (ii) each of Capricorn
--
Investors II, L.P., Capricorn Holdings, Inc., Demeter Holdings Corporation,
Phemus Corporation, Commonwealth Overseas Trading, Xxxxxxxx X. Xx-Xxxxxxxx, J.
Xxxxxxxx Xxxxxx, III, Xxxx X. Xxxxxx and Xxxxxx Xxxxxxxxxx shall have validly
tendered and not withdrawn prior to the expiration date of the Offer their
respective shares of Company Common Stock (the "Minimum Condition") and (iii) at
---
any time on or after the date of the Merger Agreement and at or before the time
that the particular Shares are accepted for payment (whether or not any other
Shares shall theretofore have been accepted for payment or paid for pursuant to
the Offer) none of the following conditions shall occur and be continuing:
(a) there shall have been any action or proceeding brought by any
governmental authority before any federal, state or foreign court, or any
order or preliminary or permanent injunction entered in any action or
proceeding before any federal, state or foreign court or governmental,
administrative or regulatory authority or agency having jurisdiction over
the Company or the Parent, or any statute, rule, regulation, legislation,
interpretation, judgment or order enacted, entered, enforced, promulgated,
amended, issued by any legislative body, court, government or governmental,
administrative or regulatory authority or agency located or having
jurisdiction within the United States or any country or economic region in
which either the Company or the Parent, directly or indirectly, has
material assets or operations, which would reasonably be expected to have
the effect of: (i) making illegal or prohibiting the making of the Offer,
-
the acceptance for payment of, payment for, or ownership, directly or
indirectly, of all or a material portion of the Shares by the Parent or the
Purchaser, or the consummation of any of the transactions contemplated by
the Merger Agreement or the Stockholders Agreement; (ii) (A) prohibiting or
--
materially limiting the ownership or operation by the Parent, the Purchaser
or any of the Parent's subsidiaries, of all or any material portion of the
business or assets of the Company and its subsidiaries taken as a whole, or
of the Parent and its subsidiaries taken as a whole, or (B) compelling the
Purchaser, the Parent or any of the Parent's subsidiaries to
A-1
dispose of or hold separate all or any material portion of the business or
assets of the Company and its subsidiaries taken as a whole or of the
Parent and its subsidiaries taken as a whole, in each case as a result of
the transactions contemplated by the Offer or the Merger Agreement or the
Stockholders Agreement; (iii) imposing limitations on the ability of the
---
Purchaser, the Parent or any of the Parent's subsidiaries effectively to
acquire or hold or to exercise full rights of ownership of the Shares
including, without limitation, the right to vote any Shares acquired or
owned by the Parent or the Purchaser or any of the Parent's subsidiaries on
all matters properly presented to the stockholders of the Company,
including, without limitation, the adoption and approval of the Merger
Agreement and the Merger or the right to vote any shares of capital stock
of any subsidiary directly or indirectly owned by the Company; or (iv)
--
requiring divestiture by the Parent or the Purchaser, directly or
indirectly, of any Shares;
(b) there shall have occurred (i) a declaration of a banking
-
moratorium or any suspension of payments in respect of banks in the United
States which would reasonably be expected to have a Material Adverse Effect
on the Company or materially adversely affect (or materially delay) the
consummation of the Offer, (ii) any limitation (whether or not mandatory)
--
by any government or governmental, administrative or regulatory authority
or agency, domestic or foreign, on, or any other event that materially
adversely affects, the extension of credit by banks or other lending
institutions which would reasonably be expected to have a Material Adverse
Effect on the Company or materially adversely affect (or materially delay)
the consummation of the Offer, (iii) a commencement of a war or armed
---
hostilities or other national or international calamity directly or
indirectly involving the United States which would reasonably be expected
to have a Material Adverse Effect on the Company or materially adversely
affect (or materially delay) the consummation of the Offer or (iv) in the
--
case of any of the foregoing existing at the time of the execution of the
Agreement, a material acceleration or worsening thereof which acceleration
or worsening is reasonably expected to have a Material Adverse Effect or to
materially adversely affect the consummation of the Offer;
(c) (i) it shall have been publicly disclosed or the Purchaser shall
-
have otherwise learned that beneficial ownership (determined for the
purposes of this paragraph as set forth in Rule 13d-3 promulgated under the
Exchange Act) of 15% or more of the outstanding Shares has been acquired by
any corporation (including the Company or any of its subsidiaries or
affiliates), partnership, person or other entity or group (as defined in
Section 13(d)(3) of the Exchange Act), other than the Parent or any of its
affiliates or the Stockholders, and such Shares have not been tendered in
the Offer, or (ii) (A) the Board of Directors of the Company or any
-- -
committee thereof shall have withdrawn or modified in a manner adverse to
the
A-2
Parent or the Purchaser the approval or recommendation of the Offer, the
Merger or the Merger Agreement, or approved or recommended any takeover
proposal or any other acquisition of Shares other than the Offer and the
Merger, (B) any such corporation, partnership, person or other entity or
-
group shall have entered into a definitive agreement or an agreement in
principle with the Company with respect to a tender offer or exchange offer
for any Shares or a merger, consolidation or other business combination
with or involving the Company or any of its subsidiaries or (C) the Board
-
of Directors of the Company or any committee thereof shall have resolved to
do any of the foregoing;
(d) any of the representations and warranties of the Company set
forth in the Merger Agreement that are qualified as to materiality shall
not be true and correct or any such representations and warranties that are
not so qualified shall not be true and correct in any material respect, in
each case as if such representations and warranties (other than
representations and warranties made as of a specified date) were made at
the time of such determination except, in each case, for changes
specifically permitted by the Merger Agreement;
(e) the Company shall have failed to perform in any respect any
material obligation or to comply in any respect with any material agreement
or material covenant of the Company to be performed or complied with by it
under the Merger Agreement prior to the time of such determination;
(f) the Company and its subsidiaries shall not have obtained and
delivered to the Parent written evidence that (i) all required notices
-
relating to the transactions contemplated by the Merger Agreement have been
provided to each of GNMA and the FHA and (as certified by the Chairman and
Chief Executive Officer of the Company) that no objections have been
received from GNMA or the FHA which would cause the Company and its
subsidiaries not to be eligible to issue mortgage-backed securities
guaranteed by GNMA or to originate, purchase, hold and service FHA-insured
mortgage loans in the same manner as on the date of the Merger Agreement
and (ii) all required approvals, consents, licenses, accreditations,
--
registrations and qualifications relating to the transactions contemplated
by the Merger Agreement have been received from Xxxxxx Mae for the Company
and its subsidiaries to be able to originate, purchase, hold and service
mortgage loans to be sold to Xxxxxx Xxx in the same manner as on the date
of the Merger Agreement;
(g) the Merger Agreement shall have been terminated in accordance
with its terms or the Offer shall have been terminated with the written
consent of the Company.
A-3
The foregoing conditions are for the sole benefit of the Purchaser and
may be asserted by the Purchaser regardless of the circumstances giving rise to
any such condition or may be waived by the Purchaser in whole or in part at any
time and from time to time in its sole discretion (subject to the terms of the
Merger Agreement). The failure by the Purchaser at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right, the waiver
of any such right with respect to particular facts and other circumstances shall
not be deemed a waiver with respect to any other facts and circumstances, and
each such right shall be deemed an ongoing right that may be asserted at any
time and from time to time.
A-4
