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Exhibit 2.1
PURCHASE AGREEMENT
BY AND AMONG
DFI ACQUIRING CORP.,
DYNEX CAPITAL, INC.,
DYNEX HOLDING, INC.,
AND
DYNEX FINANCIAL, INC.
NOVEMBER 27, 1999
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PURCHASE AGREEMENT
This Purchase Agreement (the "Agreement") is made and entered into as
of November 27, 1999, by and among DFI ACQUIRING CORP., a Michigan corporation
("Purchaser"), DYNEX CAPITAL, INC., a Virginia corporation ("DCI"), DYNEX
HOLDING, INC., a Virginia corporation ("DHI") and DYNEX FINANCIAL, INC., a
Virginia corporation ("DFI"). For the purposes of this Agreement, DCI and DHI
are referred to sometimes collectively as the "Sellers" and individually as a
"Seller", and Purchaser, DCI, DHI and DFI are referred to sometimes collectively
as the "Parties" and individually as a "Party".
RECITALS:
A. DCI is the owner of all of the issued and outstanding shares of the
non-voting preferred stock of DHI and DHI is the owner of all of the issued and
outstanding shares of the capital stock (the "DFI Stock") of DFI. DFI is the
owner of all of the issued and outstanding shares of the capital stock (the "DFI
Alabama Stock") of Dynex Financial of Alabama, Inc., a Virginia corporation
("DFI Alabama"), and all of the issued and outstanding shares of the capital
stock (the "DIA Stock") of Dynex Insurance Agency, Inc., a Virginia corporation
("DIA").
B. DHI desires to sell to Purchaser, and Purchaser desires to purchase
from DHI, all of the issued and outstanding shares of the DFI Stock on the terms
and subject to the conditions set forth in this Agreement.
C. DCI desires to sell to Purchaser, and Purchaser desires to purchase
from DCI, Sellers' and the Companies' "Manufactured Home Lending Program" and
all of the rights related thereto, inclusive of all Intellectual Property,
Intangible Property, Dynex Software and other intangibles (the "Rights"), on the
terms and subject to the conditions set forth in this Agreement.
D. Purchaser requires, as a condition of this Agreement, that all
agreements for the servicing of certain MH Loans, Land/Home Loans, Floorplan
Loans and Home Equity Loans by DFI (under its assumed name "Dynex Services") for
the benefit of MERIT Securities Corporation, a Virginia corporation ("MERIT"),
be modified as provided in this Agreement.
NOW, THEREFORE, for and in consideration of the foregoing Recitals, the
mutual covenants and undertakings set forth below and other good and valuable
consideration, the receipt and adequacy of which are acknowledged, the Parties
agree as follows:
1. CERTAIN DEFINITIONS. For purposes of this Agreement, the following
capitalized terms shall have the following meanings (other capitalized
terms may be defined elsewhere in this Agreement):
1.1. Assets means all of the assets and properties, whether known
or unknown, tangible or intangible, real or personal, wherever
situated, owned by the Companies or in which the Companies
have any right, title or interest. The Assets include, without
limitation, the following:
(a) All cash and cash equivalents;
(b) All furniture, fixtures and other fixed assets,
including, without limitation, the assets listed on
the attached Schedule 1.1(b);
(c) All goodwill and all other intangible assets;
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(d) All patents, trademarks, trade names, service
marks, service names, copyrights, logos, commercial
and technical trade secrets, designs, drawings,
specifications, formulae, technologies, computer and
electronic data processing programs and software
(subject to the rights of DCI as provided in Section
6.8 below), inventions, processes, know-how,
confidential information, corporate and assumed names
used in the DFI Business, the DFI Alabama Business or
the DIA Business, and other proprietary property
rights and interests used in connection with the
operation of the DFI Business, the DFI Alabama
Business or the DIA Business or otherwise owned by
the Companies or in which the Companies have any
right, title or interest, including, without
limitation, the name "Dynex Financial" (including the
right to use that name or any variation thereof as an
Internet domain name, e.g. "xxxxxxxxxxxxxx.xxx") and
the items set forth on the attached Schedule 1.1(d)
(collectively, the "Intellectual Property");
(e) All sales and business records, personnel records of
the Companies' employees, credit records of the
Companies' customers, customer lists, advertising and
promotional materials and all other books and records
of every kind and nature;
(f) All equipment, machinery, engineering and office
equipment and vehicles used in connection with the
DFI Business, the DFI Alabama Business or the DIA
Business, including, without limitation, the assets
listed on the attached Schedule 1.1(f);
(g) All written personal property leases entered into by
the Companies (the "Personal Property Leases"), a
complete list of which, together with a list of the
assets subject to such leases, are set forth on the
attached Schedule 1.1(g);
(h) All written contracts and agreements, other than the
Personal Property Leases, entered into by the
Companies or to which the Companies are subject
(subject to the rights of DCI as provided in Section
6.8 below), including, without limitation, all
contracts with dealers from whom MH Loans and
Land/Home Loans have been or may hereafter be
purchased by DFI, as well as all servicing agreements
and all license agreements, sublicense agreements,
extended warranty service agreements and other
contracts relating to software licensed by Sellers
and the Companies or, with respect to the operation
of the DFI Business, the DFI Alabama Business or the
DIA Business, by Sellers (the "General Contracts").
The attached Schedule 1.1(h) contains a complete list
of General Contracts, other than (i) dealer contracts
that do not have terms materially different from the
terms set forth in the form dealer contracts Sellers
have previously provided Purchaser, and (ii)
contracts terminable by DFI upon 30 days or less
notice, with a current maturity of less than one year
and requiring payments of less than $100 per month,
which such contracts do not number more than 25.
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(i) All licenses and permits held by the Companies,
including, without limitation, those described on the
attached Schedule 1.1(i);
(j) All third party warranties and claims for warranties
relating to the DFI Business, the DFI Alabama
Business, the DIA Business, the Assets or the "Leased
Personal Property" (defined in Section 4.5 below),
including, without limitation, those set forth on the
attached Schedule 1.1(j);
(k) All leases and subleases for all land, buildings and
improvements leased by the Companies, as described on
the attached Schedule 1.1(k) (the "Real Property
Leases");
(l) All options the Companies may have to purchase any
real property, as described on the attached Schedule
1.1(l);
(m) All of the accounts receivable of the Companies;
(n) All claims and rights concerning any litigation in
which the Companies are a claimant;
(o) All of the software developed by Sellers, the
Companies or their affiliates for use in the DFI
Business, the DFI Alabama Business and the DIA
Business or for use in connection with the
securitization or servicing of loans (subject to the
rights of DCI as provided in Section 6.8 below),
including without limitation, the programs and
modules known as Polaris, CRS, Portal, LPSExport,
ERS, Servicing Reports, Imaging, Document Tracking,
RIP/DRS, IFS, IFS Billing, Dytel, Loan Tracking, DFI
Maintenance, Bug Tracking, and any other software,
modules, coding (including without limitation all
HTML code for web pages on DCI's Internet web site
that describe the DFI Business, the DFI Alabama
Business or the DIA Business) or derivatives or
enhancements developed internally or using third
party programmers or consultants, in source and
object code form, together with all system manuals,
user documentation, and programmer notes
(collectively, the "Dynex Software"); and
(p) All trade secrets, proprietary information, copies of
third party software and computer programs of which
any of the Companies is a licensee (in source and
object code form), rights to phone numbers (including
without limitation the phone number 1-800-DYNEX88),
system documentation and user manuals, Internet
domain names and addresses, web sites, and corporate
Intranet pages used in the DFI Business, the DFI
Alabama Business or the DIA Business (subject to the
rights of DCI as provided in Section 6.8 below),
including, without limitation, those described on the
attached Schedule 1.1(p), which schedule excludes
items listed on the attached Schedule 1.1(d)
(collectively, the "Intangible Property").
1.2. Attendant Documents has the meaning set forth in Section 4.1
below
1.3. Breach as that term relates to any representation or warranty
in this Agreement, means that such representation, warranty or
covenant was incorrect or untrue in a material respect when
made or repeated or deemed to have been made or repeated,
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and, as that term relates to any covenant in this Agreement,
means that Seller has failed to comply with such covenant.
1.4. [intentionally omitted]
1.5. Closing has the meaning set forth in Section 8.1 below.
1.6. [intentionally omitted]
1.7. Closing Date has the meaning set forth in Section 8.1 below.
1.8. COBRA has the meaning set forth in Section 4.16(a)(i) below.
1.9. Code has the meaning set forth in Section 4.16(a)(ii) below.
1.10. Companies means DFI, DFI Alabama and DIA collectively, and
Company means any one of them, individually, as the context
requires.
1.11. Contracts means all of the General Contracts and the Personal
Property Leases.
1.12. Controlled Group has the meaning set forth in Section
4.16(a)(iii) below.
1.13. Controlled Group Member has the meaning set forth in Section
4.16(a)(iv) below.
1.14. Covenants has the meaning set forth in Section 8.2(a) below.
1.15. Customary Loan Origination Practices means those practices,
policies, requirements and standards generally and customarily
applied and followed by each of DFI and DFI Alabama as a
prudent lender in connection with the origination of Loans
conforming to the Underwriting Guidelines, and which are in
all material respects legal and proper in the consumer loan
origination business and in material compliance with the
requirements of federal and state laws, rules and regulations
applicable to each Loan, including without limitation and as
applicable, truth-in-lending, real estate settlement
procedures, consumer credit protection, equal credit
opportunity and disclosure laws.
1.16. DIA Business means DIA's Business of providing, as agent,
various insurance products to customers of DFI and DFI
Alabama.
1.17. DIA Shares has the meaning set forth in Section 4.28 below.
1.18. DIA Stock has the meaning set forth in the Recitals to this
Agreement.
1.19. DFI Alabama Shares has the meaning set forth in Section 4.28
below.
1.20. DFI Alabama Stock has the meaning set forth in the Recitals to
this Agreement.
1.21. DFI Alabama Business means DFI Alabama's business of
originating MH Loans, Land/Home Loans and Floorplan Loans to
Alabama residents.
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1.22. DFI Business means DFI's business of originating and servicing
MH Loans, Land/Home Loans and Floorplan Loans.
1.23. DFI Financial Statements and DCI Financial Statements have the
meanings set forth in Sections 4.17(a) and 4.17 (b),
respectively.
1.24. DFI Material Adverse Effect means a material adverse effect on
the Companies, the DFI Business, the DFI Alabama Business, the
DIA Business, the Assets, the Leased Property, the Rights and
the Loans, taken as a whole.
1.25. DFI Shares has the meaning set forth in Section 2.1 below.
1.26. DFI Stock has the meaning set forth in the Recitals to this
Agreement.
1.27. Drop Dead Date with respect to all closing conditions other
than obtaining the consent described in the next sentence,
means December 17, 1999. The Drop Dead Date will be
automatically extended until the consent with respect to the
Texas Registered Creditor License identified on the attached
Schedule 4.21(b) is obtained; provided, however, that the Drop
Dead Date will not be automatically extended past February 28,
2000.
1.28. Dynex Software has the meaning set forth in Section 1.1(o)
above.
1.29. Employees has the meaning set forth in Section 4.14 below.
1.30. Employment Agreements has the meaning set forth in Section
8.2(b) below.
1.31. Employee Benefit Plan has the meaning set forth in 4.16(a)(vi)
below.
1.32. Environmental Laws has the meaning set forth in Section
4.20(a)(i) below.
1.33. Environmental Reports has the meaning set forth in Section
4.20(a)(iii) below.
1.34. ERISA has the meaning set forth in Section 4.16(a)(v) below.
1.35. Estimated Closing Balance Sheet means the unaudited
consolidated balance sheet of the Companies as of the
effective time of the Closing on the Closing Date, prepared by
DHI and certified by DHI's chief financial officer.
1.36. Excluded Securitizations means Merit 11, Merit 12 and Merit 13
and all other securitizations of MH Loans or Land/Home Loans
which have been proposed or offered by MERIT or Sellers prior
to the Closing Date and involving loans of that type
originated by DFI.
1.37. Floorplan Loans means the floorplan loans which have been
originated by DFI or DFI Alabama and sold to DCI, as
specifically identified on the attached Schedule 1.37.
1.38. Former Property has the meaning set forth in Section
4.20(a)(iii) below.
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1.39. General Contracts has the meaning set forth in Section 1.1(h)
above.
1.40. Hazardous Materials has the meaning set forth in Section
4.20(a)(ii) below.
1.41. Home Equity Loans means those home equity loans being serviced
by DFI under the MERIT Servicing Agreements, as specifically
identified on the attached Schedule 1.41.
1.42. Intellectual Property has the meaning set forth in Section
1.1(d) above.
1.43. Intangible Property has the meaning set forth in Section
1.1(p) above.
1.44. Knowledge, as it relates to the Companies, Sellers or any of
their affiliates, means the actual knowledge of each of the
individuals on the attached Schedule 1.44.
1.45. Land/Home Contract means a fully amortizing installment loan
agreement, retail installment sales contract or secured
promissory note, and the related mortgage, deed of trust or
security agreement, as may be applicable in the relevant
jurisdiction and customarily used in that context, executed by
an obligor and evidencing indebtedness originated in
connection with Land/Home Loan financing.
1.46. Land/Home Loan means an MH Loan made under a Land/Home
Contract, secured by a mortgage on the obligor's real property
and the Manufactured Home permanently affixed to it.
1.47. Leased Personal Property has the meaning set forth in Section
4.5 below.
1.48. Leased Property has the meaning set forth in Section 4.5
below.
1.49. Leased Real Property has the meaning set forth in Section 4.8
below.
1.50. Licenses has the meaning set forth in Section 4.6 below.
1.51. Liens has the meaning set forth in Section 4.10 below.
1.52. Loan Documents means the documents required for each Loan in
accordance with the Underwriting Guidelines and the Customary
Loan Origination Practices, together with any additional
documents and information delivered to DFI or DFI Alabama in
connection with the origination of a Loan.
1.53. Loan Purchase Agreement means the Loan Purchase Agreement
dated as of October 12, 1999 by and between Xxxxxxx Financial
Services Corporation ("Xxxxxxx") and DFI, as amended from time
to time.
1.54. Loans means any one or more of the MH Loans, the Floorplan
Loans, the Land/Home Loans originated by DFI or DFI Alabama,
or the Home Equity Loans.
1.55. Manufactured Home means a unit of new or used manufactured
residential housing consisting of a pre-fabricated
manufactured unit affixed to a permanent foundation, or a
mobile home (including all add-ons, attachments, improvements
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and accessions) which meets the requirements of Section
25(e)(10) of the Code, as amended. The term Manufactured Home
includes each borrower's interest in each Manufactured Home
and all improvements thereon, accessions and additions
thereto, including all personal property used or useable in
connection therewith, together with all rights pertaining
thereto.
1.56. MERIT Servicing Agreements means those Servicing Agreements
between DFI (under its assumed name "Dynex Services") and
MERIT (or their successors in interest in and to the Loans
subject to servicing thereunder), which provide for the
servicing of certain MH Loans, Land/Home Loans and Home Equity
Loans by DFI, dated May 1, 1997 (with respect to MERIT 11),
March 1, 1999 (with respect to MERIT 12), and August 1, 1999
(with respect to MERIT 13).
1.57. MERIT has the meaning set forth in the Recitals to this
Agreement.
1.58. MERIT 11 refers to the securitization of Loans by MERIT under
its Series 11 Collateralized Bonds, pursuant to an Indenture
dated as of November 1, 1994, as supplemented by Series 11
Supplement dated May 1, 1998.
1.59. MERIT 12 refers to the securitization of Loans by MERIT under
its Series 12 Collateralized Bonds, pursuant to an Indenture
dated as of November 1, 1994, as supplemented by Series 12-1
Supplement dated March 1, 1999.
1.60. MERIT 13 refers to the securitization of Loans by MERIT under
its Series 13 Collateralized Bonds, pursuant to an Indenture
dated as of November 1, 1994, as supplemented by Series 13
Supplement dated August 1, 1999.
1.61. MH Contract means a fully amortizing installment loan
agreement, retail installment sales contract or secured
promissory note and security agreement, as may be applicable
in the relevant jurisdiction and customarily used in that
context, executed by an obligor and evidencing indebtedness
originated in connection with the financing of a Manufactured
Home.
1.62. MH Loan means a loan originated under an MH Contract, secured
by a first lien on the obligor's Manufactured Home, but not by
real property.
1.63. Most Recent DFI Balance Sheet has the meaning set forth in
Section 4.17(a) below.
1.64. Pension Plan has the meaning set forth in Section 4.16(a)(vii)
below.
1.65. Personal Property Leases has the meaning set forth in Section
1.1(g) above.
1.66. Purchaser has the meaning set forth in the preamble to this
Agreement.
1.67. Purchaser Parties has the meaning set forth in Section 9.1
below.
1.68. Purchase Price has the meaning set forth in Section 3.1 below.
1.69. Related Expenses has the meaning set forth in Section 9.1(e)
below.
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1.70. Rights has the meaning set forth in the Recitals to this
Agreement.
1.71. Sales Agreements means, collectively, the Sales Agreement
between Issuer Holding Corp. ("IHC") and DCI dated May 1,
1998, the Sales Agreement between IHC and MERIT dated May 22,
1998, the Sales Agreement between IHC and DCI dated March 1,
1999, the Sales Agreement between IHC and MERIT dated March
29, 1999, the Sales Agreement between IHC and DCI dated August
31, 1999, and the Sales Agreement between IHC and MERIT dated
August 31, 1999.
1.72. Sellers has the meaning set forth in the preamble of this
Agreement.
1.73. Seller Parties has the meaning set forth in Section 9.2 below.
1.74. Shares shall mean the DFI Shares, the DFI Alabama Shares and
the DIA Shares, collectively.
1.75. Tax means any federal, state, province, local, or foreign
income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits,
environmental, customs duties, capital stock, franchise,
profits, withholding, social security (or similar),
unemployment, disability, real property, personal property,
sales, use, transfer, registration, value added, alternative
or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not.
1.76. Tax Return means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including
any amendment thereof.
1.77. Third Party Claim has the meaning set forth in Section 9.1(d)
below.
1.78. Underwriting Guidelines means the Dynex Financial, Inc.
Guidelines for Underwriting Loans, the most recent copy of
which is dated as of June 16, 1999 and is attached to this
Agreement as Exhibit A. For Loans underwritten prior to June
16, 1999, the term "Underwriting Guidelines" shall refer to
DFI's underwriting guidelines in effect at the time of such
underwriting. For purposes of this Agreement, the term
"Underwriting Guidelines" shall include Portal, DFI's credit
scoring model.
1.79. Welfare Plan has the meaning set forth in Section
4.16(a)(viii) below.
2. PURCHASE AND SALE
2.1. Stock. At the Closing, DHI shall transfer, sell, assign and
otherwise convey to Purchaser its entire right, title and
interest in and to all issued and outstanding shares (the "DFI
Shares") of DFI Stock, owned, beneficially or of record, by
DHI, or in which DHI has any right, title or interest of any
nature whatsoever, free and clear of all Liens.
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2.2. Rights. At the Closing, DCI shall transfer, sell, assign and
otherwise convey to Purchaser its entire right, title and
interest in and to the Rights, free and clear of all Liens.
2.3. Servicing Advances. At the Closing, DFI shall pay to DCI by
wire transfer of immediately available funds to an account or
accounts designated by DCI the aggregate amount (the
"Servicing Advance Payment") of outstanding advances (the
"Servicing Advances") that DCI made to DFI and that DFI in
turn advanced (and has not yet been repaid) as a reimbursable
"advance" under the MERIT Servicing Agreements. Upon such
payment, the line items "Servicing advances" and "Payable to
affiliates for servicing advances" will be deemed to have been
eliminated on the Estimated Closing Balance Sheet and the
Adjusted Closing Balance Sheet (as defined in Section 3.3(b)
below).
3. PURCHASE PRICE
3.1. Purchase Price. Purchaser shall pay Sellers an aggregate
purchase price (the "Purchase Price") of Four Million One
Thousand Dollars ($4,001,000) for the DFI Shares and the
Rights, in the manner provided in Section 3.2 below. The
amount of the Purchase Price allocated to the DFI Shares shall
be the net book value of DFI as set forth on the Adjusted
Closing Balance Sheet (defined in Section 3.3(b) below), as
finally determined in accordance with Section 3.3(b) (the
"Shares Consideration"). The remainder of the Purchase Price
shall be allocated to the Rights.
3.2. Payment of Purchase Price. At the Closing, Purchaser shall pay
Sellers the amount of the Purchase Price by wire transfer of
immediately available funds to an account or accounts
designated by Sellers.
3.3. Cash Adjustments.
(a) The Parties contemplate that the Net Working Capital
(defined below) of DFI as set forth on the Estimated
Closing Balance Sheet (the "Estimated Net Working
Capital") will be $2,201,000, less any depreciation
on DFI's depreciable assets between November 30, 1999
and the Closing Date (the "Target Net Working
Capital"). "Net Working Capital" is defined as (i)
the sum of (A) "Cash", (B) "Property and equipment,
net", (C) "Deposits", (D) "Prepaid expense", and (E)
"Other assets", all as reflected on the Estimated
Closing Balance Sheet or the Adjusted Closing Balance
Sheet, as applicable, less (ii) the sum of all
liabilities reflected on the Estimated Closing
Balance Sheet or the Adjusted Closing Balance Sheet,
as applicable, including without limitation "Accounts
payable and other liabilities", "Accrued salaries,
benefits and bonuses", "Outstanding checks" and
"Furniture and computer leases payable".
Notwithstanding the foregoing, for purposes of
calculating Estimated Net Working Capital and the
Adjusted Net Working Capital (as defined in Section
3.3(b) below), those assets and liabilities
specifically described in Section 2.3 above and
Sections 7.2(g) and 6.10 below shall be disregarded
to the extent that the actions described in Sections
2.3, 7.2(g) and 6.10 are actually taken before or at
Closing.
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(b) No later than 30 days after the Closing Date,
Purchaser shall conduct an internal audit of the
Companies and shall prepare and deliver to Sellers a
new balance sheet (the "Adjusted Closing Balance
Sheet"), from which Purchaser's determination of the
Net Working Capital as of the Closing Date (the
"Adjusted Net Working Capital") will be calculated.
Sellers shall have 20 days to object to the Adjusted
Net Working Capital by giving written notice to
Purchaser, specifying those items to which they
object. If Sellers do not object within the 20-day
period, Purchaser and Sellers shall proceed under
clauses (i) or (ii) below. If Sellers do object
within the 20-day period, Purchaser and Sellers shall
have ten days to use their best efforts to resolve
any disputes with respect to the Adjusted Closing
Balance Sheet. If Purchaser and Sellers do not
resolve any such disputes within the ten-day period,
they shall proceed under clause (iii) below.
(i) If the Adjusted Net Working Capital is
greater than the Target Net Working Capital,
Purchaser shall within two business days
deliver to Sellers the difference between
the Adjusted Net Working Capital and the
Target Net Working Capital by cash payment
or wire transfer, as directed by Sellers.
(ii) If the Adjusted Net Working Capital is less
than the Target Net Working Capital, Sellers
shall within two business days deliver to
Purchaser the difference between the
Adjusted Net Working Capital and the Target
Net Working Capital by cash payment or wire
transfer, as directed by Purchaser.
(iii) If Purchaser and Sellers are unable to
resolve any disputes with respect to the
Adjusted Closing Balance Sheet within the
ten-day period referenced above, Purchaser
and Sellers shall submit their proposed
resolution of the dispute to the managing
partner of the Richmond, Virginia (or the
nearest city to the place where the books
and records of the Companies are then
located) office of Xxxxxx Xxxxxxxx (the
"Independent Accountant"). The Independent
Accountant shall review each of the proposed
resolutions and conclusively resolve the
dispute. Purchaser and Sellers shall proceed
under either clause (i) or clause (ii) above
based on such resolution. The determination
of the Independent Accountant shall be final
and binding on the Parties. Purchaser and
Sellers shall be responsible for and pay
that portion of the Independent Accountant's
fees, costs and expenses as the Independent
Accountant determines in its judgment is
equitable, based on the fairness of the
proposals submitted to the Independent
Accountant by the Parties, the good faith of
the Parties and related matters.
4. REPRESENTATIONS AND WARRANTIES OF DFI AND THE SELLERS. DFI and each of
the Sellers, jointly and severally, represent, warrant and covenant the
following to Purchaser, both as of the date of this Agreement and as of
the Closing Date, with the knowledge and expectation that, in agreeing
to enter into this Agreement, Purchaser is completely relying on, and
in connection with the consummation of the transactions contemplated in
this Agreement, will completely rely on, such representations,
warranties
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and covenants; provided, however, that effective as of the Closing, DFI
shall be deemed not to have made any of the following representations,
warranties or covenants, and shall not be jointly and severally liable
with the Sellers for any of them, but the Sellers, jointly and
severally, shall continue to remain liable for them, as provided in
this Agreement:
4.1. Good Standing and Authority. Each of DFI, DFI Alabama and DIA
is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Virginia. Each
of the Companies is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in
which it is required to be so qualified, except where the
failure to be so qualified would not have a DFI Material
Adverse Effect. Each of DFI and DFI Alabama is and has at all
times it held Loans been duly licensed and qualified in any
state where the related collateral is or was located if the
laws of that state require licensing or qualification in order
to conduct business of the type conducted therein by DFI or
DFI Alabama, as the case may be, except where the failure to
be so licensed or qualified would not have a DFI Material
Adverse Effect. Each such jurisdiction is listed on the
attached Schedule 4.1. DFI has all requisite corporate power
and authority to enter into this Agreement and any and all
documents contemplated in this Agreement (the "Attendant
Documents") to which it is a party and to consummate the
transactions contemplated in this Agreement and the Attendant
Documents. The Sellers have all requisite power and authority
to enter into this Agreement and the Attendant Documents to
which they are parties and to consummate the transactions
contemplated in this Agreement and the Attendant Documents.
This Agreement and all of the Attendant Documents to which any
of DFI or Sellers is a party, and the consummation of the
transactions contemplated in this Agreement, have been duly
authorized and approved by DFI's Board of Directors and the
Sellers' Board of Directors and all other necessary and proper
corporate action on the part of DFI and the Sellers. This
Agreement, and all of the Attendant Documents to which DFI is
a party, when executed and delivered, will constitute legal,
valid and binding obligations of DFI enforceable against it in
accordance with their respective terms. This Agreement, and
all of the Attendant Documents to which the Sellers are
parties, when executed and delivered, will constitute legal,
valid and binding obligations of the Sellers enforceable
against the Sellers in accordance with their respective terms.
4.2. Assets. The Assets, together with the Leased Property and the
Rights, constitute all of the assets used in connection with,
and are all of the assets that are necessary for, the
operation of the DFI Business, the DFI Alabama Business and
the DIA Business. The attached Schedule 1.1(b) contains a true
and complete list of all material furniture, fixtures and
fixed assets used in connection with the operation of the DFI
Business, the DFI Alabama Business and the DIA Business, other
than the Leased Personal Property. The attached Schedule
1.1(f) contains a true and complete list of all material
equipment used in connection with the operation of the DFI
Business, the DFI Alabama Business and the DIA Business, other
than the Leased Personal Property.
4.3. Intellectual Property.
(a) DCI is the sole owner (except for licensed property
for which valid and subsisting licenses exist with
third parties, as set forth on the attached Schedule
4.3) of the Intellectual Property, Intangible
Property and Dynex
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Software, free of all liens, claims, charges and
encumbrances. The Intellectual Property, Intangible
Property and Dynex Software are fully transferable to
Purchaser and no party other than DCI and the
Companies has any interest therein except as
specifically disclosed on the attached Schedule 4.3.
To the Knowledge of the Sellers and the Companies,
there is no claim against any of Sellers or the
Companies that the Intellectual Property, Intangible
Property, Dynex Software or any of its operations,
activities, products or publications infringes any
patent, trademark, trade name, copyright or other
proprietary or intellectual property right of any
third party or that any of them is illegally using
the trade secrets or property rights of others.
Sellers and the Companies have no disputes with or
claims against, or any basis for claims against, any
third party for infringement by such third party of
any Intellectual Property, Intangible Property or
Dynex Software. The Intellectual Property, Intangible
Property and Dynex Software are the only proprietary
property used or necessary in connection with the DFI
Business, the DFI Alabama Business and the DIA
Business as presently conducted.
(b) The Dynex Software performs substantially in
accordance with the specifications, documentation and
other written material used in connection therewith
and is free of any material defects in programming
and operation.
(c) Any source code, object code, programming,
modifications, enhancements or other inventions,
improvements, discoveries, methods or works of
authorship included in the Dynex Software,
Intellectual Property or Intangible Property (i) was
created by employees of the Sellers or the Companies
in the regular course of the respective employee's
employment with such employer during normal business
hours and using such employer's facilities or
resources; or (ii) was created by consultants or
other third parties and has been validly assigned
exclusively to DCI. All employment agreements or
policies regarding ownership of inventions and all
agreements with consultants or other third parties
who have participated in the creation or development
of the Dynex Software, Intellectual Property or
Intangible Property are set forth on the attached
Schedule 4.3.
(d) All registrations or applications for registration
filed with any governmental authority regarding the
Intellectual Property, Intangible Property or the
Dynex Software are set forth on the attached Schedule
4.3.
(e) All license, sublicense or other agreements with
respect to the use of the Intellectual Property,
Intangible Property or the Dynex Software are set
forth on the attached Schedule 4.3. Any consideration
owed by DCI or the Companies under any such license,
sublicense or other agreement has been paid in full
except for customary consideration which (i) is paid
to third parties (i.e., persons not directly or
indirectly affiliated with the Companies, Sellers or
their affiliates) on a periodic invoice basis for
continued use or future services, (ii) is not due as
of the Closing Date, and (iii) does not in the
aggregate annually exceed the amounts set forth on
the attached Schedule 4.3(e). Neither Sellers, the
Companies nor any third
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party has violated the material terms of any such
license, sublicense or other agreement.
(f) Seller has not delivered, furnished, disclosed or in
any way transferred to any licensee or other party,
the source code for the Dynex Software.
4.4. Contracts. The attached Schedule 4.4 identifies all of the
Contracts, true and complete copies of all of which have been
delivered to Purchaser. Except as set forth on the attached
Schedule 4.4, all of the Contracts were entered into in the
ordinary course of business. Except as set forth on the
attached Schedule 4.4, (i) the Companies have complied in all
material respects with the provisions of each Contract and are
not in default under any Contract, and (ii) to the Knowledge
of the Companies or Sellers, no party to any Contract has
failed to comply in any material respect with, or is in
default under, the provisions of any Contract. DCI has not
assigned any of its rights or liabilities under the Loan
Origination Agreement dated January 1, 1997 (the "Loan
Origination Agreement") between DFI and DCI (f/k/a Resource
Mortgage Capital, Inc.).
4.5. Leased Assets. The attached Schedule 1.1(g) contains a true
and complete list of all personal property covered under the
Personal Property Leases (collectively, "Leased Personal
Property", and together with the Leased Real Property, "Leased
Property"). The Companies are the exclusive users of all of
the Leased Personal Property and all of the Leased Personal
Property is located at the Leased Real Property. Except for
the Leased Personal Property, there is no personal property
which is leased and which is used in connection with the
operation of the DFI Business, the DFI Alabama Business or the
DIA Business.
4.6. Permits and Licenses.
(a) The attached Schedule 1.1(i) lists all governmental
franchises, permits, licenses or other authorizations
held by the Companies in connection with the DFI
Business, the DFI Alabama Business, the DIA Business,
the Assets or the Leased Property ("Licenses"), true
and complete copies of all of which have been
delivered to Purchaser. Except as set forth on the
attached Schedule 4.6, all of the Licenses are in
full force and effect and will not be affected in any
way by, and will continue to be in full force and
effect after, the consummation of the transactions
contemplated in this Agreement and the Attendant
Documents. Except as set forth on the attached
Schedule 4.6, and except where the failure to obtain
any such permit, license, franchise or other
authorization would not have a DFI Material Adverse
Effect, the Companies have obtained all permits,
licenses, franchises and other authorizations
necessary or desirable with respect to, and have
complied in all material respects with all laws
applicable to, the operation of the DFI Business, the
DFI Alabama Business and the DIA Business, the
ownership of the Assets or the lease of the Leased
Property, and the Companies have not engaged in any
activity which would cause revocation or suspension
of any such permit, license, franchise or
authorization. Except as set forth on the attached
Schedule 4.6, no action or proceeding looking to or
contemplating the revocation or
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suspension of any such permits, licenses, franchises
or authorizations is pending or, to the Companies' or
Sellers' Knowledge, threatened.
(b) Mortgage Licenses. The Companies are licensed for the
conduct of their respective businesses of mortgage
lending, indirect consumer lending and direct
(retail) consumer lending in each of those states
listed in the attached Schedule 4.6, subject to the
limitations or comments contained in Schedule 4.6.
DFI is an approved FNMA Seller/Servicer, under FNMA
license number 00000-000-0 ("FNMA License"). DFI is
an Investing Mortgagee approved as such by the
Federal Housing Administration of the U.S. Department
of Housing and Urban Development. Neither DFI nor DFI
Alabama (i) is in breach of any contract for the sale
or servicing of mortgage loans or mortgage loan
servicing rights or for the servicing of mortgage
loans to which it is a party; or (ii) is a party to
or has received notice that it is to be made a party
to any legal or regulatory action by any state or
federal agency or any private party, the adverse
outcome of which might have a DFI Material Adverse
Effect, except as set forth in the attached Schedule
4.6.
4.7. Real Property Owned. The Companies own no real property and,
except as set forth on the attached Schedule 4.7, the
Companies have never owned any real property.
4.8. Real Property Leased. The attached Schedule 1.1(k) lists and
sets forth the legal description for all real properties
leased or subleased to the Companies for use in connection
with the operation of the DFI Business, the DFI Alabama
Business and the DIA Business (the "Leased Real Property"). No
Leased Real Property occupies all of the space in a building.
The Companies have delivered to Purchaser true, correct and
complete copies of the leases and subleases listed on the
attached Schedule 1.1(k). Except as set forth on the attached
Schedule 4.8, with respect to each such lease or sublease:
(a) the lease or sublease is legal, valid, binding,
enforceable and in full force and effect;
(b) the lease or sublease will continue to be legal,
valid, binding, enforceable and in full force and
effect on identical terms following the Closing;
(c) neither the Companies nor, to the Companies' or
Sellers' Knowledge, any other party to the lease or
sublease is in breach or default, and with respect to
the Companies, no event has occurred, and with
respect to any other party thereto, to the Knowledge
of the Companies or Sellers, no event has occurred
which, with notice or lapse of time, would constitute
such a breach or default or permit termination,
modification or acceleration under the lease or
sublease;
(d) no party to the lease or sublease has repudiated any
of its provisions;
(e) there are no disputes, oral agreements or forbearance
programs in effect as to the lease or sublease;
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(f) the Companies have not assigned, transferred,
conveyed, mortgaged, deeded in trust or encumbered
all or any portion of their interest in the leasehold
or subleasehold;
(g) all facilities leased or subleased under the lease or
sublease have been operated and maintained in
material compliance with applicable laws, rules and
regulations;
(h) all facilities leased or subleased under the lease or
sublease are supplied with utilities and other
services necessary for the operation of such
facilities; and
(i) all facilities leased or subleased under the lease or
sublease are in good operating condition, and would
not, with ordinary wear and tear, require major
repair or replacement during the remainder of the
lease term.
Except as set forth on the attached Schedule 4.8, no property
insurer or similar body has made any recommendations with
respect to any parcel of Leased Real Property which have not
been complied with in all material respects, and all
structures on the Leased Real Property meet all qualifications
for "highly protected risk" classification for fire insurance
purposes.
4.9. Notes and Accounts Receivable. The attached Schedule 4.9
contains a true and complete list of all notes and accounts
receivable of the Companies as of October 29, 1999. At the
Closing, and from time-to-time prior thereto on request of
Purchaser, the Companies shall deliver to Purchaser a true and
complete list of all notes and accounts receivable of the
Companies as of five business days prior to the Closing Date
or the date of such request. Except as set forth on the
attached Schedule 4.9, all notes and accounts receivable of
the Companies are reflected properly on their books and
records, arose from bona fide transactions in the ordinary
course of business, are valid receivables subject to no
setoffs or counterclaims, are current and collectible and will
be collected in substantial accordance with their terms and at
their recorded amounts, subject only to the reserve for bad
debts set forth on the face of the Most Recent DFI Balance
Sheet as adjusted for the passage of time through the Closing
Date in accordance with generally acceptable accounting
principles consistently applied.
4.10. Liens. Except as set forth on the attached Schedule 4.10:
(a) the Companies own and have good, marketable and
unencumbered title to, or an unencumbered interest
in, each item comprising the Assets, free and clear
of any and all title defects, judgments, objections,
security interests, liens, charges, liabilities,
rights of redemption, options, mortgages, easements,
restrictions, reservations, tenancies, agreements or
other obligations or encumbrances of any nature
whatsoever (collectively, "Liens");
(b) the Companies and DCI own and have good, marketable
and unencumbered title to, or an unencumbered
interest in, each item comprising the Rights, free
and clear of any and all Liens; and
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(c) DFI owns and has good, marketable and unencumbered
title to, or an unencumbered interest in, each of the
Loans reflected on the Estimated Closing Balance
Sheet, free and clear of any and all Liens.
4.11. Good Condition. Except as set forth in the attached Schedule
4.11, all facilities used in connection with the operation of
the DFI Business, the DFI Alabama Business and the DIA
Business, all of the Assets and all of the Leased Personal
Property are currently operating for their respective intended
uses and need no major repairs.
4.12. Litigation. Except as set forth on the attached Schedule 4.12,
there are no actions, suits or proceedings pending and, to the
Companies' or Sellers' Knowledge, there are no actions, suits,
investigations or proceedings threatened against the
Companies, Sellers, the DFI Business, the DFI Alabama
Business, the DIA Business, the Assets, the Leased Property,
the Rights or the Loans, at law or in equity, before any
federal, state, municipal or other governmental department,
commission, board, agency, court or instrumentality which
could affect the Companies, the DFI Business, the DFI Alabama
Business, the DIA Business, the Assets, the Leased Property,
the Rights or the Loans in any way. Except as set forth on the
attached Schedule 4.12, the Companies are not in default with
respect to or in violation of any order, writ, injunction or
decree of any court or other governmental department,
commission, board, agency or instrumentality affecting the
Companies, the DFI Business, the DFI Alabama Business, the DIA
Business, the Assets, the Leased Property or the Rights.
4.13. Business Practices and Compliance with Applicable Laws and
Regulations. Except as set forth on the attached Schedule
4.13:
(a) The Companies have complied in all material respects
with all laws, regulations, rules, orders, judgments,
decrees and other requirements imposed by any
governmental authority applicable to them, including
without limitation, truth-in-lending, real estate
settlement procedures, consumer credit protection,
equal credit opportunity and disclosure laws, in
connection with the operation of DFI Business, the
DFI Alabama Business and the DIA Business, the
ownership of the Assets or the lease of the Leased
Property.
(b) DFI has not materially breached and is not in
material default under the Loan Purchase Agreement or
the Loan Origination Agreement. Neither DCI nor IHC
has materially breached or is in material default
under the Sales Agreements.
(c) The servicing and collection practices of DFI have
been in all material respects legal, proper and
prudent and have met customary industry standards
applicable to similar loans.
(d) The Loans were originated by DFI and DFI Alabama in
the regular course of business in accordance with
Customary Loan Origination Practices, and comply and
conform in all material respects with the
Underwriting Guidelines.
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(e) No fraudulent acts were committed by DFI, DFI Alabama
or their affiliates in connection with the
origination of any Loan.
4.14. Employees. The attached Schedule 4.14 contains a complete and
accurate list of the Companies' current employees as of
November 15, 1999 (the "Employees") and, with respect to each
Employee, his or her salary or hourly rate currently in
effect, annual bonuses (last paid or payable), if any, any
other fringe benefits or incentive paid or payable to him or
her, including vacation accruals. Except as set forth on the
attached Schedule 4.14, all such Employees are actively at
work, and no such Employee is currently on leave of absence,
layoff, military leave, suspension, sick leave, workers'
compensation, salary continuance or short or long term
disability or otherwise not actively performing his or her
work during all normally scheduled business hours.
4.15. Employee Relations.
(a) Except as set forth on the attached Schedule 4.15,
there are no written or oral collective bargaining or
other employment agreements or understandings with or
affecting any Employee. Except as set forth on the
attached Schedule 4.15, hours worked by, and payments
made to, all Employees and former employees of the
Companies ("Former Employees") have been in material
compliance with the Fair Labor Standards Act and
other applicable federal, state and local laws.
(b) Except as set forth on the attached Schedule 4.15, as
of the Closing Date, all payments determined to be
due from the Companies on account of any Employee's
or Former Employees' work, health or welfare
insurance, under any agreement, whether oral or
written, will have been paid or properly accrued on
the DFI Financial Statements (or incurred in the
ordinary course of the Companies' business since the
date of the Most Recent DFI Balance Sheet).
(c) Except as set forth on the attached Schedule 4.15,
there are no vacation monies or rights to time off
which have been earned by any Employee or Former
Employee under any agreement, whether oral or
written, that have not been paid or properly accrued
on the DFI Financial Statements (or incurred in the
ordinary course of the Companies' business since the
date of the Most Recent Balance Sheet), nor are there
any severance payments which could become payable by
the Companies under the terms of any oral or written
agreement or commitment.
(d) Except as disclosed pursuant to Section 4.16 below,
the Companies have no liability with respect to any
pension, profit sharing, retirement or similar plan,
or other employee benefit plan.
(e) Except as set forth on the attached Schedule 4.15:
(i) there is no unfair labor practice charge or
complaint concerning the Companies or any
Employee or Former Employee pending before
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any governmental agency in any jurisdiction
in which the Companies conduct business;
(ii) there is no labor strike or slowdown, work
stoppage, lockout or other collective labor
action actually pending or, to the
Companies' or Sellers' Knowledge, threatened
against or affecting the DFI Business, the
DFI Alabama Business or the DIA Business,
and the Companies have not experienced any
strike or slowdown, work stoppage, lockout
or other collective labor action in
connection with their business by or with
respect to any Employees or Former
Employees;
(iii) there is no representation claim or petition
concerning the DFI Business, the DFI Alabama
Business, the DIA Business or any Employee
or Former Employee pending before any
governmental agency in any jurisdiction in
which the Companies conduct business, and no
question concerning representation exists
relating to the Employees;
(iv) there are no charges with respect to or
relating to the DFI Business, the DFI
Alabama Business or the DIA Business pending
before the Equal Employment Opportunity
Commission or any agency in any jurisdiction
in which the Companies conduct business
responsible for the prevention of unlawful
employment practices;
(v) the Companies have not received formal
notice from any governmental agency
responsible for the enforcement of labor or
employment laws of an intention to conduct
an investigation of the Companies and no
such investigation is currently in progress;
and
(vi) to the Companies' and Sellers' Knowledge, no
key Employee or group of Employees has any
plans to terminate employment with the
Companies prior to or after Closing.
4.16. Employee Benefits.
(a) Definitions: For purposes of this Agreement, the
following words and phrases shall have the meanings
set forth below:
(i) "COBRA" shall mean the Consolidated Omnibus
Budget Reconciliation Act of 1985, as
amended;
(ii) "Code" shall mean the Internal Revenue Code
of 1986, as amended;
(iii) "Controlled Group" shall mean a group of
corporations, trades or businesses, or a
combination thereof, described in Section
4.16(b) below;
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(iv) "Controlled Group Member" shall mean a
corporation, trade or business that is a
part of the same Controlled Group as the
Companies;
(v) "ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as amended;
(vi) "Employee Benefit Plan" shall mean and
include any Pension Plan, Welfare Plan and
any bonus, severance, deferred compensation,
annuity, retirement, stock option, stock
purchase, executive compensation, incentive
compensation, educational assistance,
insurance or other plan or arrangement
providing benefits to employees of the
Companies or a Controlled Group Member,
including, if the Companies or any
Controlled Group Member is organized under
foreign law, any similar plan allowed by any
foreign law, and including any multiemployer
plan (as defined in Section 3(37) of ERISA);
(vii) "Pension Plan" means any employee pension
benefit plan as defined in Section 3(2) of
ERISA; and
(viii) "Welfare Plan" means any employee welfare
benefit plan as defined in Section 3(1) of
ERISA.
(b) Controlled Group: Except as disclosed in the attached
Schedule 4.16, no Company is now, has ever been or
will be at any time prior to the Closing Date, a
member of:
(i) a controlled group of corporations as
defined in Section 414(b) of the Code;
(ii) a group of trades or businesses under common
control as defined in Section 414(c) of the
Code;
(iii) an affiliated service group as defined in
Section 414(m) of the Code;
(iv) a group of businesses referred to in Section
414(o) of the Code;
(v) a group of trades or businesses under common
control as defined in Section 4001(b) of
ERISA; or
(vi) any other group under the law, rules or
regulations of a foreign country similar to
(i) through (v) above.
(c) Employee Benefit Plans and Documents: The attached
Schedule 4.16 lists each and every Employee Benefit
Plan which either the Companies or any Controlled
Group Member now, or will at any time prior to the
Closing Date, maintain, sponsor, participate in or
contribute to with respect to the Employees or the
Former Employees, or which the Companies or any
Controlled Group Member ever maintained, sponsored,
participated in or
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made contributions to or with respect to the Employees or the Former
Employees, to the extent the Companies or any Controlled Group Member
continue to have any liability or reasonable expectation of any
liability under such previous plan. Schedule 4.16 discloses the name
of the plan sponsor for each plan set forth on Schedule 4.16. Except
as disclosed in the attached Schedule 4.16, neither the Companies nor
any Controlled Group Member is a party to any collective bargaining or
union contract with respect to the Employees or the Former Employees.
The Companies have provided to Purchaser true and correct copies of
the following documents relating to the Employee Benefit Plans listed
in the attached Schedule 4.16: (A) plan documents; (B) trust
documents; (C) plan and trust amendments; (D) summary plan
descriptions and amendments thereto; (E) summaries of material
modifications; (F) insurance (including reinsurance), administrative
services or annuity contracts; (G) collective bargaining agreements or
contracts and all amendments thereto; (H) the most recent financial
statements; (I) with regard to self-funded Welfare Plans (other than
those for which benefits are paid from the general assets of the
employer and/or insurance contracts), experience and enrollment data
for the prior three plan years as well as documentation and
calculations demonstrating the present value of accrued obligations
under such plans as of the Closing Date; (J) if the Companies provide,
or have any commitment or obligation to provide, any Employee Benefit
Plan benefits to their retirees, copies of all documentation and
calculations demonstrating the present value of such obligation or
commitment as of the Closing Date; (K) if the Companies or any
Controlled Group Member maintains a defined benefit pension plan, as
defined in Section 3(35) of ERISA with respect to the Employees or the
Former Employees, the most recent actuarial valuation for each such
plan and copies of any funding waivers and applications therefor, and
all related correspondence and documentation; (L) a list or
description of participants from the Companies in each plan; (M) the
five most recent annual reports; (N) agreements with respect to leased
or temporary employees; (O) all Internal Revenue Service rulings, if
any; and (P) the most recent Internal Revenue Service determination
letters.
(d) Representations: Except as specifically set forth in the attached
Schedule 4.16:
(i) Qualification: All the Pension Plans required to be listed on the
attached Schedule 4.16, and the related trusts, if any, now meet,
and since their inception have met, and as of the Closing Date
shall meet, the requirements for qualification under Section
401(a) of the Code and are now, and since their inception have
been, exempt from taxation under Section 501(a) of the Code;
(ii) Determination Letters: The Internal Revenue Service has issued a
favorable determination letter with respect to the qualified
status of each such Pension Plan and trust, and has not taken,
nor, to the Knowledge of the Companies, Controlled Group Members
or
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Sellers, prior to the Closing Date shall it take, any action to
revoke such letter;
(iii) Satisfaction of Obligations: The Companies and each Controlled
Group Member have performed, and through Closing shall perform,
in all material respects, all obligations required to be
performed by them under the Employee Benefit Plans (including,
but not limited to, the making of all contributions), and are not
in material default under, or in material violation of, any of
the Employee Benefit Plans, and neither the Companies, any
Controlled Group Member nor any of the Sellers have Knowledge of
any such material default or violation of any other party to any
and all of the Employee Benefit Plans;
(iv) Compliance With Laws: Each Employee Benefit Plan has been, and
through Closing shall be, administered in material compliance
with ERISA, the Code, the Age Discrimination in Employment Act
(to the extent applicable), COBRA, and any other applicable
federal, state or local laws, and, if applicable, any foreign
laws, and each Employee Benefit Plan is valid and binding, in
full force and effect, and there are no defaults thereunder;
(v) No Prohibited Transactions: None of the Employee Benefit Plans
maintained by the Companies or any Controlled Group Member, nor
any trust created thereunder, any trustee or administrator
thereof, nor the Companies or Sellers has engaged in any
transaction, or will prior to the Closing Date engage in any
transaction, which would violate Section 4975 of the Code, or
Part 4 of Title I of ERISA, or, if applicable, any similar
provision under foreign law;
(vi) No Claims Pending or Threatened: There are not presently, nor, to
the Knowledge of the Companies, Controlled Group Members or
Sellers, shall there be prior to the Closing Date, any actions,
suits or claims pending (other than routine claims for benefits)
or, to the Companies' or Sellers' Knowledge, threatened against,
any Employee Benefit Plan, against the assets of any Employee
Benefit Plan, or against the Companies or any Controlled Group
Member for benefits arising under or pursuant to any Employee
Benefit Plan;
(vii) No Funding Deficiency: Neither the Companies nor any Controlled
Group Member has, nor as of the Closing will have, a "funding
deficiency", as that term is used in Section 412 of the Code,
whether or not waived, with regard to any Employee Benefit Plan;
(viii) Bonding: Each "plan official", within the meaning of Section
412 of ERISA, of each Pension Plan listed in the attached
Schedule
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4.16 is, and through the Closing shall be, bonded to the extent
required by said Section 412;
(ix) No Reportable Event: No proceeding has been initiated, nor,
except as otherwise expressly provided in this Agreement, shall
any proceeding be initiated prior to the Closing Date, to
terminate any Employee Benefit Plan and no "reportable event",
within the meanings of Section 4043 or 4063 of ERISA, has
occurred, nor shall any occur prior to the Closing Date, with
respect to any Employee Benefit Plan;
(x) No Multiple Employer Plan: The Companies do not, nor will they
prior to the Closing Date, participate in, contribute to, or, to
their Knowledge, employ any persons covered by any "multiple
employer plan" as discussed in Section 413(c) of the Code, and
there is no reasonable expectation that the Companies have or
will have any liability with respect to any such plan. The
Companies have never participated in, contributed to, or, to
their Knowledge, employed any persons covered by any such plan;
(xi) No Multi-Employer Plan: Neither the Companies nor any Controlled
Group Member participates in, contributes to, or, to their
Knowledge, employs any persons covered by a "multiemployer plan"
as defined in Section 3(37) of ERISA, nor will it do so prior to
the Closing Date, and there is no reasonable expectation that the
Companies have or will have any liability with respect to any
such plan;
(xii) No Withdrawal Liability: Neither the Companies nor any
Controlled Group Member has incurred, nor will they incur prior
to the Closing Date, any withdrawal liability, as defined in
Title IV of ERISA, to a multi-employer plan;
(xiii) No Retiree Benefits: No retiree benefits are payable, either
now or in the future, pursuant to any Welfare Plan with respect
to the Employees or Former Employees, nor shall an obligation to
provide such benefits be incurred prior to the Closing Date,
except as otherwise required by Code Section 4980B and ERISA
Sections 601 through 608;
(xiv) Reporting and Disclosure: With regard to each Employee Benefit
Plan listed in the attached Schedule 4.16, the Companies have
complied with, and will through the Closing continue to comply,
in each case in all material respects, with all reporting and
disclosure requirements of ERISA and the Code;
(xv) Sufficient Assets: As of the Closing: (i) with regard to funded
plans, the assets of each such Employee Benefit Plan listed in
the attached Schedule 4.16 will be equal to or greater than the
accrued benefits of the participants and beneficiaries of such
plans determined, if they are defined benefit plans, pursuant to
the
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actuarial methods and assumptions utilized by the Pension
Benefit Guaranty Corporation in the event of plan
termination and any applicable foreign law and/or agency;
(ii) with regard to Employee Benefit Plans listed in the
attached Schedule 4.16 that are funded by the Companies'
general assets, a sufficient reserve has been established on
the Companies' books to pay all accrued benefits of
participants and beneficiaries who are Employees or Former
Employees; and (iii) with regard to insured Employee Benefit
Plans listed in the attached Schedule 4.16, all insurance
premiums to provide benefits under such plans through the
Closing are paid;
(xvi) No Further Liabilities: Except as provided in the attached
Schedule 4.16, the Companies do not, and shall not as of the
Closing, have any liability or obligation to any Employee
Benefit Plan or to the Pension Benefit Guaranty Corporation,
Department of Labor, Department of Treasury or similar
agency of a foreign government, any other plan or entity, or
any employee, participant or beneficiary of any Employee
Benefit Plan, arising out of or pursuant to any Employee
Benefit Plan which could subject the Companies to any
material liability;
(xvii) Defined Contribution Plan: With respect to each plan listed
in the attached Schedule 4.16 that is a defined contribution
plan within the meaning of Section 3(34) of ERISA, the
Companies and their Controlled Group Members have paid all
contributions on behalf of prior plan years, and any salary
deferrals and employer contributions, including matching
contributions, have been paid or accrued for the current
plan year; and
(xviii) Termination and Amendment: Each Employee Benefit Plan
listed in the attached Schedule 4.16 is, and as of and
through the Closing, shall be terminable, and/or subject to
amendment by the Companies, at the discretion of the
Companies, with no liability for benefits incurred after
such termination or inconsistent with the terms of any
amendment after its effective date.
4.17. Financial Information.
(a) Set forth on the attached Schedule 4.17(a) are: (i) the audited
consolidated balance sheet of the Companies as of December 31,
1998 (the "Most Recent DFI Balance Sheet") and the related
statements of income and expenses, retained earnings and cash
flow, and notes thereto, for the year then ended (collectively,
the "1998 DFI Financial Statements"); and (ii) the unaudited
consolidated balance sheets of the Companies as of and September
30, 1999, and the related statements of income and expenses,
retained earnings and cash flow for the months then ended
(collectively, the "September 1999 DFI Financial Statements", and
together with the 1998 DFI Financial Statements, the "DFI
Financial Statements"). All of the DFI Financial Statements (i)
are true, correct and complete in all material respects; (ii)
have been prepared in accordance with generally accepted
accounting principles applied consistently with all corresponding
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prior fiscal periods of the Companies; and (iii) present fairly
the financial condition, results of operation and cash flows of
the Companies as of the dates and for the periods indicated;
subject, in the case of the September 1999 DFI Financial
Statements only, to normal year-end adjustments consistent with
past practices and the absence of footnotes (the "Missing
Adjustments/Footnotes"). Except to the extent disclosed on the
attached Schedule 4.17(a), the Missing Adjustments/Footnotes, if
presented in the September 1999 DFI Financial Statements, would
not differ materially from those included in the 1998 DFI
Financial Statements. Two business days before the Closing,
Sellers shall deliver to Purchaser the Estimated Closing Balance
Sheet. The Estimated Closing Balance Sheet will present fairly
DHI's estimate of the financial condition of the Companies as of
the Closing Date. All Servicing Advances to be reflected on the
Estimated Closing Balance Sheet are recoverable. All Servicing
Advances paid with respect to monthly principal and interest will
be collected from the applicable pools on a pool-wide basis as
funds are available. All Servicing Advances with respect to
repossession expenses will be collected on the liquidation of the
respective Loans. The DFI Financial Statements and the attached
Schedule 4.18 make substantially full and adequate provision for
all obligations, liabilities or commitments, whether fixed or
contingent, and doubtful accounts receivable of the Companies.
(b) Set forth on the attached Schedule 4.17(b) are: (i) the
audited consolidated balance sheet of DCI as of December 31, 1998
(the "Most Recent DCI Balance Sheet") and the related statements
of income and expenses, retained earnings and cash flow, and
notes thereto, for the year then ended (collectively, the "1998
DCI Financial Statements"); and (ii) the unaudited consolidated
balance sheets of DCI as September 30, 1999, and the related
statements of income and expenses, retained earnings and cash
flow for the months then ended (collectively, the "September 1999
DCI Financial Statements", and together with the 1998 DCI
Financial Statements, the "DCI Financial Statements"). All of the
DCI Financial Statements (i) are true, correct and complete in
all material respects; (ii) have been prepared in accordance with
generally accepted accounting principles applied consistently
with all corresponding prior fiscal periods of DCI; and (iii)
present fairly the financial condition, results of operation and
cash flows of DCI as of the dates and for the periods indicated;
subject, in the case of the September 1999 DCI Financial
Statements only, to Missing Adjustments/Footnotes. Except to the
extent disclosed on the attached Schedule 4.17(b), the Missing
Adjustments/Footnotes, if presented in the September 1999 DCI
Financial Statements, would not differ materially from those
included in the 1998 DCI Financial Statements.
4.18. No Undisclosed Liabilities. Except as and to the extent set forth on
the attached Schedule 4.18 or reflected in the DFI Financial
Statements, and except for current liabilities incurred by the
Companies in connection with the operation of or with respect to the
DFI Business, the DFI Alabama Business and the DIA Business in the
ordinary course since the date of the Most Recent DFI Balance Sheet,
the Companies have no debts, liabilities or obligations of any nature
or kind (whether absolute, accrued, contingent, unliquidated or
otherwise, whether the Companies have any Knowledge thereof, whether
due or to become due and regardless of
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when asserted) arising out of transactions entered into, at or prior to
the Closing, or any action or inaction at or prior to the Closing or any
state of facts existing at or prior to the Closing that could
cause DFI a Material Adverse Effect.
4.19. Tax Matters.
(a) Except as set forth on the attached Schedule 4.19:
(i) the Companies, each of their affiliated groups and each of
the entities identified on the attached Schedule 4.19
pursuant to Section 4.19(b) below (the "Predecessors") have
filed all Tax Returns which they are required to file under
applicable laws and regulations, and all such Tax Returns
are complete and correct in all material respects and have
been prepared in compliance with all applicable laws and
regulations;
(ii) the Companies, each of their affiliated groups and each of
their Predecessors have paid all material Taxes due and
owing by them (whether or not such Taxes are required to be
shown on a Tax Return) and have withheld and paid over to
the appropriate taxing authority all Taxes which they are
required to withhold from amounts paid or owing to any
employee, stockholder, creditor or other third party;
(iii) neither the Companies, nor any of their affiliated groups
or Predecessors have waived any statute of limitations with
respect to any Taxes or agreed to any extension of time with
respect to any Tax assessment or deficiency;
(iv) the accrual for Taxes on the Most Recent DFI Balance Sheet
would be adequate to pay all Tax liabilities of the
Companies if their current tax year were treated as ending
on the date of the Most Recent DFI Balance Sheet (excluding
any amount recorded which is attributable solely to timing
differences between book and Tax income);
(v) since the date of the Most Recent DFI Balance Sheet, neither
the Companies nor any of their subsidiaries has incurred any
liability for Taxes with respect to their businesses other
than in the ordinary course;
(vi) no foreign, federal, state or local tax audits or
administrative or judicial proceedings are pending or being
conducted with respect to the Companies, any of their
affiliates groups or any of their Predecessors;
(vii) neither the Companies nor any of their affiliated groups or
Predecessors have received from any foreign, federal, state
or local taxing authority any (A) written notice indicating
an intent to open
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an audit or other review, or (B) request for information
related to Tax matters; and
(viii) there are no unresolved questions or claims concerning any
Tax liability of the Companies or any affiliated group or
Predecessor of the Companies.
(b) Except as set forth on the attached Schedule 4.19, none of the
Companies:
(i) has made an election under Section 341(f) of the Code;
(ii) is liable for the Taxes of another person (A) under Treasury
Regulation Section 1.1502-6 (or comparable provisions of
state, local or foreign law), (B) as a transferee or
successor, (C) by contract or indemnity or (D) otherwise;
(iii) is a party to any tax sharing agreement; or
(iv) has made any payments, is obligated to make any payments or
is a party to an agreement that could obligate it to make
any payments that would not be deductible under Section 280G
of the Code.
4.20. Environmental, Health and Safety Matters.
(a) Definitions. As used in this Agreement, the following terms have
the following meanings:
(i) "Environmental Laws" means any and all applicable federal,
state, and local statutes, laws, regulations and ordinances
concerning public health or safety, worker health or safety
or pollution or protection of the environment, as amended
and in effect as of the date hereof, including but not
limited to, the Clean Air Act, 42 U.S.C. ss. 7401 et seq.,
the Clean Water Act, 33 U.S.C. ss. 1251 et seq., the
Resource Conservation Recovery Act ("RCRA"), 42 U.S.C. ss.
6901 et seq., the Toxic Substances Control Act, 15 U.S.C.
ss. 2601 et seq., and the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), 42
U.S.C. ss. 9601 et seq. or which govern: (i) the
identification, investigation, cleanup, removal and/or
remedy of releases or threat of releases of Hazardous
Materials on owned or leased real property; (ii) the
emission or discharge of Hazardous Materials into the
environment; or (iii) the use, generation, transport,
treatment, storage, disposal, removal, recycling, handling
or recovery of Hazardous Materials.
(ii) "Hazardous Materials" means any material or substance which
is defined as a "hazardous waste", "hazardous substance",
"pollutant" or "contaminant" or other such terms used to
define a substance having an adverse effect on the
environment under any Environmental Laws or: (i) that is
classified as gasoline, oil, diesel fuel or other petroleum
products, or fractions thereof; (ii) that
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contains 50 parts per million or more polychlorinated
biphenyls (PCBs); (iii) that is classified as
asbestos-containing material; (iv) that is radioactive; (v)
that is biologically hazardous; or (vi) the presence of
which requires investigation or remediation under any
Environmental Law.
(iii) "Environmental Reports" means any and all environmental
site assessment reports which the Companies have ever caused
to be prepared or have ever received with respect to the
Leased Real Property or any other parcel or real property
ever owned, leased or operated by the Companies or any
subsidiary, affiliate or predecessor in interest of the
Companies ("Former Property").
(b) Except as set forth in the Environmental Reports or on the
attached Schedule 4.20:
(i) The Companies have not received notice, and to the Knowledge
of Sellers and the Companies, they have no information which
indicates that the Companies will be receiving notice, of
proceedings, claims or losses relating to alleged violations
by the Companies of any Environmental Laws or relating to
the alleged responsibility of the Companies for the
investigation, cleanup, removal and/or remedy of releases or
discharges or the presence of Hazardous Materials;
(ii) The Companies are and have been in material compliance with
all applicable limitations, restrictions, conditions,
standards, prohibitions, requirements and obligations
established under the requirements of Environmental Laws
relating to their business, except where such noncompliance
would not have any reasonable likelihood, singly or in the
aggregate, of causing a DFI Material Adverse Effect;
(iii) The Companies and, to the Knowledge of the Companies and
Sellers, the Companies' predecessors in interest, have
timely filed all notices, reports and other submissions
required under all Environmental Laws, except for such
notices, reports or other submissions with respect to which
the failure to so file would not have any reasonable
likelihood, singly or in the aggregate, of causing a DFI
Material Adverse Effect;
(iv) The Companies have been issued all permits, certificates,
approvals, licenses and other authorizations required under
all Environmental Laws, except where the failure to obtain
any such permit, certificate, approval, license or other
authorization would not have a DFI Material Adverse Effect
and are and continue to be in material compliance therewith;
(v) The Companies have not caused or suffered any Hazardous
Materials to be disposed onto or into soils of the Leased
Real Property or the Former Property which would have any
reasonable
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likelihood, singly or in the aggregate, of causing a DFI
Material Adverse Effect;
(vi) To the Knowledge of the Companies and Sellers, the Companies
have not owned or operated any underground storage tanks on
or under the Leased Real Property or the Former Property
which have not been removed together with any associated
contaminated media in accordance with currently applicable
requirements;
(vii) To the Knowledge of the Companies and Sellers, the
Companies have not arranged for the transportation,
treatment or disposal of any waste that was disposed of or
treated at any site listed on any federal CERCLA or state
list or other lists of hazardous substances sites; and
(viii) True, correct and complete copies of all Environmental
Reports have been provided to Purchaser.
4.21. Consents, Approvals and Authorizations. Except as set forth on the
attached Schedule 4.21(a), no consent, approval or authorization of,
or designation, declaration or filing with, or notice to, any
governmental authority, or any lenders, lessors, creditors,
shareholders or others, is required on the part of the Companies or
the Sellers in connection with the valid execution and delivery of
this Agreement and the Attendant Documents or the consummation of the
transactions contemplated in this Agreement and the Attendant
Documents that, if not obtained, performed or given, would cause a DFI
Material Adverse Effect. The attached Schedule 4.21(b) sets forth
those consents, approvals, authorizations, designations, declarations,
filings and notices that, if not obtained, performed or given before
the Closing, would cause a DFI Material Adverse Effect. Prior to the
Closing, the Companies and Sellers shall properly obtain, perform or
give all of the consents, approvals, authorizations, designations,
declarations, filings and notices set forth on the attached Schedule
4.21(b), and as of the Closing, the Companies and Sellers shall have
given Purchaser's counsel copies or adequate evidence of all such
consents, approvals, authorizations, designations, declarations,
filings and notices.
4.22. Insurance. Except as set forth on the attached Schedule 4.22, the
Companies, through DCI, have maintained and now maintain insurance
with respect to the Assets, Leased Property, the DFI Business, the DFI
Alabama Business and the DIA Business, covering property damage by
fire or other casualty, and against such liabilities, claims and
risks, including, without limitation, workers compensation, and in
such amounts as is customary or appropriate in the industry. The
attached Schedule 4.22 contains a true and correct summary of all such
insurance policies other than property damage insurance policies
maintained by the Companies, presently or at any point during the last
five years, setting forth the names of the insured and the insurer,
policy numbers, the types of coverage, premium payments or basis of
payment, deductible amounts and limits of coverage. Except as set
forth on the attached Schedule 4.22, no such policy of
insurance is subject to any deductible, self-insured retention,
retrospective rating agreement, indemnification agreement or any other
method or device by which the insured person is subject to all or any
part of the liability for any or all claims.
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Concurrently with or prior to the execution of this Agreement, the
Companies have delivered to Purchaser or Purchaser's counsel true,
correct and complete copies of all such insurance policies. Except as
set forth in the attached Schedule 4.22, all such insurance policies
will be in full force and effect through the Closing. The Parties
mutually understand, however, that all such insurance policies will
cease to cover the Companies' employees and the Assets, Leased
Property, the DFI Business, the DFI Alabama Business and the DIA
Business after the Closing and that Purchaser or DFI will be
responsible for obtaining new insurance policies as of and after the
Closing. Except as set forth on the attached Schedule 4.22, there is
no state of facts and no event has occurred forming the basis for any
present property, casualty or fidelity claim against the Companies
which is not fully covered by insurance. The attached Schedule 4.22
contains loss runs for the last five years setting forth all property,
general and products liability and workers compensation claim activity
against the DFI Business, the DFI Alabama Business or the DIA
Business, including the date and place of the occurrence, the
claimant's name, reserves, amounts paid, a brief description of the
incident and whether the claim is open or closed. Except as set forth
on the attached Schedule 4.22, none of the Companies or Sellers has
any Knowledge of any occurrence, circumstance, or event which could
reasonably be expected to result in any such claim.
4.23. Recent Conduct of Business; Interim Operations
(a) Except as set forth on the attached Schedule 4.23, since December
31, 1998 there has not been, and through the Closing, there shall
not be, any DFI Material Adverse Effect. Except as set forth on
the attached Schedule 4.23, since December 31, 1998, the
Companies have not and will not, without the prior written
consent of Purchaser, which may be granted or withheld in
Purchaser's sole discretion:
(i) sold or transferred any assets of DFI Business, the DFI
Alabama Business or the DIA Business, other than
inventories in the ordinary course of business;
(ii) issued or redeemed, or agreed to issue or redeem any shares
of XXX Xxxxx, XXX Alabama Stock or DIA Stock, or granted
any other options, rights or other entitlements in respect
of shares of XXX Xxxxx, XXX Alabama Stock or DIA Stock;
(iii) paid or declared any dividends or other distributions to
any of their shareholders;
(iv) made any changes in the Companies' accounting principles;
(v) paid out any cash generated by earnings of the Companies
from and after the date of the Most Recent DFI Balance
Sheet, except to pay ordinary and routine expenses incurred
in the ordinary course of the DFI Business, the DFI Alabama
Business and the DIA Business; or
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(vi) entered into any agreement or commitment (other than this
Agreement or any arrangement provided for or contemplated
in this Agreement) to take any of the types of action
described in subsection (i) through (v) of this Section
4.23(a).
(b) Except as set forth on the attached Schedule 4.23, since
September 30, 1999, the Companies have caused, and through the
Closing, the Companies shall cause, the DFI Business, the DFI
Alabama Business and the DIA Business to be conducted only in the
ordinary course. Except as set forth on the attached Schedule
4.23, since September 30, 1999, the Companies have not and, from
the date hereof through the Closing, will not, without the prior
written consent of Purchaser, which may be granted or withheld in
Purchaser's sole discretion:
(i) made or incurred any capital expenditures in excess of Five
Thousand Dollars ($5,000) per item acquired;
(ii) entered into, terminated or amended any material Contract
other than those described on the attached Schedule 4.4; or
(iii) entered into any agreement or commitment (other than this
Agreement or any arrangement provided for or contemplated
in this Agreement) to take any of the types of action
described in subsection (i) or (ii) of this Section
4.23(b).
4.24. Non-Violative Agreement. Neither the execution and delivery of this
Agreement and the Attendant Documents to which the Companies or any of
the Sellers is a party nor the consummation of the transactions
contemplated in this Agreement and the Attendant Documents will
conflict with, result in the breach or violation of or constitute a
default under the terms, conditions or provisions of any of the
Companies' or the Sellers' Articles of Incorporation or bylaws, or any
other agreement or instrument to which any of the Companies or any of
the Sellers is a party, or by which any of the Companies or any of the
Sellers may be bound or to which any of the Companies or any of the
Sellers may be subject.
4.25. Brokerage or Finder's Fee. Except for Xxxxxx Brothers, Inc., no
broker, finder, agent or similar intermediary has acted for or on
behalf of the Companies or the Sellers in connection with this
Agreement or the transactions contemplated hereby and, except for the
fee payable to Xxxxxx Brothers, Inc. by Sellers, no broker, finder,
agent or similar intermediary is entitled to any broker's, finder's or
similar fee or other commission in connection therewith based on any
agreement, arrangement or understanding with the Companies or the
Sellers or any action taken by the Companies or the Sellers.
4.26. Disclosure. No representation or warranty by DFI or Sellers contained
in this Agreement and no statement contained in any of the Attendant
Documents or any other certificate or instrument to be furnished at
Closing, either pursuant to this Agreement or in connection with the
transactions contemplated in this Agreement contains or will contain
any untrue statement of a material fact, or omits or will omit to
state a material fact.
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4.27. Ownership of Shares. On consummation of the transactions contemplated
in this Agreement, (a) Purchaser will be the sole shareholder of DFI,
and Purchaser will have valid and marketable title to all of the
issued and outstanding shares of DFI's capital stock free and clear of
all Liens, (b) DFI will be the sole shareholder of DFI Alabama and
DIA, and DFI will have valid and marketable title to all of the issued
and outstanding shares of DFI Alabama's capital stock and DIA's
capital stock, free and clear of all Liens, and (c) no other person or
entity will have any rights to purchase or otherwise acquire shares of
XXX Xxxxx, XXX Alabama Stock or DIA Stock.
4.28. Capitalization. DFI has one class of capital stock, common stock, no
par value per share. Each of DFI Alabama and DIA has one class of
capital stock, common stock, $0.01 par value per share. The attached
Schedule 4.28 sets forth the number of authorized and the number of
issued and outstanding shares of common stock of each Company.
Schedule 4.28 also identifies all of the Companies' shareholders, and
with respect to each such shareholder, identifies the number of issued
and outstanding shares of stock of a Company which stand in the name
of such shareholder on such Company's books and records. All of the
DFI Shares, all of the issued and outstanding shares (the "DFI Alabama
Shares") of DFI Alabama Stock and all of the issued and outstanding
shares (the "DIA Shares") of DIA Stock have been duly authorized and
validly issued, are fully paid and non-assessable and were issued by
DFI, DFI Alabama and DIA, respectively, without violating any
requirements of law. Except as set forth on the attached Schedule
4.28, there are no preemptive or first refusal rights to purchase or
otherwise acquire shares of the XXX Xxxxx, XXX Alabama Stock or DIA
Stock pursuant to DFI's, DFI Alabama's or DIA's Articles of
Incorporation or bylaws ("Governing Documents") or by agreement or
otherwise. There are no outstanding agreements, commitments, rights,
options, warrants or claims of any nature whatsoever for the issuance,
sale, purchase or redemption of any shares of DFI's, DFI Alabama's or
DIA's capital stock or any securities convertible into or exchangeable
for such shares.
4.29. Subsidiaries. Except for the fact that DFI Alabama and DIA are
subsidiaries of DFI, and except as and to the extent set forth on the
attached Schedule 4.29, no Company has any subsidiaries, and no
Company has any equity interest in, or any right to acquire any equity
interest in, any other entity.
4.30. Millennium Compliance.
(a) Sellers and the Companies have (i) conducted a comprehensive
review and assessment of all areas of the DFI Business, the DFI
Alabama Business and the DIA Business that could be adversely
affected by the "Year 2000 Problem" (that is, the risk that
computer applications may not be able to properly perform
date-sensitive functions after December 31, 1999), (ii) developed
a detailed plan and timeline for addressing the Year 2000 Problem
on a timely basis, and (iii) to date implemented that plan in
accordance with that timetable.
(b) All computer applications that are material to the DFI Business,
the DFI Alabama Business and the DIA Business are able properly
to perform date-sensitive functions for all dates before and
after January 1, 2000 (i.e.,
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are "Year 2000 Compliant"). Without limiting the foregoing, the
Dynex Software (i) is designed to be used prior to, during, and
after the calendar year 2000 and will operate during each such
time period without error relating to date data, including any
error relating to, or the product of, date data which represents
or references different centuries or more than one century; (ii)
will not abnormally end or provide invalid or incorrect results
as a result of date data; and (iii) has been designed to insure
year 2000 compatibility, including, date data century
recognition, calculations which accommodate same century and
multi-century formulas and date values, and date data interface
values that reflect the century.
(c) Sellers and the Companies have made inquiry of each of the
Companies' key suppliers and vendors with respect to the Year
2000 Problem and, based on that inquiry, believes that each of
them will on a timely basis be Year 2000 Compliant, except to the
extent that their failure, individually or in the aggregate, to
be Year 2000 Compliant would have a DFI Material Adverse Effect.
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents, warrants
and covenants the following to each of the Sellers, both as of the date of
this Agreement and as of the Closing Date, with the knowledge and
expectation that, in agreeing to enter into this Agreement, each of the
Sellers and DFI are completely relying on, and in connection with the
consummation of the transactions contemplated in this Agreement, will
completely rely on, such representations, warranties and covenants:
5.1. Good Standing and Authority. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Michigan and is qualified to transact business in the State
of Michigan. Purchaser has all requisite corporate power and authority
to enter into this Agreement and the Attendant Documents to which it
is a party and to consummate the transactions contemplated in this
Agreement and such Attendant Documents. This Agreement and all of the
Attendant Documents to which Purchaser is a party, and the
consummation of the transactions contemplated in this Agreement, have
been duly authorized and approved by the Purchaser's Board of
Directors and all other necessary and proper corporate action on the
part of Purchaser. This Agreement, and all of the Attendant Documents
to which Purchaser is a party, when executed and delivered, will
constitute legal, valid and binding obligations of Purchaser
enforceable against Purchaser in accordance with their respective
terms.
5.2. Non-Violative Agreement. Neither the execution and delivery of this
Agreement and the Attendant Documents to which Purchaser is a party
nor the consummation of the transactions contemplated in this
Agreement and the Attendant Documents will conflict with, result in
the breach or violation of or constitute a default under the terms,
conditions or provisions of Purchaser's Articles of Incorporation or
bylaws, or any other agreement or instrument to which Purchaser is a
party, or by which Purchaser is bound or to which it may be subject.
5.3. Disclosure. No representation or warranty by Purchaser contained in
this Agreement and no statement contained in any of the Attendant
Documents or any other certificate or instrument to be furnished at
Closing, either pursuant to this Agreement or in connection with the
transactions contemplated in this Agreement
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contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact, necessary in order to
make any of the statements not misleading.
5.4. Brokerage or Finder's Fee. No broker, finder, agent or similar
intermediary has acted for or on behalf of Purchaser in connection
with this Agreement or the transactions contemplated hereby and no
broker, finder, agent or similar intermediary is entitled to any
broker's, finder's or similar fee or other commission in connection
therewith based on any agreement, arrangement or understanding with
Purchaser or any action taken by Purchaser.
5.5. Consents, Approvals and Authorization. No consent, approval or
authorization of, or designation, declaration or filing with, or
notice to any governmental authority, or any lenders, lessors,
creditors shareholders or others, is required on the part of Purchaser
in connection with the valid execution and delivery of this Agreement
and the Attendant Documents or the transactions contemplated in this
Agreement and the Attendant Documents.
5.6. Purchase for Investment. Purchaser will be acquiring the DFI Shares
solely for its own account for investment and not with a view to or
for the distribution thereof.
6. ADDITIONAL AGREEMENTS; SURVIVAL.
6.1. Notice of Material Developments. Each Party shall give prompt written
notice to the other Parties of any (i) representation or warranty of
such Party contained in this Agreement which was true as of the date
of this Agreement, but which has subsequently become untrue, (ii)
Breach of any covenant under this Agreement by such Party, and (iii)
any other material development affecting the ability of such Party to
consummate the transactions contemplated in this Agreement.
6.2. Transition Agreement. At Closing, DCI, DFI and Purchaser shall enter
into a Transition Service Agreement, the form of which is attached as
Exhibit B (the "Transition Agreement").
6.3. Amendments to Existing Servicing Agreements. After Closing, DFI shall
continue to service a servicing portfolio of approximately $1 billion
of Loans pursuant to the Loan Purchase Agreement and three servicing
agreements between DFI (as "Servicer") and MERIT (the "MERIT Servicing
Agreements") (or their successors in interest in and to the Loans
subject to servicing thereunder). Effective as of Closing, Sellers and
DFI shall cause all of the MERIT Servicing Agreements to be amended so
that the following shall be accomplished:
(a) None of the MERIT Servicing Agreements will be subject to
quarterly or annual renewal and will only be terminable for
material cause, and (except as set forth in subparagraph (b)
below) only the MERIT Servicing Agreement applicable to MERIT 13
will also be terminable at the direction of a majority (in dollar
amount) of the Bondholders after the occurrence of a "Servicing
Trigger Event" (as defined under the MERIT Servicing Agreement
applicable to MERIT 13).
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(b) After that time when a Trust Indenture is terminated, the related
MERIT Servicing Agreement will nevertheless be subject to (and be
amended to provide for) Servicing Trigger Events identical to
those currently provided under the MERIT Servicing Agreement
applicable to MERIT 13, with the right to cause a termination as
a result of the occurrence of a Servicing Termination Event
exercisable by MERIT or its assigns.
(c) DFI, as Servicer under and subject to the terms of those MERIT
Servicing Agreements, shall continue as "Servicer" under each
such MERIT Servicing Agreement and any substitute servicing
agreements on identical substantive and economic terms, unless
otherwise agreed to by DFI in its sole discretion, except,
however, at the request of MERIT the Servicer agrees to add to or
delete from the MERIT Servicing Agreements for the Serviced Loans
currently serviced under the MERIT Servicing Agreements, the
"REMIC" related provisions contained in the MERIT Servicing
Agreement for MERIT 13 . In the event that any of the Serviced
Loans serviced by DFI under any of the Servicing Agreements
(including successor or substitute agreements) are no longer
subject to the Trust Indenture applicable to the respective MERIT
11, 12 or 13 securitization, or if no "Senior Bonds" are
outstanding under any of MERIT 11, 12 or 13 (e.g., if they have
been redeemed under a call option), the existing provisions of
any applicable documents requiring or causing a subordination of
the Servicing Fee by DFI shall terminate and no longer apply.
Prior to that time, however, and to the extent that DFI shall not
receive its Servicing Fee otherwise payable under any of the
MERIT Servicing Agreements as the result of the subordination of
such Servicing Fee, DCI will reimburse all such subordinated
amounts to DFI on demand. In the event that DCI fails to pay DFI
such fees and MERIT shall fail to exercise any existing call
right under or with respect to MERIT 11, 12 or 13, as and when it
shall arise after the date when the amounts payable to the
Bondholders of any class shall be increased in accordance with
the terms of the applicable Trust Indenture, DCI shall cause
MERIT to assign those unexercised call options to DFI or its
designee. Effective as of Closing, DCI shall cause MERIT to enter
into an agreement with DFI and DCI, in form and substance
reasonably satisfactory to Purchaser, providing for the foregoing
rights and remedies.
(d) MERIT will have the right to terminate the MERIT Servicing
Agreement related to each of MERIT 11, 12 or 13 in whole or in
part under the following terms and conditions: (i) the related
Trust Indenture shall have been terminated by MERIT, (ii) no such
termination will be within three years of the Closing Date, (iii)
the servicing by DFI as to no more than $200 million of Serviced
Loans will be terminated in any twelve month period, (iv) if the
reason for termination relates to the sale of the Serviced Loans
by MERIT or DCI, DFI or an affiliate will have the right of first
refusal to purchase those Serviced Loans, and (v) MERIT will pay
to DFI a servicing termination penalty equal to A times B times
C, where A equals 4, B equals the difference of the average
servicing fee (including any servicing incentive fees) paid to
DFI on such Serviced Loans over the prior three years (expressed
as a percentage of the principal balance of
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such Serviced Loans) and 0.30%, and C equals the principal
balance of the loans at time of the transfer.
(e) Effective as of Closing, DCI shall cause MERIT to enter into an
agreement with DFI and DCI, in form and substance reasonably
satisfactory to Purchaser, providing for the foregoing rights and
remedies described in the foregoing subparagraphs (d) and (e).
(f) The servicing fee structure is amended as set forth in the letter
of intent dated October 11, 1999 between Xxxxxxx and DCI, which
modifications shall otherwise be acceptable to Purchaser in its
sole discretion.
(g) The Servicer thereunder shall not be required to pay the fees and
expenses of any Back-Up or Stand-By Master Servicer or Servicer
after the Closing Date.
(h) DFI shall be released and discharged from any continuing
obligation or liability to repurchase any Serviced Loans due to
any breach or default by DFI under or with respect to the MERIT
Servicing Agreements (including without limitation any
representations or warranties) which occurred prior to the
Closing, in the manner presently provided under Section 540 of
the Servicing Guide, as if DFI's rights under the MERIT Servicing
Agreements had been sold and transferred to a third party (and
the pre-Closing liability of DFI shall be assumed and undertaken
by DCI, or any other entity satisfactory to the Rating Agencies
and the respective Trustees). The manner in which that release
and discharge is accomplished shall be satisfactory to Purchaser
in its sole discretion and where accomplished through additional
documentation the same shall be executed and/or consented to by
all necessary parties (including at a minimum DCI, in its own
right and as Master Servicer, MERIT, in its own right and as
Issuer, and, if necessary, the Trustee).
(i) Those specific changes to the Servicing Guide, described in the
attached Exhibit C, shall be adopted and applicable to all
Serviced Loans effective no later than Closing.
(j) Each of the MERIT Servicing Agreements will be modified to
provide that (i) the Servicer will provide monthly electronic
reporting for all Serviced Loans on a loan-level basis,
consistent with current reporting provided by Dynex Services to
investors under those arrangements, and (ii) Servicer will at the
request of DCI make available, on a monthly basis, qualified and
knowledgeable personnel for a meeting or telephonic discussion
with the Issuer, bond investors, Rating Agencies and/or other
parties deemed necessary or appropriate by DCI in the exercise of
its reasonable discretion, relating to the performance and other
relevant issues regarding of the Serviced Loans.
6.4. Survival. The representations and warranties set forth in Sections 4
and 5 of this Agreement shall survive for a period of three years
after the Closing Date; provided, however, that the representations
and warranties set forth in Section 4.19 above shall survive for the
applicable statute of limitations period and that
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the representations and warranties set forth in Sections 4.27 and 4.28
above shall survive indefinitely.
6.5. No Hire or Solicitation.
(a) Purchaser agrees that from the date of this Agreement until
Closing, or in the event this Agreement is terminated under
Section 10.1, until one year after the date of this Agreement,
Purchaser shall not, and shall not permit its officers,
directors, employees, agents or affiliates, nor the respective
officers, directors, employees or agents of such affiliates, to
directly solicit the hiring of any current employees of the
Companies or to directly induce, influence, combine or conspire
with, or attempt to induce, influence, combine or conspire with
any current employees of the Companies to terminate their
employment with the Companies. Notwithstanding the foregoing,
Purchaser or its affiliates may at any time hire any employee of
the Companies who responds to a general advertisement or is
directed to Purchaser by a headhunter without Purchaser having
identified such employee as a candidate for a position with
Purchaser, provided that such hiring does not violate the
provisions of such employee's employment agreement(s) or
conditions with the Companies.
(b) Each Seller agrees that from the date of this Agreement until
Closing, and, if the Closing occurs, for one year after the date
of this Agreement, Sellers shall not, and shall not permit their
officers, directors, employees, agents or affiliates, nor the
respective officers, directors, employees or agents of such
affiliates, to directly solicit the hiring of any current
employees of the Companies or to directly induce, influence,
combine or conspire with, or attempt to induce, influence,
combine or conspire with any current employees of the Companies
to terminate their employment with the Companies. Notwithstanding
the foregoing, Sellers or their affiliates may at any time hire
any employee of the Companies who responds to a general
advertisement or is directed to Sellers by a headhunter without
Sellers having identified such employee as a candidate for a
position with Sellers, provided that such hiring does not violate
the provisions of such employee's employment agreement(s) or
conditions with the Companies.
6.6. Reasonable Efforts. Each of the Parties will use its reasonable
efforts to take all action and to do all things necessary in order to
consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing
conditions set forth in Section 7 below).
6.7. Use of Dynex Name.
(a) Sellers hereby grant to DFI and Purchaser a non-exclusive license
to use the names "Dynex Financial, Inc.", "Dynex Financial of
Alabama, Inc." and "Dynex Insurance Agency, Inc.", all variations
of those names (including the Internet domain name
"xxxxxxxxxxxxxx.xxx" ) and all Intellectual Property related to
those names (collectively, the "Dynex Name") for a term of two
years without any additional consideration from Purchaser or DFI.
Purchaser will stop using the Dynex Name and amend the articles
of incorporation of each of the Companies to change their
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names to comply with this Section 6.7 no later than two years
after the Closing Date.
(b) Except as provided in Section 6.7(c) below, no later than five
business days after the Closing Date, DCI shall cause all
references to the Companies, including but not limited to the web
pages describing DFI's "Manufactured Housing Lending
(Refinancing/Direct to Consumer)" and "Manufactured Housing
Lending (Retail and Inventory)" financing products and services,
to be removed from DCI's Internet web site.
(c) Notwithstanding Section 6.7(b) above, after the Closing and
until Purchaser stops using the Dynex Name under Section 6.7(a)
above, each of DFI and DCI will put on its own Internet web site
(if any) either or both of a hyperlink to the other's Internet
web site and a referral page that includes the other's toll-free
telephone number and/or the other's URL.
6.8. Dynex Software. The Parties agree that after the Closing, subject to
the following, DCI and DFI shall have co-ownership of the Dynex
Software as in existence on the date of this Agreement, including the
right to copy, license, distribute, prepare derivative works and
exercise other rights enjoyed by copyright holders, subject to the
following:
(a) Neither DCI nor DFI shall have the duty to account to the other
for any revenue or royalties derived from licensing of the Dynex
Software.
(b) DCI shall not own, have any rights in, retain any copies of (in
source or object code form) or reproduce the software known as
Portal (DFI's credit scoring model) or any portions thereof.
(c) DCI, at its sole cost and expense:
(i) shall obtain any third party licenses currently held by DFI
as may be required in connection with the use or operation
of the Dynex Software by DCI after Closing; and
(ii) shall take any action necessary to transfer to DFI all of
DCI's rights in the Intellectual Property and the Intangible
Property, including such rights as may be necessary in
connection with the use and operation of the Dynex Software
or the operation of the DFI Business, the DFI Alabama
Business or the DIA Business as presently conducted,
including without limitation the items identified as being
licensed to DCI on the attached Schedule 1.1(d). DCI will be
responsible for and pay all additional license fees in
excess of currently payable fees necessary to permit each of
DFI and DCI to continue to use the Intellectual Property and
the Intangible Property of third party vendors or licensors,
except any portion of such fees that relates to any vendor's
or licensor's normal and customary increase in fees payable
with respect to any license held by XXX xxxxx xxx Xxxxxxx.
00
00
(x) For a period of five years from the Closing, DCI shall not:
(i) license, sublicense, sell, assign, transfer or otherwise
directly or indirectly provide use of or access to the Dynex
Software for use in the manufactured home financing business
or the land and home financing business; or
(ii) directly or indirectly, alone or in conjunction with other
parties, use the Dynex Software or other third party
software to compete with the DFI Business, the DFI Alabama
Business.
(e) Each of DCI and DFI shall provide reasonable technical assistance
to the other in connection with the operation and maintenance of
the Dynex Software, provided, that neither DCI nor DFI shall have
any rights to updates, modifications, or derivative works of the
Dynex Software prepared by the other, any such rights being
subject to the terms of a separate agreement.
(f) Subject to their rights to license or sublicense the Dynex
Software as described in the following sentence, each of DCI and
DFI shall maintain the confidentiality of the Dynex Software and
underlying source code and take reasonable precautions against
unauthorized use or access, which procedures shall be no less
than those currently employed by DCI and DFI. Any licensing or
sublicensing of the Dynex Software shall be done pursuant to bona
fide license agreements that protect the respective interests of
DCI and DFI in the Dynex Software.
6.9. Employee Benefit Covenants.
(a) Continuing Coverage. With respect to the types of plans
identified in items 1 and 2 of paragraph (c) on the attached
Schedule 4.16, as of and after the Closing Date, Purchaser or one
of its affiliates will cause the Companies' employees to be
provided benefits not in the aggregate less than the benefits
provided to the employees of Purchaser and its affiliates from
time to time.
(b) 401(k) Loan Repayments and Vesting. Effective as of the Closing
Date, Sellers will amend the Dynex Capital, Inc. 401(k) Plan and
the Dynex Capital, Inc. 401(k) Overflow Plan to cause the account
balances of each Employee of the Companies thereunder to fully
vest as of the Closing Date and to cause their active
participation in each such plan to cease as of the Closing Date.
(c) Prior Service Credit. All of the Companies' employees shall be
credited under Purchaser's tax-qualified Defined Contribution
Plan (as defined in Section 3(34) of ERISA) (or a tax-qualified
Defined Contribution Plan of an affiliate of Purchaser) with
eligibility service, vesting service and benefit accrual service,
for all periods of service with Sellers and the Companies. As
soon as practicable after the Closing Date, Purchaser will cause
its tax-qualified Defined Contribution Plan (or the tax-qualified
Defined Contribution Plan of an affiliate of Purchaser) to accept
any
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qualifying rollover contributions on behalf of the Companies'
employees from the Dynex Capital, Inc. 401(k) Plan, including
401(k) account loan balances.
(d) COBRA. Subject to Section 6.13 below, Purchaser will not assume
any, and Sellers will retain, bear and discharge all, liabilities
with respect to COBRA (including the timely provision of notices
and election forms and benefit payments) with respect to all of
the Companies' employees and all Former Employees (and their
spouses and dependents) who, as of the Closing Date, are entitled
to receive or entitled to elect to receive COBRA benefits by
reason of a qualifying event that occurred before the Closing
Date.
(e) Long-Term Disability. With respect to each Employee and Former
Employee of the Companies covered under any of Sellers' long-term
disability plans who, as of the Closing Date, is either receiving
long-term disability benefits under such plans or is in a waiting
or elimination period and would qualify for long-term disability
benefits under such plans after the waiting or elimination period
expires if not for the transactions contemplated by this
Agreement, Sellers agree to use reasonable efforts to cause the
respective insurance carrier to continue to cover such Employee
or Former Employee for the duration of the applicable period of
disability under such long-term disability plans and to provide
long-term disability benefits to such Employee or Former Employee
after the Closing Date for the duration of the applicable period
of disability as if the transactions contemplated by this
Agreement had not occurred.
(f) Tuition Reimbursement Program. Purchaser will assume those
liabilities identified on the attached Schedule 6.9(f) with
respect to reimbursement of employees under Sellers' tuition
reimbursement program. Sellers will retain, bear and discharge
all liabilities under Sellers' tuition reimbursement program
other than those on the attached Schedule 6.9(f).
(g) Section 125 Plan/Flexible Spending Accounts. Purchaser will
maintain a Section 125 Plan as a continuation of DCI's Section
125 Plan for the 1999 calendar year, so that the aggregate
benefits that the Companies' employees receive under Purchaser's
Section 125 Plan for the remainder of 1999 are not less than the
benefits the Companies' employees would have received had they
remained covered under DCI's Section 125 Plan through 1999. At
the end of the 1999 year, the following adjustments will be made
between DFI and DCI:
(i) If the aggregate amount contributed by the Companies'
employees for 1999 to their spending accounts under DCI's
Section 125 Plan exceeds the aggregate claims paid by DCI
for 1999 with respect to the Companies' employees' spending
accounts, DCI shall pay DFI an amount in cash equal to the
difference between the aggregate amount contributed by the
Companies' employees for 1999 to their spending accounts
under DCI's Section 125 Plan and the aggregate
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claims paid by DCI for 1999 with respect to the
Companies' employees' spending accounts.
(ii) If the aggregate amount contributed by the Companies'
employees for 1999 to their spending accounts under DCI's
Section 125 Plan is less than the aggregate claims paid by
DCI for 1999 with respect to the their spending accounts,
DFI will pay DCI an amount in cash equal to the difference
between the aggregate amount contributed by the Companies'
employees for 1999 to the their spending accounts under
DCI's Section 125 Plan and the aggregate claims paid by DCI
for 1999 with respect to the their spending accounts.
(iii) The foregoing payments shall be made as soon as practicable
after all claims have been paid for the 1999 year.
(h) Miscellaneous.
(i) Notwithstanding anything to the contrary in this Agreement,
under no circumstances will Purchaser or its affiliates be
obligated to provide benefits to the employees of the
Companies that are in any way different from or superior to
the benefits provided to the employees of Purchaser and its
affiliates under any of the employee benefit plans
maintained by Purchaser or its affiliates.
(ii) As soon as practicable after the Closing Date, Sellers will
make available to Purchaser or DFI such records and
information as Purchaser may reasonably request to perform
its (and cause DFI to perform its) obligations under this
Section 6.9. Without limiting the foregoing, Sellers will
provide Purchaser with copies of all plans amended under
Section 6.9(b) above. The Parties agree to cooperate with
each other in performing their respective obligations under
this Section 6.9.
(iii) Except as otherwise expressly provided in this Agreement,
Sellers will retain, bear and discharge all obligations and
liabilities under Sellers' Employee Benefit Plans, including
without limitation all obligations and liabilities with
respect to the Companies' employees and Former Employees
that arises based on their employment by the Companies
before the Closing and all liability with respect to failure
to comply with reporting and disclosure requirements.
6.10. Uncleared Checks. At the Closing, Sellers shall deliver to Purchaser
a true and correct copy of all check registers showing all checks
drafted by any of the Companies that have not cleared ("Uncleared
Checks") as of the close of business on the business day immediately
before the Closing Date (the "Check Register Date"). Sellers shall
also cooperate with Purchaser and its representatives in gathering
information related to Uncleared Checks from all banks at which DFI
or Sellers have accounts upon which Uncleared Checks have been drawn.
At the Closing, Sellers shall provide Purchaser evidence reasonably
satisfactory to Purchaser that funds in an amount, when added to the
proceeds of the sale of
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Loans to Xxxxxxx at the Closing as described in Section 7.2(g) below,
at least equal to 110% of the aggregate amount of all Uncleared Checks
outstanding as of the Check Register Date have been segregated in a
separate trust account designated for the benefit of DFI and its
assigns to fund the Uncleared Checks included in the check registers.
All proceeds of the sale of Loans to Xxxxxxx will be transferred by
wire to the trust account referenced above. To the extent such funds
have actually been segregated as of the Closing, the amount of "Cash
set aside for outstanding checks" and "Outstanding checks" will be
deemed to be reduced or eliminated as line items on the Estimated
Closing Balance Sheet and the Adjusted Closing Balance Sheet. No later
than five business days after the Closing Date, Sellers shall
determine the number of Uncleared Checks that were actually
outstanding as of the Closing and the aggregate amount for which those
checks were drafted. Once determined, Sellers will deliver to
Purchaser updated copies of the check registers described above and
evidence that funds in an amount at least equal to the aggregate
amount of all Uncleared Checks then outstanding have been segregated
as described above.
6.11. Leasehold Improvements. The Parties contemplate that Sellers or DFI
will make certain leasehold improvements to DFI's National Servicing
Center in Fort Worth, Texas between the date of this Agreement and the
Closing Date. Sellers will not incur any expenses for the leasehold
improvements without first consulting with Purchaser and obtaining
Purchaser's written authorization.
6.12. Funds Flow. Before or at the Closing, the Parties will mutually
prepare a funds flow memorandum in substantially the same form as the
attached Exhibit D specifying how, from which Party and to which Party
cash payments will be made at the Closing.
6.13. Termination of Employees.
(a) At Purchaser's sole cost and expense and upon Purchaser's written
request, Sellers will take all actions reasonably necessary from
the date of this Agreement until Closing to terminate the
employment of those employees of the Companies that Purchaser
desires be terminated. Sellers will comply with Purchaser's
lawful instructions as to the manner of such terminations.
(b) Notwithstanding anything to the contrary in this Agreement,
Purchaser agrees that it, and not Sellers, will be responsible
for all employee-benefit related liabilities arising out of such
employees' termination. Without limiting the foregoing, (i) with
respect to employees terminated under this Section whose actual
effective termination date is after the Closing, Purchaser or its
affiliates will be responsible through their welfare plans for
all COBRA coverage for such employees, and (ii) with respect to
employees terminated under this Section whose actual effective
termination date is before the Closing, Purchaser will reimburse
Sellers for the amount of all costs actually incurred by Sellers
in providing COBRA coverage with respect to such employees.
(c) Notwithstanding anything to the contrary in this Agreement,
Purchaser agrees to indemnify and hold harmless the Seller
Parties (as defined in
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Section 9.2 below) from and against all liabilities, losses,
costs or expenses (including attorneys' fees) that any of the
Seller Parties may suffer or for which any of the Seller Parties
may become liable that arise in connection with Sellers'
termination of employees under this Section 6.13. Sellers agree,
however, that Purchaser will not be obligated under the previous
sentence to indemnify or hold the Seller Parties harmless from
any liabilities, losses, costs or expenses that arise other than
in connection with DCI's termination of employees under this
Section 6.13 or for claims that arise before the actual date of
such termination.
7. CONDITIONS TO CLOSING
7.1. Conditions Precedent to Purchaser's Obligation. The obligation of
Purchaser to consummate the transactions contemplated in this
Agreement at the Closing is subject to the satisfaction of all of the
following conditions, any of which may be waived (but only in writing,
except as set forth in Section 7.1(d) below) by Purchaser:
(a) DFI's and Sellers' Representations and Warranties. All
representations and warranties made by DFI and Sellers in this
Agreement shall have been true and correct in all material
respects on the date of this Agreement and shall be true and
correct in all material respects as of the Closing Date with the
same force and effect as if they had been made on and as of such
date.
(b) Performance of Agreements.
(i) DFI and the Sellers shall have performed and complied in all
material respects with all of their obligations under this
Agreement which are to have been performed or complied with
on or prior to the Closing Date.
(ii) DFI and DCI shall have performed and complied in all
material respects with all of their obligations under the
Loan Purchase Agreement which are to have been performed or
complied with on or prior to the Closing Date.
(c) Approvals. The Companies and the Sellers shall have obtained,
performed or given all of the consents, approvals,
authorizations, designations, declarations, filings and notices
set forth on the attached Schedule 4.21(b).
(d) Due Diligence. Purchaser shall have completed its due diligence
investigation of, and shall in its reasonable discretion be
satisfied with, the Companies, the Sellers, the Shares, the DFI
Business, the DFI Alabama Business, the DIA Business, and the
Assets, liabilities, prospects, financial condition and other
matters of or affecting each of the Companies (including, without
limitation, the status and post-closing continuation of the
Licenses). In connection with Purchaser's due diligence
investigation, the Companies and the Sellers shall have fully
cooperated with Purchaser and shall have provided to Purchaser
and its representatives such access to information as Purchaser
or its representatives may from time to time reasonably request.
With respect to Section 4.13(a), Purchaser must
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complete its due diligence investigation on or before December 3,
1999 and, with respect to all other items, Purchaser must
complete its due diligence investigation on or before November
30, 1999. Unless Purchaser notifies Sellers on or before that
date that it is dissatisfied with the results of its due
diligence investigation, this condition shall be deemed to have
been waived by Purchaser.
(e) Litigation. There shall not be any litigation, action, suit,
claim, proceeding, order, investigation or inquiry pending or
threatened before any court or quasi-judicial or administrative
agency to, or pursuant to which a judgment, order, decree,
stipulation, injunction or charge could be entered, which could:
(i) enjoin or prevent the consummation of the transactions
contemplated in this Agreement or the Attendant Documents, (ii)
cause any of the transactions contemplated in this Agreement or
the Attendant Documents to be rescinded following consummation
thereof, (iii) adversely affect the right of Purchaser to own the
DFI Shares, or to own, operate or control any of the Companies,
the Assets, and the Leased Property, (iv) adversely affect the
right of DFI to own the DFI Alabama Shares or the DIA Shares, or
(v) otherwise have a DFI Material Adverse Effect.
(f) Financial Information. Sellers shall have provided to Purchaser
and its representatives information regarding the line items
"Accounts payable and other liabilities", "Accrued salaries,
benefits and bonuses" on the Estimated Closing Balance Sheet
reasonably acceptable to Purchaser so that Purchaser can make an
informed decision that such amounts are fairly reflected on the
Estimated Closing Balance Sheet.
(g) [intentionally omitted]
(h) [intentionally omitted]
(i) [intentionally omitted]
(j) Updating of Disclosure Schedules. From the date of this Agreement
until the Closing, the Companies and the Sellers shall have used
their best efforts to update all of the Schedules to this
Agreement and shall have promptly notified Purchaser of any
changes or additions or events which may cause any change or
addition to any such Schedules or in any representation or
warranty made pursuant to Section 4 above. Subject to the other
provisions of this Section 7.1(j), neither the immediately
preceding sentence nor any notice by the Companies or Sellers
pursuant to this Section 7.1(j) shall be deemed in any way to
constitute a waiver by Purchaser of the condition set forth in
Section 7.1(a) above.
(k) Termination. This Agreement shall not have been terminated
pursuant to Section 10.1 below.
(l) Delivery of Closing Documents. The Companies and the Sellers
shall have executed and delivered, or caused to be executed and
delivered, all of the documents described in Section 8.2 below.
All documents relating to
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the transactions contemplated in this Agreement shall be
reasonably satisfactory in form and content to Purchaser and its
legal counsel.
(m) No Encumbrances. All of the Assets shall be owned by the
Companies free and clear of all Liens, other than those
identified on the attached Schedule 4.10. All of the DFI Shares
shall be owned by DHI free and clear of all Liens. All of the DFI
Alabama Shares and all of the DIA Shares shall be owned by DFI
free and clear of all Liens.
(n) Operation of Business and Material Adverse Change.
(i) The Companies shall have continued the active operation of
the DFI Business, the DFI Alabama Business and the DIA
Business in the ordinary course through the Closing.
(ii) Since the date of this Agreement, no change shall have
occurred which could have a DFI Material Adverse Effect.
(o) Loan Origination Agreement and Opinion. The Loan Origination
Agreement shall have been unconditionally terminated and DCI
shall have unconditionally discharged and released DFI from any
and all liabilities and obligations arising under the Loan
Origination Agreement. Purchaser shall have received the opinion
of Xxxxx & Xxxxxx, addressed to Purchaser, that no such liability
or obligation exists as a matter of law that would give the
trustees with respect to MERIT 11, 12 or 13, any backup or
stand-by servicer, any master servicer, or any other party the
right to seek any remedy against DFI for any claim that arises
under, out of or pursuant to the Loan Origination Agreement. Such
opinion shall be in form and substance reasonably satisfactory to
Purchaser and shall not be materially different than the draft of
such opinion distributed to Purchaser and its counsel before the
date of this Agreement.
(p) Financing. No later than December 17, 1999, Purchaser shall have
obtained those assurances and commitments (in form and substance
satisfactory to it, in its sole discretion) under which Purchaser
is satisfied with the following: (i) there will be available to
Purchaser as of the Closing, in amounts and on terms acceptable
to it, sufficient capital to finance the transactions
contemplated in this Agreement; (ii) there will be available to
DFI and/or Purchaser as of and after Closing, in amounts and on
terms acceptable to Purchaser, working capital financing for the
operation of DFI and the origination and carrying of Loans
purchased under the Loan Purchase Agreement, retained or
purchased by DFI under this Agreement or originated by DFI
subsequent to Closing; and (iii) there will be a public market
for bonds collateralized by the foregoing Loans that reflects
approval by the applicable rating agencies and pricing and
execution, in each case acceptable to Purchaser.
(q) [intentionally omitted]
(r) [intentionally omitted]
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(s) [intentionally omitted]
(t) [intentionally omitted]
(u) [intentionally omitted]
(v) MERIT Servicing Agreements. The MERIT Servicing Agreements shall
have been amended as described in Section 6.3 above and consents
shall have been obtained from all necessary parties for such
amendments, including without limitation, all applicable rating
agencies. The applicable rating agencies shall have confirmed
that the acquisition of DFI by Purchaser will not result in a
requalification, reduction or withdrawal of any rating currently
assigned to the securities for which loans serviced by DFI serve
as collateral.
7.2. Conditions Precedent to DFI's and the Sellers' Obligation. The
obligation of DFI and the Sellers to consummate the transactions
contemplated in this Agreement at the Closing is subject to the
satisfaction of all of the following conditions, any of which may be
waived (but only in writing) by such Parties:
(a) Purchaser's Representations, Warranties and Covenants. All
representations, warranties and covenants made by Purchaser in
this Agreement shall have been true and correct in all material
respects on the date of this Agreement and shall be true and
correct in all material respects as of the Closing Date with the
same force and effect as if they had been made on and as of such
date.
(b) Performance of Agreement. Purchaser shall have performed and
complied in all material respects with all of its obligations
under this Agreement which are to have been performed or complied
with on or prior to the Closing Date.
(c) Termination. This Agreement shall not have been terminated
pursuant to Section 10.1 below.
(d) Delivery of Closing Documents. Purchaser shall have executed and
delivered, or caused to be executed and delivered, all of the
documents described in Section 8.3 below. All documents relating
to the transactions contemplated in this Agreement shall be
reasonably satisfactory in form and content to the Sellers and
their legal counsel.
(e) Litigation. There shall not be any litigation, action, suit,
claim, proceeding, order, investigation or inquiry pending or
threatened before any court or quasi-judicial or administrative
agency to, or pursuant to which a judgment, order, decree,
stipulation, injunction or charge could be entered which could:
(i) enjoin or prevent the consummation of the transactions
contemplated in this Agreement or the Attendant Documents, (ii)
cause any of the transactions contemplated in this Agreement or
the Attendant Documents to be rescinded following consummation
thereof, (iii) adversely affect the right of Purchaser to own the
DFI Shares, or to own, operate or control any of the Companies,
the Assets, and the Leased
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Property, (iv) adversely affect the right of DFI to own the DFI
Alabama Shares or the DIA Shares, or (v) otherwise have a DFI
Material Adverse Effect.
(f) MERIT Servicing Agreements. The MERIT Servicing Agreements shall
have been amended as described in Section 6.3 above and consents
shall have been obtained from all necessary parties for such
amendments, including without limitation, all applicable rating
agencies. The applicable rating agencies shall have confirmed
that the acquisition of DFI by Purchaser will not result in a
requalification, reduction or withdrawal of any rating currently
assigned to the securities for which loans serviced by DFI serve
as collateral.
(g) Loans Held For Sale to Xxxxxxx. Xxxxxxx shall have purchased all
Loans (including without limitation the Floorplan Loans set forth
on the attached Schedule 1.37) that it is obligated to purchase
under the Loan Purchase Agreement. To the extent of Xxxxxxx'x
purchase of Loans, the amounts of "Loans held for sale to
Xxxxxxx" and "Payable to affiliates for loans held to sale to
Xxxxxxx" will be deemed to be reduced or eliminated as line items
on the Estimated Closing Balance Sheet and the Adjusted Closing
Balance Sheet.
(h) Leasehold Improvement Reimbursement. Purchaser shall have
reimbursed Sellers for the amounts of all leasehold improvements
described in Section 6.11 above; provided, however, that
Purchaser will not be obligated to reimburse Sellers for
leasehold improvement expenses not authorized in writing by
Purchaser.
8. CLOSING
8.1. Closing. The closing (the "Closing") of the transactions contemplated
in this Agreement shall take place as soon as reasonably possible
following execution of the Agreement and the satisfaction of each of
the conditions precedent set forth in Section 7 above; provided,
however, that in no event shall the Closing take place after the Drop
Dead Date. The Parties shall mutually agree on the date of the Closing
consistent with the immediately preceding sentence. As used in this
Agreement, the "Closing Date" means the date on which the Closing
actually occurs. The Closing shall be deemed effective as of 12:01
a.m., EST on the Closing Date. The Closing shall take place at the
offices of Purchaser's counsel, Jaffe, Raitt, Heuer & Xxxxx,
Professional Corporation, Xxx Xxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx,
Xxxxxxxx, or at such other location and in such other manner as the
Parties may mutually agree.
8.2. Deliveries at Closing by Sellers. At the Closing, the Companies and
the Sellers shall properly execute (if necessary) and deliver to
Purchaser, or cause to be executed and delivered to Purchaser, the
following:
(a) A Covenant Not to Compete and Confidentiality Agreement
(collectively, the "Covenants") executed by each of the Sellers,
the form of which is attached to this Agreement as Exhibit E.
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(b) An Employment Agreement (collectively, the "Employment
Agreements"), executed by each of the individuals set forth on
the attached Schedule 8.2(b), which shall amend or supersede all
existing employment agreements for such individuals and which
shall be mutually acceptable to Purchaser and such employee.
(c) The amendments to the MERIT Servicing Agreements, as described in
Section 6.3 above.
(d) The opinion of Xxxxx & Xxxxxx described in Section 7.1(o) above.
(e) An opinion of Xxxxxxx, Baetjer and Xxxxxx, LLP, counsel to the
Companies and the Sellers, addressed to Purchaser, in form and
substance reasonably satisfactory to Purchaser and its counsel.
(f) A copy of each of the Sellers' and the Companies' Articles of
Incorporation, certified by the State Corporation Commission of
the Commonwealth of Virginia and a Certificate of Good Standing
(or analogous document) for each of the Sellers and Companies
issued by the State Corporation Commission of the Commonwealth of
Virginia and every other state in which any Seller or Company is
authorized to do business. All such documents shall be dated not
earlier than 30 days prior to the Closing Date.
(g) The resignations of each officer and director of the Companies
other than those who, with Purchaser's consent, desire to remain
as officers or directors of the Companies.
(h) Sellers' Certificates.
(i) A "Closing Certificate", executed by an officer of each of
the Sellers and DFI, to the effect that (A) all of the
representations and warranties made by such party in this
Agreement are true and correct in all material respects on
the Closing Date with the same force and effect as though
made on and as of the Closing Date, (B) such party has
performed and complied in all material respects with all of
its obligations under this Agreement and (with respect to
DFI and DCI only) the Loan Purchase Agreement which are to
have been performed or complied with on or prior to the
Closing Date, (C) since the date of this Agreement, Sellers
and the Companies have operated the DFI Business, the DFI
Alabama Business and the DIA Business only in the ordinary
course, and (D) there has been no DFI Material Adverse
Effect from the date of this Agreement to the Closing Date.
(ii) A "Secretary's Certificate", executed by the Secretary or
Assistant Secretary of each of the Sellers and the
Companies, attaching a copy of the Articles of Incorporation
and bylaws of such party and, in the case of DFI and the
Sellers, a copy of the resolutions of the Sellers' Boards of
Directors approving the transactions contemplated in this
Agreement, and the officer executing such
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certificate shall certify that, as of the Closing Date, such
Articles of Incorporation, bylaws and (in the case of the
Sellers and DFI) resolutions are true, complete and correct,
have not be altered or repealed and are in full force and
effect.
(i) The DFI Shares and assignments separate from certificate in
respect of the DFI Shares, all of which shall be mutually,
reasonably acceptable to the Sellers and Purchaser.
(j) [intentionally omitted]
(k) A Xxxx of Sale and Assignment and Assumption Agreement with
respect to the Rights (the "Xxxx of Sale"), the form of which is
attached to this Agreement as Exhibit F.
(l) Copies of the check registers and evidence of segregation of
funds as described in Section 6.10 above.
(m) The Transition Agreement.
(n) [intentionally omitted]
(o) Such other documents and instruments as are contemplated in this
Agreement (or as the Parties and their affiliates have
contemplated in connection with this Agreement) or as Purchaser
or Purchaser's counsel may reasonably request in order to
evidence or consummate the transactions contemplated in this
Agreement or to effectuate the purpose or intent of this
Agreement.
8.3. Deliveries at Closing by Purchaser. At the Closing, Purchaser (or with
respect to clause (b) below, DFI) shall properly execute (if
necessary) and deliver to the Sellers, or cause to be executed and
delivered to the Sellers, as the case may be, the following:
(a) The Purchase Price, in the manner and form contemplated in
Section 3.2 above.
(b) The Servicing Advance Payment, in the manner and form
contemplated in Section 2.3 above.
(c) An opinion of Jaffe, Raitt, Heuer & Xxxxx, Professional
Corporation, counsel to Purchaser, addressed to Sellers, in form
and substance reasonably satisfactory to Sellers and their
counsel.
(d) A copy of Purchaser's Articles of Incorporation, certified by the
Michigan Department of Consumer and Industry Services, and a
Certificate of Good Standing for Purchaser issued by the Michigan
Department of Consumer and Industry Services. All such documents
shall be dated not earlier than 30 days prior to the Closing
Date.
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(e) Purchaser's Certificates.
(i) A "Closing Certificate", executed by an officer of
Purchaser, to the effect that (A) all of the
representations, warranties and covenants made by Purchaser
in this Agreement are true and correct in all material
respects on the Closing Date with the same force and effect
as though made on and as of the Closing Date, and (B)
Purchaser has performed and complied in all material
respects with all of its obligations under this Agreement
which are to have been performed or complied with on or
prior to the Closing Date.
(ii) A "Secretary's Certificate", executed by the Secretary or an
Assistant Secretary of Purchaser, attaching a copy of the
Articles of Incorporation and bylaws of Purchaser and a copy
of the resolutions of Purchaser's Board of Directors
approving the transactions contemplated in this Agreement,
and the officer executing such certificate shall certify
that, as of the Closing Date, such Articles of
Incorporation, bylaws and resolutions are true, complete and
correct, have not be altered or repealed and are in full
force and effect.
(f) The Covenants.
(g) The Xxxx of Sale.
(h) The Transition Agreement.
(i) Such other documents and instruments as are contemplated in this
Agreement or as the Companies, Sellers or Sellers' counsel may
reasonably request in order to evidence or consummate the
transactions contemplated in this Agreement or to effectuate the
purpose or intent of this Agreement.
9. INDEMNIFICATION
9.1. Indemnification of Purchaser. Sellers hereby agree to jointly and
severally indemnify, defend and hold harmless, prior to the Closing,
Purchaser and its officers, directors, shareholders, managers,
members, employees, independent contractors, agents, successors and
assigns, and following the Closing, Purchaser, the Companies and their
respective officers, directors, shareholders, managers, members,
employees, independent contractors, agents, successors and assigns
(collectively, the "Purchaser Parties"), for, from and against any and
all liabilities, losses, costs or expenses which any of the Purchaser
Parties may suffer or for which any of the Purchaser Parties may
become liable and which are based on, are the result of, arise out of
or are otherwise related to any of the following:
(a) any inaccuracy or misrepresentation in, or Breach of any
representation or warranty of the Companies or Sellers contained
in this Agreement, as modified under Section 7.1(j) above, any of
the Attendant Documents or any certificate, schedule, list or
other instrument to be furnished by the Companies or Sellers to
Purchaser pursuant to this Agreement or any of
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the Attendant Documents; provided, however, that for
purposes of determining if there is an inaccuracy or
misrepresentation in, or has been a Breach of any
representation or warranty under this Section 9.1(a),
all words (such as, but not limited to, "material",
"in material compliance with" and "in all material
respects" and, with respect to Sections 4.20 and 4.22
only, the word "Knowledge") that limit or qualify
representations and warranties of DFI and Sellers
shall be disregarded.
(b) any Breach or failure of the Companies or Sellers to
perform any covenant or agreement required to be
performed by the Companies or Sellers pursuant to
this Agreement or any of the Attendant Documents;
(c) any failure of the Sellers to reimburse the Companies
for any and all expenses, costs, fees and charges
that are (i) incurred by the Companies in connection
with this Agreement or the transactions contemplated
in this Agreement, and (ii) not otherwise already
paid by DCI or not accrued as a liability on the
Adjusted Closing Balance Sheet, as finally determined
by the Independent Accountant (if necessary);
(d) any claim, demand, suit, action or legal,
administrative or other proceeding by any person
(other than a Party) or any federal, state or local
department, agency or other governmental body (a
"Third Party Claim") against any of the Purchaser
Parties resulting from, arising out of or in any way
related to (i) the failure of Sellers to perform, pay
or discharge any of the liabilities described on the
attached Schedule 9.1(d), (ii) the Loan Origination
Agreement, or (iii) the failure of DFI to have
properly performed under the MERIT Servicing
Agreements prior to the Closing Date;
(e) Uncleared Checks which are returned for insufficient
funds; or
(f) any and all actions, suits, proceedings, demands,
assessments, judgments, costs and expenses, including
reasonable attorneys' and consultants' fees
(collectively, "Related Expenses"), incident to any
of the foregoing.
provided, however, that, subject to Section 9.5 below, within
60 days after learning of the assertion of any Third Party
Claim against which Purchaser claims indemnification under
this Section 9.1, Purchaser shall notify Sellers and afford
them the opportunity to assume control of the defense or
settlement thereof at Sellers' own expense with counsel of
their choosing, and Purchaser shall cooperate fully to make
available to Sellers all pertinent information under its
control or in its possession, provided that Sellers shall not
settle any such claim without the prior written consent of
Purchaser, which consent shall not be unreasonably withheld.
Sellers shall not be obligated to indemnify Purchaser for any
Related Expenses incurred by Purchaser in connection with such
claim after Sellers assume its defense, except to the extent
those Related Expenses are incurred by Purchaser at Sellers'
request. It is the intent of the Parties that Sellers not be
obligated to reimburse the Companies for any expenses, costs,
fees or charges under subsection (c) above and Section 11.2
below to the extent any such expenses, costs, fees or charges
are effectively reimbursed to Purchaser or the Companies
pursuant to the adjustment mechanism of Section 3.3 hereof.
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9.2. Indemnification of Seller. Purchaser and, following the
Closing, the Companies, hereby agree, jointly and severally,
to indemnify, defend and hold harmless Sellers and their
respective officers, directors, shareholders, managers,
members, employees, independent contractors, agents,
successors and assigns (collectively, the "Seller Parties")
for, from and against any and all liabilities, losses, costs
or expenses which any of the Seller Parties may suffer or for
which any of the Seller Parties may become liable and which
are based on, the result of, arise out of or are otherwise
related to any of the following:
(a) any inaccuracy or misrepresentation in, or breach of
any representation or warranty of Purchaser contained
in, this Agreement, any of the Attendant Documents or
any certificate, schedule, list or other instrument
to be furnished by Purchaser to Sellers pursuant to
this Agreement or any of the Attendant Documents;
(b) any breach or failure of Purchaser to perform any
covenant or agreement required to be performed by
Purchaser pursuant to this Agreement or any of the
Attendant Documents; and
(c) any Third Party Claim against any of the Seller
Parties resulting from, arising out of or in any way
related to (i) the failure of Purchaser to perform,
pay or discharge any assumed liability, or (ii) the
operation of the DFI Business, the DFI Alabama
Business and the DIA Business after the Closing; and
(d) any and all Related Expenses incident to any of the
foregoing.
provided, however, that within 60 days after learning of the
assertion of any Third Party Claim against which Sellers claim
indemnification under this Section 9.2, Sellers shall notify
Purchaser and afford it the opportunity to assume the defense
or settlement thereof at Purchaser's own expense with counsel
of its choosing, and Seller shall cooperate fully to make
available to Purchaser all pertinent information under their
control or in their possession, provided that Purchaser shall
not settle any such claim without the prior written consent of
Sellers, which consent shall not be unreasonably withheld.
Purchaser shall not be obligated to indemnify Sellers for any
Related Expenses incurred by Sellers in connection with such
claim after Purchaser assumes its defense, except to the
extent those Related Expenses are incurred by Sellers at
Purchaser's request.
9.3. Minimization of Indemnities. Each Party shall use reasonable
efforts to minimize the indemnification obligations of the
other Parties under this Section 9.3 by, among other
reasonable things and without limiting the generality of the
foregoing, taking such reasonable remedial action as it
believes may minimize such obligation and seeking to the
maximum extent possible reimbursement from insurance carriers
under applicable insurance policies covering any such
liability.
9.4. Assignment of Claims. Each Party agrees that on satisfaction
of the obligation to indemnify under this Section 9.4, and in
consideration of such obligation, it will assign to the Party
or Parties making such payment or giving such credit any and
all claims, causes of action and demands of whatever kind and
nature which such indemnified Party may have against any
person, firm or other entity giving rise to
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such indemnified loss, and to reasonably cooperate in any
efforts to recover therefrom.
9.5. Purchaser's Right to Control Claims. Notwithstanding the
provisions of Section 9.1 above:
(a) Purchaser may assume control of the defense of any
Third Party Claim against which it claims
indemnification under Section 9.1 above, provided
that Purchaser (i) notifies Sellers of such
assumption in writing and that Purchaser believes
that such Third Party Claim, if adversely determined,
would have a DFI Material Adverse Effect, (ii)
obtains Sellers' consent to the legal counsel to be
used by Purchaser in connection with such assumption
(which consent shall not be unreasonably withheld),
and (iii) consults with Sellers throughout such
defense and affords Sellers the meaningful
opportunity to make suggestions regarding Purchaser's
conduct of such defense. If Purchaser assumes control
of the defense of any Third Party Claim under the
foregoing provisions, Purchaser will pay all costs of
such defense and shall be reimbursed by Sellers for
the costs of such defense upon final disposition of
the Third Party Claim; provided, however, that
Purchaser shall not settle any such claim without the
prior written consent of Sellers, which consent shall
not be unreasonably withheld.
(b) If (i) Purchaser assumes control of the defense of
any Third Party Claim under Section 9.5(a) above;
(ii) Purchaser wants to settle the Third Party Claim
before a final judgment is rendered pursuant to a
settlement offer made by or agreed to by the claimant
in an amount less than or equal to the "Remaining
Ceiling" (defined in Section 9.7(d) below); and (iii)
Sellers do not agree to the proposed settlement, then
(x) Sellers shall deposit the amount of the proposed
settlement into escrow to be applied to the final
settlement of the Third Party Claim, (y) Section
9.7(d) below shall no longer be applicable to that
claim and any related claims, and (z) Sellers'
remaining aggregate liability under this Article 9
for any unrelated claims shall be limited to the
difference between the Remaining Ceiling and the
amount deposited in escrow under clause (x) above.
(c) If (i) Purchaser does not assume control of the
defense of any Third Party Claim under Section 9.5(a)
above; (ii) Sellers want to settle the Third Party
Claim before a final judgment is rendered; and (iii)
Purchaser does not agree to the proposed settlement,
then Sellers shall deposit the amount of the proposed
settlement into escrow to be applied to the final
settlement of the claim and the Sellers' obligation
to continue the defense of that claim will cease and
Sellers' liability to indemnify Purchaser for that
claim will be limited to the amount of the proposed
settlement.
9.6. Remedies Exclusive. The indemnification provisions of this
Article 9 shall be the exclusive remedies of the Parties with
respect to any transaction contemplated by this Agreement in
the absence of bad faith, fraud or intentional, knowing and
willful misconduct.
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9.7. Limitation on Indemnities.
(a) Any provision of this Agreement to the contrary
notwithstanding, no claim for indemnification by any
party against another party shall be valid and
assertible unless and until the aggregate amount of
all claims exceeds Fifty Thousand Dollars ($50,000)
(the "Basket Amount"). A party seeking
indemnification under this Agreement shall be
entitled to recover only the amount of claims over
the Basket Amount. Any provision of this Agreement to
the contrary notwithstanding, the dollar limitations
set forth in this Section 9.7 shall not apply to any
claim relating to the liabilities described on the
attached Schedule 9.1(d) or any Related Expenses
incident to those liabilities.
(b) Available Insurance and Tax Benefits. The amount of
any loss suffered hereunder shall be determined (i)
after taking into account all amounts to which the
indemnified party is entitled and actually receives
under the provisions of all agreements and/or
insurance policies with third parties (i.e., actual
insurance policies, and not self-insurance or
retention programs) in existence prior to Closing
(subject to offset for any increase in premiums
attributable to such losses or payments made in
respect of such losses) and (ii) net of any actual
tax benefit or detriment derived by the indemnified
party. The Parties agree to use reasonable efforts to
collect amounts available under any such agreement
referred to in clause (i) above.
(c) Additional Limitations. The Parties hereby waive any
rights they may have to claim or receive punitive,
indirect, special or consequential damages, or any
damages intended to compensate a party for lost
revenue or income, in connection with any legal
proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby.
(d) Ceiling and Remaining Ceiling. The aggregate amount
of the Sellers' liability under this Article 9 shall
not exceed the Purchase Price (the "Ceiling"). The
"Remaining Ceiling" as of any given time is defined
as the amount of the Ceiling less the aggregate
amount of all claims for indemnification actually
paid by Sellers to the Purchaser Parties as of that
time.
10. TERMINATION
10.1. Termination. This Agreement may be terminated at any time
before the Closing:
(a) by the mutual consent of the Sellers, the Companies
and Purchaser; or
(b) by the Sellers (i) if any of the conditions set forth
in Section 7.2 above have not been fulfilled,
satisfied or waived by the Drop Dead Date, (ii) if
Purchaser breaches any material covenant or agreement
set forth in this Agreement, or (iii) as contemplated
in Section 7.1(j) above; or
(c) by Purchaser (i) if any of the conditions set forth
in Section 7.1 above have not been fulfilled,
satisfied or waived by the Drop Dead Date, or (ii) if
any
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of the Companies or any of the Sellers Breach any
material covenant or agreement set forth in this
Agreement.
10.2. Effect of Termination. If terminated in accordance with
Section 10.1 above, this Agreement shall be null and void and
have no further force or effect, except as provided in the
remaining provisions of this Section 10.2, in Section 6.5
above and in Section 11.2 below. In the event a Party
terminates this Agreement as a result of a breach by another
Party, then such non-breaching Party shall be entitled to
recover from the breaching Party all out-of-pocket expenses
incurred by it and any of its affiliates (including, without
limitation, reasonable legal and accounting fees and expenses)
in connection with (a) the preparation, drafting and
negotiation of this Agreement and any other document related
to the transactions contemplated in this Agreement, and (b) if
Purchaser is the non-breaching party, the due diligence review
by Purchaser of the Companies and their liabilities, condition
and prospects, the DFI Business, the DFI Alabama Business, the
DIA Business and the Assets, together with appropriate damages
in connection therewith.
11. MISCELLANEOUS
11.1. Exclusivity. From the date of this Agreement through the
Closing Date (unless this Agreement is sooner terminated in
accordance with Section 10.1 above), (i) neither of the
Sellers, nor any of their officers, directors, employees or
agents shall, directly or indirectly, offer the DFI Shares to,
or carry on negotiations with respect to the sale of such
shares with, any party other than Purchaser; (ii) neither DFI,
nor any of its officers, directors, employees or agents shall,
directly or indirectly offer the DFI Alabama Shares or the DIA
Shares to, or carry on negotiations with respect to the sale
of such shares with, any party other than Purchaser; (iii)
none of the Companies, nor any of their officers, directors,
employees or agents shall, directly or indirectly, offer its
business or Assets to, or carry on negotiations with respect
to the sale of its business or Assets with, any party other
than Purchaser; (iv) none of the Companies shall issue any
shares of its stock (or any options, rights to acquire or
similar rights with respect to its stock) to any party other
than Purchaser; and (v) none of the Sellers or the Companies,
nor any of their officers, directors, employees or agents
shall, directly or indirectly, offer the Rights or assets
relating to the Rights to, or carry on negotiations with
respect to the sale of the Rights or such assets with, any
party other than Purchaser. Sellers shall immediately notify
Purchaser of any contacts between the Sellers, the Companies,
or any of their officers, directors, employees or agents and
any other person regarding any offer or negotiations which
violate this Section 11.1.
11.2. Expenses. Except as is provided in Section 10.2 above and in
this Section 11.2, the Sellers and Purchaser shall each bear
the expenses incurred by them in connection with the
preparation and negotiation of this Agreement and the
Attendant Documents and the consummation of the transactions
contemplated in this Agreement. Sellers shall reimburse the
Companies for all expenses of the type described in Section
9.1(c) above. Sellers shall reimburse Purchaser for all
amounts, if any, which, pursuant to the terms of this
Agreement, were to have been paid by Sellers, but which were
paid by Purchaser.
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11.3. Dispute Resolution. Any and all disputes between the Parties
arising out of any provision of this Agreement shall be
resolved in accordance with the procedure set forth in this
Section 11.3; provided, however, that a Party may seek a
preliminary injunction or other provisional judicial relief
if, in its judgment, such action is necessary to avoid
irreparable damage or to preserve the status quo. Despite any
such action, the Parties will continue to participate in good
faith in the procedures set forth in this Section 11.3. The
Parties shall submit all disputes under this Agreement or any
of the Attendant Documents to arbitration. Such arbitration
shall be conducted in accordance with the rules of the Center
for Public Resources Rules for Non-Administered Arbitration of
Business Disputes by three arbitrators, of whom Purchaser
shall appoint one and the Sellers shall appoint one. The third
arbitrator shall be selected by the two arbitrators appointed
by the Parties. Any arbitrator not appointed by a Party shall
be selected from the CPR Panels of Distinguished Neutrals. The
arbitration shall be governed by the United States Arbitration
Act, 9 U.S.C., Sections 1 - 16, and judgment on the award
rendered by the arbitrators may be entered by any court having
jurisdiction thereof. The place of the arbitration shall be
the metropolitan area where DFI's principal office is then
located. The arbitrators shall make written findings of fact
and conclusions of law, and the decision of the arbitrators
shall be final. Each Party shall pay its own expenses of
arbitration and the expense of the arbitrators shall be
equally shared; provided, however, that if in the opinion of
the arbitrators any claim for indemnification under the
Agreement or any defense in objection thereto was
unreasonable, the arbitrators may assess, as part of their
award, all or any part of the arbitration expenses (including
reasonable attorney's fees) of the other party and of the
arbitrators against the party raising such unreasonable claim,
defense or objection.
11.4. Notices. Any notice, election, demand, request, consent,
approval, concurrence or other communication (collectively, a
"notice") given or made under any provision of this Agreement
shall be deemed to have been sufficiently given or made for
all purposes only if it is in writing and it is: (a) delivered
personally to the party to whom it is directed; (b) sent by
first class mail or overnight express mail, postage and
charges prepaid, addressed to the party to whom it is
directed, at his, her or its address set forth below; or (c)
telecopied to the party to whom it is directed, at his, her or
its address set forth below:
If to any of the Companies (prior to the With a required copy
to: Closing only) or to any of the Sellers (either before or
after the Closing):
Dynex Capital, Inc. Xxxxxxx, Xxxxxxx and Xxxxxx, LLP
10900 Xxxxxxx Road, Third Floor 0000 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxx Xxxxx, XX 00000 XxXxxx, XX 00000
Fax: (000) 000-0000 Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxx Attn: Xxxxxx X. Xxxxxxxxx
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If to any of the Companies (after the Closing With required copies to:
only) or Purchaser (either
before or after Closing):
Jaffe, Raitt, Heuer & Xxxxx,
Xxxxxxx Financial Services Corporation Professional Corporation
000 X. Xxxxx Xxxxxx, Xxxxx 200 One Xxxxxxxx Avenue, Suite 2400
Birmingham, Michigan 48009 Xxxxxxx, XX 00000
Fax: (000) 000-0000 Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxx and Attn: Xxxxx Sugar
Xxxxxx X. Xxxxx
and
Xxxxxxx Xxxxxxxx, P.C.
000 X. Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attn: Xxxxx X. Xxxxxxx
Unless any other provision of this Agreement expressly
provides to the contrary, any notice:
(i) given or made in the manner indicated in
Section 11.4(a) above shall be deemed to
have been given or made on the day on which
such notice was actually delivered to an
adult residing or employed at the address of
the intended recipient, but if such day was
not a business day, such notice shall be
deemed to have been given or made on the
first business day following such day;
(ii) given or made in the manner indicated in
this Section 11.4(b) shall be deemed to have
been given or made on the third business day
after the day on which it was deposited in a
regularly maintained receptacle for the
deposit of the United States' mail, or in
the case of overnight express mail, on the
business day immediately following the day
on which it was deposited in a regularly
maintained receptacle for the deposit of
overnight express mail, provided that the
notice is subsequently delivered by the U.S.
Post Office or the courier service to the
designated address in the ordinary course of
business; and
(iii) given or made in the manner indicated in
this Section 11.4(c) above shall be deemed
to have been given or made on receipt by the
transmitting party of printed confirmation
that the transmission was received, provided
that if the transmission occurs after 4:30
p.m. EST or EDT (as appropriate) or on a
non-business day, the notice shall be deemed
to have been given or made on the first
business day to follow such transmission.
Notwithstanding the immediately preceding sentence, if the
intended individual recipient actually receives a notice
before the date on which such notice is deemed
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to have been given or made, as specified above, the date of
actual receipt shall be the date on which such notice is
deemed to have been given or made for the purposes of this
Agreement.
11.5. Headings. The headings contained in this Agreement are for
reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
11.6. Construction. This Agreement shall be construed and enforced
in accordance with the laws of the State of Michigan without
regard to its conflicts of law principles. This Agreement
shall be construed as if drafted jointly by the Parties and no
presumption or burden of proof shall arise favoring or
disfavoring any Party.
11.7. No Assignment; Benefit. No Party may assign its rights and
obligations under this Agreement without the prior written
consent of the other Parties; provided, however, that
Purchaser may assign its rights and obligations under this
Agreement to any subsidiary or affiliate (and in the event of
such an assignment to such a subsidiary or affiliate,
Purchaser shall remain liable and continue to be obligated
under this Agreement). This Agreement shall be binding on and
inure to the benefit of the Parties and their respective
successors and permitted assigns.
11.8. Entire Agreement. This Agreement, including the Exhibits and
the Schedules attached or to be attached to it, is and shall
be deemed to be the complete and final expression of the
agreement between the Parties as to the matters contained in
and related to this Agreement and supersedes any previous
agreements between the Parties pertaining to such matters.
11.9. Tax Matters.
(a) Sellers shall pay all state and local transaction
privilege, business privilege, sales, use and
transfer taxes (including taxes, if any, imposed on
the transfer of real and personal property) and
similar taxes, and all filing, recording and
registration fees, if any, payable in connection with
the transactions contemplated in this Agreement.
(b) Sellers shall be responsible for the preparation and
filing of all Tax Returns for the Companies which are
due either before or after the Closing Date and which
cover any period of time ending before the Closing
Date, including, without limitation, all Tax Returns
for any partial tax years ending on or immediately
prior to the Closing Date. Purchaser shall have the
right to review all Tax Returns of the Companies
prepared by Sellers before they are filed. Sellers
shall reimburse the Companies for all payments
required with respect to any such Tax Returns. It is
the intent of the Parties that Sellers obtain all tax
benefits associated with the line item "Income tax
benefits" reflected as an asset on DFI's balance
sheet before the Closing Date and Purchaser obtain
all such tax benefits on and after the Closing Date.
To give effect to that intent, within 240 days after
the Closing Date, Sellers shall file Tax Returns with
respect to DFI for the
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partial tax year ending as of the Closing Date and
all tax benefits for such partial tax year shall
inure to Sellers.
(c) Purchaser shall be responsible for the preparation
and filing of all Tax Returns for the Companies which
are due on or after the Closing Date and which cover
any period of time ending on or after the Closing
Date. Purchaser shall make, or cause the Companies to
make, all payments required with respect to any such
Tax Returns; provided, however, that Sellers shall
reimburse the Companies on or before the due date of
each such payment to the extent the payment relates
to the operation of the DFI Business, the DFI Alabama
Business or the DIA Business for any period of time
ending before the Closing Date.
(d) All Taxes shall be pro rated and shared by Sellers
and the Companies as provided in this Section
11.9(d). To the extent that, on or after the Closing
Date, Purchaser or any of the Companies makes any
payments, or incurs any liabilities or obligations,
in respect of any Tax, and such Tax relates, in whole
or in part, to any period of time ending before the
Closing Date, such Tax shall be pro rated, based on
the Closing Date and the period of time covered by
such Tax, and Sellers shall reimburse the Companies
for the pro rata share of such Tax which relates to
the period of time up to, but not including, the
Closing Date.
(e) Purchaser and Sellers will join in an election under
Section 338(h)(10) of the Code (the "Election"), not
to be effective before the Closing. In accordance
with the Treasury Regulations under Section
338(h)(10), Sellers acknowledge that as a result of
making the Election, the transactions contemplated in
this Agreement will be treated for federal and state
income tax purposes as a deemed sale of DFI's assets
for consideration equal to: (i) the Shares
Consideration, plus (ii) all liabilities of DFI as of
the Closing (the "Deemed Asset Purchase Price"),
followed by a deemed liquidation of DFI. The Parties
agree to allocate the Deemed Asset Purchase Price
solely among the assets set forth on the attached
Schedule 11.9(e). The amount of the Deemed Asset
Purchase Price allocated to each of the assets set
forth on the attached Schedule 11.9(e) shall be the
fair market value of those assets as of the Closing.
Purchaser and Sellers covenant to use such allocation
for all purposes, including but not limited to, IRS
Form 8023, and all other federal and state tax
returns.
11.10. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
Photostatic or facsimile reproductions of this Agreement may
be made and relied upon to the same extent as originals.
11.11. Waiver. The waiver by any Party of any breach of any provision
of this Agreement shall not operate or be construed as a
waiver of any subsequent or similar breach.
11.12. Amendment. This Agreement may only be amended by written
agreement executed by all of the Parties.
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11.13. Brokerage or Finder's Fee. Any and all brokerage fees due and
payable to any broker, finder, agent or similar intermediary
in connection with this Agreement or the transactions
contemplated hereby, including but not limited to the fee
payable to Xxxxxx Brothers, Inc. by Sellers as described in
Section 4.25 above, shall be borne by the party responsible
for retaining, or claimed to be responsible for retaining,
such broker, finder, agent or similar intermediary. Sellers
shall reimburse the Companies for any fees described in this
Section 11.13 which the Companies incur.
11.14. Further Assurances. From time to time after the Closing Date,
at Purchaser's reasonable request and without further
consideration or undue cost or expense to the Sellers, the
Sellers shall (a) execute and deliver or cause to be executed
and delivered such further instruments of conveyance,
assignment and transfer and shall take such other action as
Purchaser may reasonably request in order more effectively to
convey, transfer, reduce to possession or record title to any
of the Shares purchased pursuant to this Agreement, (b)
cooperate with Purchaser on or after the Closing Date by
furnishing information, evidence, testimony and other
assistance in connection with any actions, proceedings,
arrangements or disputes involving Purchaser and which are
based on contracts, leases, arrangements or acts of the
Companies which were in effect or occurred before the Closing
Date; provided, however that Sellers shall have no obligation
to cooperate with Purchaser under this Section 11.14(b) in any
controversy in which Purchaser and Sellers are adverse
parties, (c) cooperate with and assist Purchaser and the
Companies in transferring Companies' employees to Purchaser's
employee benefit plans, and (d) cooperate with Purchaser on or
after the Closing Date by furnishing to Purchaser historical
information regarding the Companies in connection with reports
and filings Purchaser or its affiliates are required to make.
11.15. Confidentiality. The Parties agree to keep in strict
confidence the fact of and the content of the negotiations and
the agreements concerning the transactions contemplated in
this Agreement until such time as the Parties agree on a joint
public announcement or consent, in writing, to the other
Party's proposed public announcement, which consent shall not
be unreasonably withheld, conditioned or delayed.
Notwithstanding the foregoing, (a) any Party may make any
public disclosure it believes in good faith is required by law
or regulation, provided the disclosing Party advises the other
Parties in writing prior to making the disclosure, and (b)
Purchaser may make disclosure to any regulatory authority if
required to do so by such regulatory authority in connection
with Xxxxxxx'x efforts and application to establish a thrift,
bank or other regulated financial institution.
11.16. No Third Party Beneficiaries. The rights and obligations of
the Parties under this Agreement are for the benefit of the
Parties, the Purchaser Parties and the Seller Parties only,
and neither any creditor of any of the Parties, the Purchaser
Parties or the Seller Parties, nor any other person or entity
(other than a successor in interest to the any of the Parties,
the Purchaser Parties or the Seller Parties), shall have the
right to rely on or enforce the provisions of this Agreement
as a third-party beneficiary or otherwise. Without limiting
the generality of the foregoing, the discretions granted to
any of the Parties, the Purchaser Parties or the Seller
Parties in this Agreement are personal to them, and no
receiver, trustee or liquidator of
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the any of them, or any other person or entity, shall the
right or power to exercise any such discretions.
[the remainder of this page intentionally left blank - the next page
is the signature page]
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IN WITNESS WHEREOF, the Parties have caused this Purchase Agreement to
be executed as of November 27, 1999.
PURCHASER:
DFI ACQUIRING CORP.,
a Michigan corporation
By: /s/ Xxxxxx X. Xxxxx
----------------------------------------------
Its: Chief Executive Officer
---------------------------------------------
SELLERS:
DYNEX CAPITAL, INC.,
a Virginia corporation
By: /s/ Xxxxxx X. Xxxxx
----------------------------------------------
Its: President
---------------------------------------------
DYNEX HOLDING, INC.,
a Virginia corporation
By: /s/ Xxxxxx X. Xxxxx
----------------------------------------------
Its: President
---------------------------------------------
DFI:
DYNEX FINANCIAL, INC.,
a Virginia corporation
By: /s/ Xxxxxxx Xxxxxxxxx
----------------------------------------------
Its: President
---------------------------------------------
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LIST OF SCHEDULES
1.1(b) Furniture, Fixtures and Other Fixed Assets
1.1(d) Intellectual Property
1.1(f) Equipment, Machinery and Vehicles
1.1(g) Personal Property Leases
1.1(h) General Contracts
1.1(i) Licenses and Permits
1.1(j) Warranties
1.1(k) Leased Real Property
1.1(l) Owned Real Property
1.1(p) Intangible Property
1.37 Floorplan Loans
1.41 Home Equity Loans
1.44 Knowledge
4.1 Foreign Jurisdictions
4.3 Intellectual Property Exceptions
4.3(e) Aggregate License Consideration
4.4 Contracts
4.6 Permit and License Exceptions
4.7 Owned Real Property Exceptions
4.8 Leased Real Property Exceptions
4.9 Accounts Receivable Exceptions
4.10 Liens/Permitted Liens
4.11 Condition of Assets Exceptions
4.12 Litigation Exceptions
4.13 Compliance with Applicable Laws and Regulations Exceptions
4.14 Employees
4.15 Employee Relations Exceptions
4.16 Employee Benefit Plan Exceptions
4.17(a) DFI Financial Statements
4.17(b) DCI Financial Statements
4.18 Undisclosed Liabilities
4.19 Tax Matter Exceptions
4.20 Environmental Exceptions
4.21(a) All Consents, Approvals and Authorizations
4.21(b) Pre-Closing Consents, Approvals and Authorizations
4.22 Insurance Exceptions
4.23 Interim Operations Exceptions
4.28 Capitalization
4.29 Subsidiaries
6.9(f) Tuition Reimbursement
8.2(b) Employment Agreements
9.1(d) Additional Liabilities
11.9(e) Deemed Asset Purchase Price Allocation
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LIST OF EXHIBITS
Exhibit A - Underwriting Guidelines
Exhibit B - Transition Agreement
Exhibit C - Changes to Servicing Guide
Exhibit D - Form of Funds Flow Memorandum
Exhibit E - Form of Covenant Not to Compete and Confidentiality Agreement
Exhibit F - Xxxx of Sale and Assignment and Assumption Agreement
