EXHIBIT 10.1
Merger Termination Agreement
This Merger Termination Agreement (the "Agreement") is entered into as of
this 28th day of August 1998, between Matrix Capital Corporation ("Matrix"),
Fidelity National Financial, Inc. ("Fidelity") and MCC Merger, Inc. ("MCC
Merger").
WHEREAS, the parties hereto have previously entered into an Agreement and
Plan of Merger, dated as of March 25, 1998 (the "Merger Agreement") and mutually
desire to terminate the Merger Agreement and to seek to engage to the extent
permissible in certain other transactions and relationships; and
WHEREAS, Matrix and Fidelity each may file with the Securities and Exchange
Commission on their respective filings on Form 8-K a copy of the press release
attached hereto as Appendix A (the "Press Release").
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth below, the parties hereby agree as follows:
ARTICLE I
TERMINATION OF THE MERGER AGREEMENT
1.1 Matrix, Fidelity and MCC Merger hereby agree to the mutual termination
of the Merger Agreement in accordance with Section 9.1(i) of the Merger
Agreement.
1.2 Matrix and Fidelity shall as soon as practicable following the
execution of this Agreement issue the Press Release.
1.3 Matrix on one hand and Fidelity and MCC Merger on the other hand shall
as soon as practicable following the execution of this Agreement execute mutual
releases of the other party and its current, former and future officers,
directors, employees, agents, shareholders, affiliates, predecessors and
successors from any and all legal and equitable claims or causes of action,
whether known or unknown or suspected to exist as of the date of the execution
of such releases with respect to all matters relating to the Merger Agreement or
the termination thereof, except that such releases shall not apply to a breach
of any agreements entered into between the parties and/or their affiliates as
contemplated by this Agreement, or for any liability relating to any securities
class action lawsuit or shareholder derivative lawsuit against Matrix or its
current, former and future officers, directors, employees, agents, shareholders,
affiliates, predecessors and successors concerning the Merger Agreement or the
termination thereof or administrative investigations or proceedings concerning
the proposed merger or its termination,
provided that the exclusion of such matters from the release shall terminate if
Matrix or its officers, directors, employees, agents, or other persons acting in
concert therewith suggest, sponsor or otherwise encourage such securities class
action lawsuit or shareholder derivative lawsuit.
1.4 Each of the parties hereto agree to take all necessary steps to
further the termination of the Merger Agreement effected by this Agreement,
including without limitation, withdrawing from any proceedings concerning the
Merger Agreement before any regulatory authorities.
ARTICLE II
DEPOSIT AGREEMENT PROVISIONS
2.1 Subject to the receipt of all required approvals (which shall include,
where applicable, statements of non-objection by a regulatory authority) from
applicable regulatory authorities, including, but not limited to, state
departments of insurance in applicable states and the Office of Thrift
Supervision or any successor agency thereto ("OTS"), and compliance with
applicable law and regulations, Fidelity agrees that it shall maintain or cause
to be maintained at the Matrix Capital Bank (the "Bank") in terms of average
daily closing balances, at least $250 million in deposits, subject to a
limitation of 33 percent of the collected balances of Fidelity's underwriters
and underwritten title companies as provided for in Section 2.6 (the "33%
Limitation"), and subject to the phase-in period and limitations described in
Section 2.2 of this Agreement for a period to extend for no longer than five and
one-half years (the "Initial Term") from the date on which the first deposits
are placed at the Bank, subject to extension pursuant to Section 2.6, and
subject to the other terms and conditions set forth in Sections 2.1, 2.2, 2.3,
2.4, 2.5 and 2.6 of this Agreement. Not less than $200 million of such deposits
shall be comprised of title escrows of Fidelity's underwriters and underwritten
title companies (the "Title Deposits") and the remainder may be comprised of
escrows from Section 1031 exchange transactions by Fidelity customers (the "1031
Deposits") except as otherwise provided in Section 2.3 hereof. Together the
Title Deposits, the Section 1031 Deposits and any other deposits by Fidelity are
referred to as the "Deposits."
2.2 Subject in all respects to the satisfaction of the conditions set
forth in Section 2.1 of this Agreement, the minimum amount of $250 million of
deposits referred to in Section 2.1 of this Agreement will be in place by
December 31, 1998, with at least one quarter of the total amount of such
deposits to be placed at the Bank as of the end of the three month-end dates
preceding December 31, 1998. Subject to the satisfaction of the conditions and
limitations set forth in Section 2.1 of this Agreement, at least $62.5 million
of such deposits shall be in place by September 30, 1998, an additional $62.5
million of such deposits shall be in place by October 31, 1998 and an additional
$62.5 million shall be in place by November 30, 1998. The obligation of
Fidelity to make or cause to be made such increasing levels of deposits shall be
subject to the Bank's ability to provide service to Fidelity with respect to the
Deposits comparable to the level of
service that Fidelity is currently receiving from other depository institutions.
The parties acknowledge that the service obligations set forth on Appendix B
constitute a standard that: (i) equals or exceeds in all material respects the
service levels considered as of the date of this Agreement to be acceptable in
the title and escrow industry, (ii) Fidelity is currently receiving from other
depository institutions, and (iii) if satisfied by the Bank, would initially
result in there being no material deficiencies in the level of service provided
by the Bank. Matrix acknowledges that a high level of services in regard to the
Deposits is critical to Fidelity's business. Matrix further acknowledges that
the level of service required in regard to the Deposits may change from time to
time due to, among other things, competitive factors and regulatory
requirements. Fidelity shall promptly notify the Bank in writing of any
material deficiencies in the level of service provided by the Bank. The Bank
shall seek to correct such deficiencies within 15 days from the date such notice
is given prior to December 31, 1998 and during this period any obligation by
Fidelity to make additional deposits shall be suspended until such time as
Fidelity and the Bank agree that the deficiencies are corrected. In the event
of a disagreement as to whether deficiencies have been corrected, the parties
shall agree on the selection of an independent industry expert, who shall
determine whether the service provided by the Bank is equivalent to or exceeds
in all material respects the service levels considered to be acceptable in the
title and escrow industry. In the event the independent industry expert
determines in a written report provided to both parties that the Bank's service
levels meet these standards, the obligations of Fidelity shall recommence as if
it were the date on which the notice of deficiency had been given. The Bank
shall provide Fidelity with periodic financial statements as such statements
become available to the public and shall, except as prohibited by law or
regulation, promptly notify Fidelity if the Bank becomes subject to the
provisions of OTS' Prompt Corrective Action regulations set forth at 12 C.F.R.
Part 565 as a result of the capital category to which the Bank is assigned.
2.3 The Bank will pay to Rocky Mountain Support Services, Inc. ("Rocky
Mountain"), for services rendered by Rocky Mountain to the Bank pursuant to a
contract to be executed in a form similar to the Data Processing Services
Agreement dated April 27, 1998 between Rock Mountain and the Bank, a fee not to
exceed the sum of (i) the amount equal to the 90-day U.S. Treasury rate (the
"Base Rate") less 100 basis points on the Title Deposits and (ii) the amount
equal to the 30-day LIBOR rate (the "LIBOR Rate") less 8 basis points on the
1031 Deposits, provided, however, that if the Warrants (as defined in Section
3.3 hereof) shall not have been issued and delivered to Fidelity on or before
the Rate Change Date (as hereinafter defined), the Base Rate shall thereafter,
commencing on the Rate Change Date, be increased by 20 basis points above the
rate that would otherwise prevail. "Rate Change Date" means the earliest to
occur of that date (a) that is ten (10) days after the date on which notice of
all required regulatory approvals (which shall include, where applicable,
statements of non-objection by a regulatory authority) from applicable
regulatory authorities is received, (b) on which notice of any regulatory
disapproval is received, or (c) that is ninety (90) days from the date hereof in
the event no notice of regulatory approval or disapproval is received. In order
to satisfy the provisions of Section 2.1 of this Agreement relating to the
amount of Title Deposits,
Fidelity may choose in its discretion to substitute 1031 Deposits at the same
rate provided for Title Deposits in this Section 2.3. Fidelity shall pay the
Bank's standard fees, including wire fees other than as provided in Sections 6
and 7 of Appendix B hereto, maintenance fees, and other charges and fees
relating to the Deposits. Such fees and charges shall be netted against the
amounts payable to Rocky Mountain set forth above.
2.4 Upon the occurrence of the following events, the term specified in
Section 2.1 of this Agreement, Fidelity shall, at its sole option, be entitled
to remove the Deposits from the Bank in their entirety, as specified further
herein, and Fidelity's obligations under Sections 2.1, 2.2, 2.5 and 2.6 of this
Agreement shall terminate if:
(1) either Fidelity notifies the Bank in writing of any material
deficiencies in the level of service provided by the Bank and such
deficiencies remain uncured for at least 30 days following notice to the
Bank of such deficiencies. In the event of a disagreement as to whether
such deficiencies exist or have been corrected, the parties shall agree on
the selection of an independent industry expert who shall determine whether
the service provided by the Bank equals or exceeds in all material respects
the service levels considered to be acceptable in the title and escrow
industry. In the event that the independent industry expert determines in
a written report provided to both the Bank and Fidelity that service levels
do not meet these standards, the Bank shall have 30 days to correct the
deficiencies identified in the written report. If following that time the
deficiencies are not corrected in the written determination of the
independent industry expert, which shall be required to make such written
determination within 15 days after the close of such 30-day period,
Fidelity shall be entitled to withdraw its Deposits in total over a 120 day
period beginning on the day after the second determination of the
independent industry expert has been received by Fidelity and the Bank
("Deposit Determination Day"). Fidelity shall not withdraw an amount which
exceeds more than 30 percent of its total Deposits as of the Deposit
Determination Day in any 30 day period commencing on the Deposit
Determination Day; or in the event the service levels set forth in Appendix
B shall cease to equal in all material respects the service levels
considered acceptable in the title and escrow industry, and Fidelity so
notifies Matrix, then Matrix shall have 30 days to upgrade its service
level to the level considered acceptable in the title and escrow industry.
If within 15 days of the close of such 30-day period the service levels are
not improved so as to equal or exceed the level considered acceptable in
the title and escrow industry, Fidelity shall have the right to withdraw
its Deposits on the same basis as provided in this Section 2.4(1); or
(2) the Bank shall report in a filing with the OTS that it does not meet
any of the minimum regulatory capital requirements applicable to it, or the
Bank becomes subject to the provisions of OTS' Prompt Corrective Action
regulations set forth at 12 C.F.R. Part 565 as a result of the capital
category to which the Bank is assigned.
2.5 If Fidelity fails to maintain or cause to be maintained the minimum
amount of deposits ("Specified Deposit Level") required under Sections 2.1 and
2.2 of this Agreement (a "Shortfall"), as determined on an average level on a
quarterly basis, Fidelity shall pay Matrix, as liquidated damages, an amount in
cash equal to the annualized spread of 200 basis points times the Shortfall for
each such quarter (based on daily averages for the quarter); such payment shall
be made by Fidelity within 10 days following the date on which Matrix notifies
Fidelity in writing of such deficiency; provided, however, Fidelity shall not be
required to make such payment if Fidelity agrees in writing within 10 days of
receipt of the deficiency notice to maintain, and then maintains, Deposits in an
amount sufficiently in excess of the Specified Deposit Level for the quarter
following a quarter in which a Shortfall has occurred so as to equal or exceed
the Shortfall for the preceding quarter, or Fidelity provides evidence to Matrix
that such Shortfall results from the 33% Limitation.
2.6 Notwithstanding any contrary provision of this Agreement, Fidelity
shall at no time be obligated to maintain or to cause to be maintained Title
Deposits at the Bank in excess of 33% of Fidelity's total Title Deposits (the
"33% Limitation"). At all times during which the 33% Limitation serves to limit
the Title Deposits at the Bank, the Specified Deposit Level shall be not less
than the sum of (i) 33% of Title Deposits and (ii) $50 million of 1031 Deposits.
If, for any measured quarter, the 33% Limitation causes a Shortfall, the
provisions of Section 2.5 shall not apply, but instead the Initial Term of this
Agreement will be extended (the "Additional Term") in accordance with the
provisions of this Section 2.6. The Additional Term shall be equal to that
number of quarters, rounded to the next whole number, which is equal to the
Aggregate 33% Limitation Shortfalls divided by $250 million. The Aggregate 33%
Limitation Shortfalls means the aggregate amount of all Shortfalls during the
Initial Term caused by the 33% Limitation. During any Additional Term, the
Deposits shall be maintained at the minimum amount required by Section 2.1,
taking into consideration the 33% Limitation.
ARTICLE III
OTHER AGREEMENTS
3.1 Subject to the receipt of all required approvals (which shall include,
where applicable, statements of non-objection by a regulatory authority) from
applicable regulatory authorities, including, but not limited to, state
departments of insurance in applicable states and the OTS, and compliance with
applicable law and regulations, United Financial, an affiliate of Matrix will
market Fidelity products and services through its network on terms and
conditions and for a period of time satisfactory to both parties.
3.2 Matrix and Fidelity will in good faith mutually investigate other
strategic alliance opportunities.
3.3. Subject to the receipt of all approvals (which shall include, where
applicable, statements of non-objection by a regulatory authority) from
applicable regulatory authorities, including the OTS, and compliance with
applicable law and regulations, Matrix agrees to issue warrants exerciseable for
the purchase of 150,000 shares of common stock, par value $.01 per share of
Matrix (the "Warrants") at a price of 115 percent of the average of the closing
bid and asked prices of Matrix's common stock on NASDAQ on the last trading day
prior to the execution of this Agreement, such Warrants to be transferable and
to be subject to customary terms and conditions, including Fidelity's right to
one demand registration on terms customary in such registration and piggy-back
registration rights provisions. With respect to the Warrants, Fidelity shall
not be required to take any action that would cause Fidelity to be required to
file an application with the OTS or any other regulatory agency to acquire
control of Matrix or to rebut a presumption of control of Matrix. The issuance
of the Warrants shall be subject to the execution of a definitive agreement.
The parties shall negotiate in good faith to reach mutually agreeable definitive
agreements with respect to the Warrants. The Warrants shall have a vesting
schedule granting Fidelity the right to exercise the Warrants on or after the
date of this Agreement, provided however, that if on any date (the "Alternate
Date") prior to the fourth anniversary of the date of this Agreement, Fidelity
fails in accordance with the terms of this Agreement to maintain or cause to be
maintained the Deposits or ceases to maintain or cause to be maintained the
Deposits either because all required approvals (which shall include, where
applicable, statements of non-objection by a regulatory authority) from
applicable regulatory authorities have not been received or pursuant to Section
2.4 of this Agreement, then the last date on which the Warrants may be exercised
will be the sixtieth day after the Alternative Date, after which date the
Warrants shall be automatically canceled.
ARTICLE IV
OTHER PROVISONS
4.1 No provision of this Agreement shall require any party to this
Agreement to take any action that would cause the party or any of its officers,
directors, or employees to be subject to a claim that such party or such other
persons are in violation of any applicable law, regulation or order. The
parties agree that no provision of this Agreement shall require Fidelity to take
any action nor shall any officer, director or employee have any obligation to
change in any way any ownership interests with respect to Fidelity held by such
officer, director or employee or any other party that is attributed to such
officer, director or employee or to change in any respect such officer's,
director's or employee's roles in regard to the board of directors or management
of Fidelity, or to seek a modification or termination of any order applicable to
such party, officer, director or employee. The parties acknowledge that they
will mutually consult with the OTS or any other applicable regulatory agency
with respect to the relationships identified in Articles II or III with Matrix
or any entity that is wholly or partially owned by Matrix. The parties to this
Agreement agree that if Fidelity is unable to engage in any of the relationships
or
transactions identified in Articles II or III due to such consultations with
regulatory authorities, including the OTS, or if the parties are unable to
obtain all required approvals (which shall include, where applicable, statements
of non-objection by a regulatory authority) from applicable regulatory
authorities, including, but not limited to, state departments of insurance in
applicable states and the OTS, or to conduct such relationships or transactions,
or if the parties are unable to conduct such relationships or transactions in
compliance with applicable law and regulations, none of the parties to this
Agreement shall be deemed on the basis of any of the foregoing to be in breach
of their obligations under this Agreement.
4.2 Subject to Sections 3.3 and 4.1 of this Agreement, if this Agreement,
any agreement contemplated by this Agreement, or the consummation of any
transaction contemplated by this Agreement or such other agreement requires the
approval (which shall include, where applicable, statements of non-objection by
a regulatory authority) of any regulatory authorities, including, but not
limited to, state departments of insurance in applicable states and the OTS, the
parties to this Agreement shall cooperate with each other and with such
regulatory authorities in good faith and shall use commercially reasonable
efforts to obtain any and all such approvals promptly after execution of this
Agreement.
4.3 Each party hereby represents and warrants to the other parties as
follows:
(1) this Agreement has been duly executed on behalf of such party; all
corporate action on the part of such party has been taken in order to duly
execute, and deliver this Agreement and this Agreement is enforceable
against such party in accordance with its terms;
(2) other than any regulatory approvals (which shall include, where
applicable, statements of non-objection by a regulatory authority) no
consents or approval of any person or entity are necessary in connection
with the execution, delivery and performance of this Agreement by such
party and consummation by such party of the transactions contemplated by
this Agreement; and
(3) to the knowledge of such party, no regulatory approvals other than
approvals which may be required from the OTS (which shall include, where
applicable, statements of non-objection by a regulatory authority) are
necessary in connection with the execution and delivery of this Agreement
by such party and the maintaining of a depository relationship.
4.4 This Agreement shall be construed in accordance with and governed by
the internal laws of the State of Delaware, without giving effect to the
principles of conflicts of laws thereof.
4.5 All notices, requests and other communications to any party hereunder
shall be in writing (including telecopy or similar writing) and shall be given,
if to Fidelity or MCC Merger, to:
Fidelity National Financial, Inc.
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxxxxx, Xxxxxxxxxx 00000
Telecopy: (000) 000-0000
Attn: Xxxxx X. Xxxxxx, President
with a copy to:
Xxxxxxxxx Xxxxx Xxxxxxx & Xxxxx
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000-0000
Telecopy: (000) 000-0000
Attn: C. Xxxxx Xxxxxxx, Esq.
if to Matrix, to:
Matrix Capital Corporation
0000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Telecopy: (000) 000-0000
Attn: Xxx X. Xxxxxx, President
with a copy to:
Jenkens & Xxxxxxxxx, P.C.
0000 Xxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Telecopy: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
4.6 All costs and expenses incurred in connection with this Agreement
shall be paid by the party incurring such cost or expense.
4.7 Any provision of this Agreement may be amended or waived if such
amendment or waiver is in writing and signed, in the case of an amendment by
Fidelity, MCC Merger and Matrix or in the case of a waiver, by the party against
whom the waiver is to be effective. No failure or delay by any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof of any other right,
power or privilege.
4.8 The provisions of this Agreement shall be binding and shall inure to
the benefit of the parties hereto and their respective successors and assigns.
Except as
expressly set forth herein nothing in this Agreement, express or implied, is
intended to or shall confer upon any person not a party hereto any right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement,
including to confer third party beneficiary rights.
4.9 If any term, provision, or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions and restrictions of the Agreement shall
remain in full force and effect and shall in no way be impaired or invalidated,
and the parties shall negotiate in good faith to modify this Agreement to
preserve each party's anticipated benefits under the Agreement.
4.10 This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instruments. The Agreement shall become effective
when each party hereto shall have received counterparts hereto signed by all of
the other parties hereto. The headings contained in this Agreement are for
reference purposes only and shall not in any way alter the meaning or
interpretation of this Agreement.
4.11 All disputes between the parties hereto relating to this Agreement
shall be determined solely and exclusively by arbitration in accordance with the
rules then in effect of the American Arbitration Association pertaining to
commercial arbitrations, or any successors thereto ("AAA") in Phoenix, Arizona,
unless the parties otherwise agree in writing. The parties shall jointly select
an arbitrator. In the event that the parties fail to agree upon an arbitrator
within ten (10) days, then each party shall select an arbitrator and such
arbitrators shall select a third arbitrator to serve as the sole arbitrator;
provided, that if either party, in such event, fails to select an arbitrator
within seven days, such arbitrator shall be selected by the AAA upon application
of either party. Judgment upon the award of the agreed upon arbitrator or the
so chosen third arbitrator, as the case may be, shall be binding on the parties
and shall be entered by any court of competent jurisdiction.
4.12 Each party shall treat this Agreement as confidential proprietary
information and shall not make this Agreement available to third parties or file
it separately or as part of any document that is or may be made available to the
public unless required by law, in which instance such party shall use its best
efforts to obtain confidential treatment for this Agreement.
4.13 This Agreement constitutes the entire agreement of the parties and
supersedes all prior agreements and understandings, written or oral between the
parties hereto with respect to the subject matter hereof.
The parties hereto have caused this Agreement to be duly executed by their
respective authorized officers as of the day and year first above written.
FIDELITY NATIONAL FINANCIAL, INC. MATRIX CAPITAL CORPORATION
By: /s/ By: /s/
---------------------------- ----------------------------
Name: Xxxxx X. Xxxxxx Name: Xxx X. Xxxxxx
Title: President Title: President
MCC MERGER, INC.
By: /s/
-------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
