ASSET PURCHASE AGREEMENT
BETWEEN
IMC MORTGAGE COMPANY
AND
EQUITY MORTGAGE CO., INC.
DATED AS OF JANUARY 1, 1997
TABLE OF CONTENTS
Page
INTRODUCTION
ARTICLE 1
CERTAIN DEFINITIONS
ARTICLE 2
PURCHASE AND SALE OF ASSETS
ARTICLE 3
PURCHASE PRICE - PAYMENT
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
ARTICLE 6
COVENANTS
ARTICLE 7
FURTHER COVENANTS OF SELLER
ARTICLE 8
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
ARTICLE 9
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
ARTICLE 10
CLOSING
ARTICLE 11
TERMINATION
ARTICLE 12
SELLER'S AND BUYER'S LICENSES
ARTICLE 13
INDEMNIFICATION
ARTICLE 14
POST-CLOSING COVENANTS
ARTICLE 15
AMENDMENTS
ARTICLE 16
MISCELLANEOUS
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (the "Agreement"), dated as of January 1, 1997,
is made by and between IMC MORTGAGE COMPANY, a Florida corporation ("Buyer"),
and EQUITY MORTGAGE CO., INC. ("Seller").
INTRODUCTION
A. Seller is engaged in the mortgage banking and brokerage business (the
"Business").
B. Buyer desires to purchase all of the Business and substantially
all of the operating assets of Seller (the "Acquisition").
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, agreements, representations and warranties herein contained, and
intending to be legally bound, the parties hereto do hereby agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
For the purpose of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires, (i) the terms defined in this
Article have the meanings assigned to them in this Article and include the
plural as well as the singular and (ii) all accounting terms not otherwise
defined herein have the meanings assigned under GAAP.
Acquisition -- As defined in the Introduction.
Affiliate -- With respect to any Person, any Person directly or
indirectly controlling, controlled by, or under common control with such other
Person. For purposes of this definition, "control" (including with correlative
meaning, the terms "controlled by" and "under common control with,") as used
with respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through ownership of voting securities, by contract or
otherwise.
Affiliated Group -- Any affiliated group within the meaning of Code
Section 1504 or any similar group defined under a similar provision of state,
local or foreign law, including any consolidated, unitary or combined group of
companies.
Agency -- FHA, VA, GNMA, FNMA, FHLMC or a State Agency, as applicable.
Agreement -- As defined in the Introduction.
Annual Financial Statements -- As defined in Section 4.7.
Balance Sheet -- The statement of financial condition forming a part of
the Interim Financial Statements.
Business -- As defined in the Introduction, and includes Seller's
Conforming Business and Non-Conforming Business.
Business Pipeline -- All Conforming Mortgage Loans and Non-Conforming
Mortgage Loans of Seller in the process of being processed and/or closed by
Seller (i.e. for which credit approval has already been obtained) which have
arisen in the ordinary course of Seller's business, consistent with Seller's
past practices, as shown on Seller's regularly prepared reports.
Buyer -- As defined in the Introduction.
Closing -- The closing with respect to the Acquisition as defined in the
preamble to Article 10.
Closing Balance Sheet -- The balance sheet of Seller as of December 31,
1996.
Closing Date -- The date and time of Closing as defined in the preamble
to Article 10.
Closing Net Worth -- As defined in Section 3.1.
Closing Date Adjustment -- The amount of the profits or loss of Seller
(other than profits or losses from Excluded Assets) from the Effective Time
through the Closing Date which have not been previously adjusted by the parties.
Code -- The Internal Revenue Code of 1986, as amended.
Conforming Business -- The Conforming Mortgage Loan origination and
brokerage business conducted by Seller.
Conforming Mortgage Loan -- A Mortgage Loan which is an FHA Loan, a VA
Loan or a loan eligible to be sold to FNMA or FHLMC.
Conventional Loan -- Any Mortgage Loan which (a) is a first lien on a
"single family" residence, (b) is neither insured by FHA nor guaranteed by VA,
(c) has a loan-to-value ratio of 95%
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or less at the time of origination, (d) matures in 30 years or less, (e) bears a
market yield at the time of origination, and (f) satisfies all requirements for
sale to FNMA and FHLMC.
Effective Time or Effective Date -- January 1, 1997 at 12:01 a.m.
Employment Agreement -- As defined in Section 9.4.
Encumbrance -- Any lien, pledge, security interest, claim, charge,
easement, restriction or encumbrance of any kind or nature whatsoever.
ERISA -- As defined in Section 4.13(b).
Environmental Claim -- Civil, criminal, administrative action, claim or
other proceeding relating to Environmental Laws.
Environmental Laws -- As defined in Section 4.15.
Excluded Assets -- As defined in Section 2.2.
FHA -- Federal Housing Administration.
FHA Loans -- Mortgage Loans which are insured by FHA.
FHLMC -- Federal Home Loan Mortgage Corporation.
Financial Statements -- As defined in Section 4.7.
FNMA -- Federal National Mortgage Association.
GAAP - - Generally accepted accounting principles and practices as used
in the United States of America.
GNMA -- Government National Mortgage Association.
GNMA Securities -- GNMA mortgage-backed certificates.
HUD -- United States Department of Housing and Urban Development.
Independent Accounting Firm -- Any "Big Six" accounting firm or its
successor.
Inquiry -- As defined in Section 4.29.
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Interim Financial Statements -- As defined in Section 4.7.
Investor -- Any Person who owns or holds Mortgage Loans, or servicing
rights to Mortgage Loans, pursuant to Mortgage Servicing Agreements or who has
agreed to purchase Mortgage Loans pursuant to an Investor Commitment.
Investor Commitment -- The commitment of a Person to purchase a Mortgage
Loan.
Investor Programs -- Mortgage participation, whole-loan sales, pooling
and servicing programs.
IRS -- Internal Revenue Service.
Lease Agreements -- As defined in Section 6.5.
Liability -- As defined in Section 2.3(a).
Licenses -- As defined in Section 4.18.
Loan Property -- Any property in which Seller holds a mortgage lien or
security interest.
Loss -- Any claim, liability, loss, cost, environmental clean up cost or
reimbursement, damage, penalty, fine, obligation, deficiency or expense of any
kind whatsoever (including, without limitation, reasonable attorneys',
accountants', consultants' or experts' fees, and disbursements including but not
limited to court costs and reasonable costs of investigation incurred in
defending against or settling any such claim, liability, loss, cost, damage or
expense, or any reasonable amounts paid in connection with the investigation,
defense or settlement thereof, whether or not arising out of third party claims
and including costs and expenses incurred on appeal or in connection with any
bankruptcy or insolvency proceeding).
Material Adverse Effect -- Adverse effect which is material in nature on
the business, condition (financial or otherwise), results of operations,
properties, assets or prospects of a Person.
Mortgage Loan -- Any closed mortgage loan (including Warehouse Loans)
whether or not such mortgage is included in a securitized portfolio, as
evidenced by notes or other evidences of indebtedness duly secured by mortgages
or deeds of trust.
Non-Conforming Business -- The Non-Conforming Mortgage Loan origination
and brokerage business conducted by Seller.
Non-Conforming Mortgage Loan -- A Mortgage Loan which does not satisfy
the requirements for being an FHA Loan, VA Loan or Conventional Loan.
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Operating Property -- As defined in Section 4.15.
Person -- Any individual, corporation, company, partnership (limited or
general), joint venture, association, limited liability company, trust or other
entity, including governmental and quasi-governmental bodies.
Plans -- As defined in Section 4.13(a).
Pooling -- Aggregation of two or more Mortgage Loans that have been
pledged or granted to secure mortgage-backed securities or participation
certificates.
Purchased Assets -- As defined in Section 2.1.
Purchase Price -- As defined in Section 3.1.
Regulations -- (i) Federal, state and local laws, rules and regulations,
(ii) the responsibilities and obligations set forth in any agreement between
Seller and an Investor or private mortgage insurer and (iii) the laws, rules,
regulations, guidelines, handbooks and other requirements of an Investor,
Agency, private mortgage insurer, Public Housing Programs or Investor Programs,
with respect to the origination, insuring, purchase, sale, or filing of claims
in connection with a Mortgage Loan.
Schedule -- The disclosure schedules delivered by Sellers to Buyer in
connection with the Acquisition.
Seller -- As defined in the Introduction.
Servicing Released Loans -- As defined in Section 4.22.
Single Employer Plan -- Any employee pension benefit plan (as that term
is defined in Section 3(2) of ERISA) maintained or contributed to by any entity
which would be deemed a "single employer" with Seller under Section 4001 of
ERISA.
State Agency -- Any state agency with authority to regulate the business
of Seller, determine the investment requirements with regard to loans originated
or purchased by Seller or otherwise participate in or promote mortgage lending.
Subsidiary -- A company is a Subsidiary of another company if 50% or
more of its outstanding voting securities is owned by such other company.
Taxes -- As defined in Section 4.12(d).
Tax Return -- As defined in Section 4.12(e).
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VA -- Veterans Administration.
VA Loans -- Mortgage Loans which are guaranteed by VA.
Warehouse Loans -- Mortgage Loans held by Seller for sale and pledged to
secure borrowings by Seller.
ARTICLE 2
PURCHASE AND SALE OF ASSETS
2.1 Assets to be Transferred
Subject to the terms and conditions of this Agreement, on the Closing
Date (as hereinafter defined) Seller shall sell, transfer, convey, assign and
deliver to Buyer (or upon Buyer's request, to one or more wholly-owned
subsidiaries of Buyer as designated by Buyer), and Buyer shall purchase and
accept all of the business, rights, claims and assets (of every kind, nature,
character and description, whether real, personal or mixed, whether tangible or
intangible, whether accrued, contingent or otherwise, and wherever situated) of
Seller, together with all rights and privileges associated with such assets and
with the business of Seller, other than the Excluded Assets (as hereinafter
defined) (collectively, the "Purchased Assets"). The Purchased Assets shall
include, but not be limited to, the following:
(a) Leased Real Property. All of the leases of real property with
respect to real property leased by Seller, including the leases (the "Real
Property Leases") described in Schedule 2.1(a) with respect to the real property
described thereon (the "Leased Real Property").
(b) Personal Property. All machinery, equipment, tools, supplies,
spare parts, furniture and all other personal property (other than personal
property leased pursuant to Personal Property Leases as hereinafter defined)
owned, utilized or held for use by Seller on the Closing Date, including,
without limitation, the personal property described on Schedule 2.1(b).
(c) Mortgage Loan Inventory. All of Seller's Mortgage Loans and
Warehouse Loans (including loans which have closed but not funded), other than
the Mortgage Loans and Warehouse Loans (i) reflected on the Closing Balance
Sheet and (ii) funded prior to 1/1/97 even if not on the Closing Balance Sheet
(collectively the "Excluded Mortgages"). Mortgage Loans and Warehouse Loans
which were funded on or after 1/1/97 shall be the property of Buyer (some of
which already have been sold by Seller) and shall be properly adjusted between
the parties.
(d) Personal Property Leases. All of Seller's rights and
interests as lessee under all leases of machinery, equipment, vehicles,
furniture and other personal property leased by Seller, including all such
leases (the "Personal Property Leases") described in Schedule 2.1(d).
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(e) Trade Rights. All of Seller's interest in any Trade Rights.
As used herein, the term "Trade Rights" shall mean and include: (i) all
trademark rights, business identifiers, trade dress, service marks, trade names,
and brand names, all registrations thereof and applications therefor and all
goodwill associated with the foregoing, including Seller's name; (ii) all
copyrights, copyright registrations and copyright applications, and all other
rights associated with the foregoing and the underlying works of ownership;
(iii) all patents and patent applications and all international proprietary
rights associated therewith; (iv) all contracts or agreements granting any
right, title, license or privilege under the intellectual property rights of any
third party; (v) all inventions, mask works and mask work registrations,
know-how, discoveries, improvements, designs, trade secrets, shop and royalty
rights, employee covenants and agreements respecting intellectual property and
non-competition and all other types of intellectual property; and (vi) all
claims for infringement or breach of any of the foregoing.
(f) Contracts. All of Seller's rights in, to and under all
contracts, Mortgage Commitments, Investor Commitments, Investor Programs and
pending mortgage applications (hereinafter "Contracts") of Seller. To the extent
that any Contract for which assignment to Buyer is provided herein is not
assignable without the consent of another party, this Agreement shall not
constitute an assignment or an attempted assignment thereof if such assignment
or attempted assignment would constitute a breach thereof.
(g) Computer Software. All computer source codes, programs and
other software of Seller, including all machine readable code, printed listings
of code, documentation and related property and information of Seller.
(h) Literature. All sales literature, promotional literature,
catalogs and similar materials of Seller.
(i) Records and Files. All records, files, invoices, customer
lists, blueprints, specifications, designs, drawings, accounting records,
business records, operating data and other data of Seller, provided that Seller
shall have reasonable access, and the right to copy, such records for tax and
other bona fide purposes at all reasonable times.
(j) Notes and Accounts Receivable. All notes, drafts and accounts
receivable of Seller relating to the Mortgage Loans and Warehouse Loans other
than those (i) reflected on the Closing Balance Sheet and (ii) funded prior to
1/1/97, even if not on the Closing Balance Sheet (collectively, the "Excluded
Accounts"). Such items funded on or after 1/1/97 shall be the property of the
Buyer (some of which have already been sold by Seller) and shall be properly
adjusted between the parties.
(k) Licenses; Permits. All licenses, permits and approvals of
Seller, to the extent transferable, including, without limitation, the licenses
set forth on Schedule 2.1(k).
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(l) Corporate Name. The name "Equity Mortgage" and all rights to
use or allow others to use such name and the related goodwill.
(m) General Intangibles. All prepaid items, all causes of action
arising out of occurrences before or after the Closing (other than those related
to Excluded Assets), and other intangible rights and assets.
(n) Trade Secrets. All know-how, research data, business methods
and trade secrets.
2.2 Excluded Assets
There are no Excluded Assets other than (i) the Excluded Mortgages and
the Excluded Accounts, (ii) cash and cash equivalents and the $50,000 due from
officer's, reflected on the Closing Balance Sheet and (iii) minor items of
tangible personal property listed on Schedule 2.2 and the vehicle driven by Xxxx
Xxxxxxxxx.
2.3 Assumption of Liabilities
(a) Liabilities to be Assumed. As used in this Agreement, the
term "Liability" shall mean and include any direct or indirect indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost, expense,
obligation or responsibility, fixed or unfixed, known or unknown, asserted or
unasserted, liquidated or unliquidated, secured or unsecured. Subject to the
terms and conditions of this Agreement on the Closing Date, Buyer shall assume
and agree to perform and discharge, (and shall indemnify and hold Seller
harmless from) the following, and only the following Liabilities of Seller
(collectively the "Assumed Liabilities"):
(i) The accounts payable reflected on the Closing Balance
Sheet and (ii) the expenses and Liabilities relating to Buyer's
operation of the Purchased Assets which accrue following the Effective
Time, including costs and expenses arising after the Effective Time
(including, but not limited to, regulatory audit fees until Buyer
terminates the temporary management agreement with Seller, if any, under
Section 12.1 hereof) related to Mortgage Loans which have not closed at
the Effective Time or to Mortgage Loans and Warehouse Loans which have
closed, but not funded at the Effective Time.
(ii) Seller's Liabilities arising from and after the
Effective Time under and pursuant to the contracts listed in Schedule
2.3. The Contracts described in subsection 2.3(a)(ii) above are
hereinafter collectively described as the "Assumed Contracts."
(b) Liabilities Not to be Assumed. Except as and to the extent
specifically set forth in Section 2.3(a), Buyer is not assuming any Liabilities
of Seller and all such Liabilities shall be
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and remain the responsibility of Seller. Notwithstanding the provisions of
Section 2.3(a), Buyer is not agreeing to perform and discharge and Seller shall
not be deemed to have transferred to Buyer the following Liabilities of Seller
(which list of specific liabilities shall not be deemed to suggest that
liabilities not listed are being assumed):
(i) Certain Contracts. The Liabilities of Seller under and
pursuant to any contracts with Investors for refunds or guarantees
related to Mortgage Loans (other than with respect to Mortgage Loans
funded on or after 1/1/97) including prepayment refund obligations and
refunds to Investors upon default by borrower or prepayment.
(ii) Taxes Arising from Transaction. Any taxes applicable
to, imposed upon or arising out of the sale or transfer of the Purchased
Assets to Buyer and the other transactions contemplated by this
Agreement, including but not limited to any income, transfer, sales,
use, gross receipts or documentary stamp taxes, provided however, Buyer
and Seller shall each pay 1/2 of the sales tax applicable to the Closing
of this transaction.
(iii) Income and Franchise Taxes. Any Liability of Seller
for Federal income taxes and any state or local income, profit or
franchise taxes (and any penalties or interest due on account therefor).
(iv) Insured Claims. Any Liability of Seller insured
against, to the extent such Liability is or will be paid by an insurer.
(v) Litigation Matters. Any Liability with respect to any
action, suit, proceeding, arbitration, investigation or inquiry, whether
civil, criminal or administrative ("Litigation"), whether or not
described in Schedule 4.10.
(vi) Infringements. Any Liability to a third party for
infringement of such third party's Trade Rights.
(vii) Transaction Expenses. All Liabilities incurred by
Seller in connection with this Agreement and the transactions
contemplated therein.
(viii) Liability for Breach. Liabilities of Seller for any
breach or failure to perform any of Seller's covenants and agreements
contained in, or made pursuant to, this Agreement, or, prior to the
Closing, any other contract, whether or not assumed hereunder, including
breach arising from assignment of contracts hereunder without consent of
third parties provided, however, Buyer shall assume the obligations of
Seller, and hold Seller harmless in respect of obligation's (other than
for Seller's breach) under the Assumed Contracts that accrue after the
Effective Date.
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(ix) Liabilities of Affiliates. Liabilities of Seller to
its present or former Affiliates.
(x) Pre-Effective Date Operating Expenses. Seller's
operating expenses (including, without limitation, payroll, rent and
utilities) incurred before, or relating to the period prior to, the
Effective Date that are not reflected on the Closing Balance Sheet.
(xi) Excluded Assets. Any Liabilities of Seller relating
to the Excluded Assets.
ARTICLE 3
PURCHASE PRICE
3.1 Purchase Price
The purchase price (the "Purchase Price") for the Purchased Assets shall
be equal to the sum of the following: (i) the total stockholder's equity of the
Seller as of the Effective Time, as shown on the Seller's regularly prepared
accrual basis balance sheet to be prepared by Seller's certified public
accountants consistent with prior periods, with appropriate adjustment (i.e.
reduction), on a book value basis, for any Excluded Assets and plus Liabilities
associated with Excluded Assets which were included in arriving at stockholder's
equity ("Closing Net Worth"), plus (ii) the sum of $150,000, being the
agreed-upon goodwill value associated with Seller's Business plus (iii) the
amount of liabilities included in Closing Net Worth.
(a) The Purchase Price for the Purchased Assets has been
estimated by the parties based on the draft balance sheet prepared by
Seller's certified public accountants consistent with prior periods (the
parties acknowledging that such balance sheet, a copy of which is
attached as Schedule 3.1, shows as of the Effective Time, the total
stockholder's equity was $871,672). At Closing the Buyer shall assume
all of the liabilities included in the Closing Net Worth and shall
promptly make payment of same or deliver sufficient monies to Seller in
order for Seller to promptly make payment of same (it being acknowledged
that Seller may already have paid certain of such liabilities in
Seller's ordinary course of business, in which event Buyer shall make
appropriate adjustment and payment to Seller with respect to same).
Based on the foregoing, the parties agree to allocate the Purchase Price
among the Purchased Assets based on their respective book values as
reflected on the Closing Balance Sheet, with an additional allocation of
the sum of $150,000 for Seller's goodwill.
In accordance with the foregoing, and with reference to the Closing
Balance Sheet, the Closing Net Worth has been estimated by the parties as
follows based on the draft balance sheet prepared by Seller's accountant:
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CATEGORY AMOUNT/STATUS
-------- -------------
Cash Excluded Asset
Interest Receivable Excluded Asset
Prepaid Expenses $38,655
Settlement Funds Advanced Excluded Asset
Due from Employees $3,279
Due from Officers Excluded Asset
Property and Equipment - Net $53,898
Deposits $28,552
Total Assets $124,384
Accounts Payable $127,162
Accrued Expenses Excluded Asset
Short Term Borrowings Excluded Asset
Total Liabilities $127,162
CLOSING NET WORTH $(2,778)
The Estimated Payment described below has been computed as follows:
$(2,778) + $150,000= $147,222. In addition, at Closing, Buyer shall assume the
accounts payable (as set forth above in the amount of $127,162 for a total
estimated Purchase Price of $274,384), and shall make an initial operating
adjustment with respect to Mortgage Loans as described in Section 3.2(c) below.
3.2 Payment of Purchase Price
The Purchase Price shall be paid by Buyer to Seller as follows:
(a) Assumption of Liabilities. At the Closing, Buyer shall assume
the Liabilities included in Closing Net Worth.
(b) Payment. At the Closing, Buyer shall deliver immediate
available funds equal to the amount of the Estimated Payment.
(c) Partial Payment on Operating Adjustment. In addition to the
Estimated Payment, at Closing Buyer shall pay to Seller (by way of payment
against Seller's warehouse loan and/or credit line loan) a reasonable estimate
of the monies advanced by Seller following the Effective Time with respect to
all Mortgage Loans funded by Seller following the Effective Time and which
remain in Seller's portfolio of Mortgage Loans at the time of Closing (all such
Mortgage Loans to be and become Buyer's Mortgage Loans based upon the adjustment
provisions of this Agreement).
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(d) Final Determination of Payment.
(i) Within 45 days after the Closing Date, Seller shall
deliver to Buyer balance sheets and profit and loss statements of
Seller for the year ending December 31, 1996, and for the period
from the Effective Time through the Closing Date, (the "Stub
Period"), prepared from the books and record of Seller, on a
basis consistent with the GAAP theretofore followed by Seller and
fairly presenting the financial position of Seller as of December
31, 1996, and as of the Closing Date, and Seller's financial
performance during the past year, and during the Stub Period,
accompanied by detailed schedules of the Purchased Assets,
Excluded Assets and Assumed Liabilities and Seller's Business
Pipeline and by (x) Seller's determination of the Closing Date
Adjustment and (y) with respect to the 12/31/96 financial
statements, a report of Seller's Accountants (1) setting forth
the amount of the Purchase Price (as defined above) reflected in
the financial statements, (2) stating that (a) the compilation of
the balance sheet and financial statements has been made in
accordance with statements on standards applicable for accounting
and review services and (b) the balance sheets and financial
statements have been compiled in accordance with such statements
and (3) setting forth the amount of such accountants
determination of the Purchase Price. Seller shall also certify to
Buyer that the financial statements and schedules are accurate
and correct and prepared in accordance with GAAP.
(ii) Within 30 days following the delivery of the
financial statements and schedules, Buyer or its independent
accountants ("Buyer's Accountants") may object to any of the
information contained in said financial statements or
accompanying schedules which could affect the necessity or amount
of any payment by Buyer or Seller pursuant to Section 3.2(e)
hereof. Any such objection shall be made in writing and shall
state Buyer's determination of the amount of the Purchase Price
and Closing Date Adjustment.
(iii) In the event of a dispute or disagreement relating
to the Closing Date Adjustment or the financial statements or
schedules which Buyer and Seller are unable to resolve, either
party may elect to have all such disputes or disagreements
resolved by an Independent Accounting Firm (the "Third Accounting
Firm") to be mutually selected by Seller and Buyer or, if no
agreement is reached, by Seller's Accountants and Buyer's
Accountants. The Third Accounting Firm shall make a resolution of
the Closing Date Adjustment or the financial statements of Seller
as of the Effective Time and the calculation of the Purchase
Price and Closing Date Adjustment, which shall be final and
binding for purposes of this Article 3. The Third Accounting Firm
shall be instructed to use every reasonable effort to perform its
services within 15 days of submission of the financial statement
and schedules to it and, in any case, as soon as
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practicable after such admission. The fees and expenses for the
services of the Third Accounting Firm shall be shared equally by
Buyer and Seller.
(iv) The parties and their respective representatives,
shall be granted access during normal business hours, to examine
and make copies of, all books and records of Seller, including
but not limited to the books, records, schedules, work papers and
audit programs of Seller and Seller's Accountants and access to
representatives of Seller's Accountants, which documents and
access are necessary to review the financial statement and
schedules delivered by Buyer in accordance herewith. In addition,
Buyer's Accountants shall have the opportunity to observe the
taking of the inventory in connection with the preparation of
such balance sheet and schedule of loans in process. Seller
similarly agrees to permit Buyer's Accountants and their
respective representatives, during normal business hours, to have
reasonable access to any books and records of Seller which do not
constitute Purchased Assets, in order to enable them to prepare
such balance sheet.
(e) Final Payment Adjustment. Once the Purchase Price and Closing
Date Adjustment is finally determined pursuant to this Section 3.2, Buyer or
Seller, as the case may be, shall pay the amount due the other within three
business days.
3.3 Prorations.
The cost of all rent (including base rent, common area charges and all
other pass-throughs and sums due landlords), utilities, leases and equipment
maintenance agreements and all other on-going business expenses directly related
to the day-to-day operation of the Business shall be adjusted and apportioned to
the Effective Date. With respect to Seller's employees employed by Buyer,
accrued sick pay, vacation pay and employee wages and benefits, such wages and
benefits shall be pro-rated between Buyer and Seller based upon the number of
days in the applicable period(s) before and after the Effective Date. There
shall be an adjustment (to be pro-rated based upon the number of days elapsed)
for any tangible personal property taxes paid (or to be paid in connection with
the Purchased Assets being sold. Sales tax in respect of this transaction shall
be shared equally by the parties. In the event that there are any errors in
adjustments or inaccurate estimates, the parties agree to correct the same
promptly after Closing upon the discovery of the correct information.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller makes the following representations and warranties to Buyer, each
of which is true and correct in all material respects on the date hereof, shall
be unaffected by any investigations heretofore or hereafter made by Buyer, or
any knowledge of Buyer other than as specifically disclosed in the
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Disclosure Schedule delivered to Buyer at the time of execution of this
Agreement, and liability in respect thereof shall survive the Closing of the
transactions provided for herein:
4.1 Organization
(a) Seller is a corporation duly organized, validly existing and
in good standing under the laws of the State of Maryland with full corporate
power and authority to carry on its business as now conducted, to own the
properties and assets that it now owns, and to lease the properties and assets
that it now leases, and, to the best of Seller's knowledge, is duly licensed and
qualified to do business and is in good standing in each state or jurisdiction
where its ownership or leasing of property or assets or the conduct of its
business requires such licensing or qualification.
(b) Seller has heretofore delivered to Buyer accurate and
complete copies of the articles of incorporation, as amended, and by-laws of
Seller, as in effect on the date thereof. Such articles and by-laws are in full
force and effect, and have not been subsequently amended, and Seller is not in
violation of any of the provisions thereof.
4.2 Intentionally Omitted.
4.3 Subsidiaries of the Seller; Nature of Business
Seller does not own any equity interest, directly or indirectly, in any
Subsidiary, except as set forth in Section 4.3 of the Schedule.
4.4 Authority; No Violation
(a) Seller has full power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed by Seller and, assuming this
Agreement constitutes a valid and binding obligation of Buyer, constitutes a
valid and binding obligation of Seller enforceable against Seller in accordance
with its terms (subject to applicable bankruptcy insolvency and similar laws
affecting creditors' rights generally and to general principles of equity).
(b) To the best of Seller's knowledge, neither the execution and
delivery of this Agreement by Seller nor the consummation by Seller of the
transactions contemplated hereby (assuming Buyer has obtained all necessary
licenses, permits and approvals), nor compliance by Seller with any of the terms
or provisions hereof, will (i) conflict with or result in a breach of any
provision of the articles of incorporation, as amended, or by-laws of Seller,
(ii) violate any statute, code, ordinance, rule, Regulation, judgment, order,
writ, decree or injunction applicable to Seller or any of its properties or
assets, or (iii) violate, conflict with, result in a breach of any provisions
of, constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of,
accelerate the performance required by, or result in a right
14
of termination or acceleration or the creation of any Encumbrance upon any of
the respective properties or assets of Seller under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed or trust,
license, lease, agreement or other instrument, or obligation to which Seller is
a party, or by which Seller or any of its properties or assets may be bound or
affected, except for such violations, conflicts, breaches or defaults which,
individually or in the aggregate, would not have a Material Adverse Effect on
Buyer or Seller. This Section 4.4(b) is qualified by, and subject to the last
sentence of Section 5.2(b).
4.5 Consents and Approvals
To the best of Seller's knowledge, except as set forth in Section 4.5 of
the Schedule, no consents, permits, authorizations or approvals of, or filings
or registrations with, any governmental or regulatory authorities, government
sponsored agencies or corporations or other third parties are necessary to be
obtained or made by Seller in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
4.6 Title to Purchased Assets
Seller has good and marketable title to the Purchased Assets, free and
clear of all Encumbrances, contracts, rights, options and assignments whatsoever
(except pursuant to this Agreement). The documents selling, assigning, conveying
and otherwise transferring from Seller to Buyer the Purchased Assets will grant
and transfer to Buyer good and marketable title to the Purchased Assets, free
and clear of all Encumbrances, contracts, rights, options and assignments
whatsoever, except those created by Buyer and Encumbrances securing the Assumed
Liabilities.
4.7 Financial Statements
Seller has previously delivered to Buyer copies of (i) the financial
statements of Seller (either audited or unaudited, as applicable) for each of
the years in the three-year period ended December 31, 1995 (the "Annual
Financial Statements"), together with reports on all such financial statements
by Seller's independent accountants, and (ii) the unaudited interim financial
statements of Seller dated October 31, 1996 (the "Interim Financial Statements")
(the Annual Financial Statements and the Interim Financial Statements are
collectively referred to herein as the "Financial Statements"). The Annual
Financial Statements (i) to the best of Seller's knowledge, have been prepared
in accordance with GAAP applied on a consistent basis throughout the periods
covered by such statements and (ii) fairly present the financial position of
Seller as of the respective dates thereof, the results of its operations and the
changes in its financial position for the respective periods covered thereby.
The
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Interim Financial Statements have been prepared from the books and records of
Seller and, to the best knowledge of Seller, are in accordance with the
requirements of GAAP.
4.8 Undisclosed Liabilities
To the best of Seller's knowledge, Seller does not have any liabilities
or obligations of any nature, whether accrued, absolute, contingent or
otherwise, asserted or unasserted, known or unknown, whether or not required to
be shown on a balance sheet prepared in accordance with GAAP (collectively,
"Liabilities"), except for (i) liabilities and obligations stated or adequately
reserved against on the Balance Sheet dated October 31, 1996, and (ii)
obligations to close Non-Conforming Mortgage Loans and Conforming Mortgage
Loans for which commitments already have been made and (iii) liabilities
incurred in the ordinary cause of business.
4.9 No Material Adverse Change
Since October 31, 1996, Seller has not suffered any Material Adverse
Effect nor taken any of the actions specified in Section 4.37(a) - (r) except
that Seller has reversed into income during 1996 the $57,889 of advances payable
reflected on the 12/31/95 balance sheet.
4.10 Legal Proceedings
To the best of Seller's knowledge, except as described in Schedule 4.10,
neither Seller nor any of Seller's directors or officers is party to any and
there are no legal, administrative, arbitral or other proceedings, claims,
actions or governmental investigations of any nature pending, threatened,
against or affecting Seller or any of its respective assets or business or
challenging the validity or propriety of the transactions contemplated by this
Agreement. Seller is not subject to any order, judgment, injunction, rule or
decree which would affect the transaction contemplated hereunder.
4.11 Material Contracts
Section 4.11 of the Schedule is a complete and accurate list of the
following contracts, agreements, and other written or oral arrangements (or
group of related written or oral arrangements) (hereinafter collectively
referred to as "arrangements"), to which Seller is a party on the date hereof:
(a) any arrangement with any employee, agent or independent
contractors involved in the origination of mortgage loans for Seller;
(b) any arrangement (including the lease of real or personal
property from or to third parties) providing for lease payments in excess of
$5,000 per annum or in excess of $10,000 for the remaining term of the
arrangement;
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(c) any arrangement in which Seller is knowingly participating as
a general partner or joint venturer;
(d) any arrangement which shall survive the Closing (other than
recourse servicing) under which Seller has created, incurred, assumed, or
guaranteed (or may create, incur, assume, or guarantee) indebtedness for
borrowed money (including capitalized lease obligations) involving more than
$5,000;
(e) any arrangement concerning confidentiality or noncompetition;
(f) any arrangement between Seller or any of its Affiliates;
(g) any arrangement pursuant to which Seller has promised to pay,
or loan any amount to, or sold, transferred or leased any property or assets to
or from, any Person in their capacity as an officer, director or other employee
of Seller; or
(h) any arrangement requiring Seller to pay severance or similar
payments as a result of the transactions contemplated hereby;
Seller has delivered to Buyer (and/or Buyer has had an opportunity to
review) a correct and complete copy of each written arrangement listed in
Section 4.11 of the Schedule. With respect to each arrangement so listed, to the
best of Seller's knowledge: (A) the arrangement is in full force and effect
(unless otherwise noted on Schedule 4.11); (B) Seller is not in breach or
default, and no event has occurred which with notice or lapse of time or both
would constitute a breach or default by Seller, or permit termination,
modification, or acceleration against Seller under the arrangement applicable to
it; (C) Seller has not repudiated or waived any material provision of any such
arrangement; (D) no other party to any such arrangement is in default in any
respect thereunder; and (E) no consent is required under any arrangement for
Seller to enter into and perform this Agreement and the transactions
contemplated herein. With respect to any lease disclosed pursuant to this
Section 4.11, all rents and other amounts currently due thereunder have been
paid; no waiver or indulgence or postponement of any obligation thereunder has
been granted by any lessor or sublessor; and Seller has not received any notice
that it has breached any term, condition or covenant.
4.12 Taxes
(a) Seller has (i) duly filed (or there has been duly filed on
its behalf) with the appropriate federal, state, local and foreign taxing
authorities all Tax Returns required to be filed by or with respect to Seller,
and such Tax Returns are true, correct and complete in all material respects,
and (ii) paid in full on a timely basis (or there has been paid on its behalf)
all Taxes shown to be due on such Tax Returns. The provision for current Taxes
on each of the Financial Statements and the Closing Balance Sheet is or will be
adequate for the payment of all accrued but unpaid Taxes through the date
thereof. Seller shall pay all of its Taxes as and when the same are due.
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(b) Neither Seller nor any Affiliate thereof has received any
notice of a deficiency or assessment with respect to taxes of Seller from any
federal, state, local or foreign taxing authority which has not been fully paid
or finally settled; there are no ongoing audits or examinations of any Tax
Return which includes Seller and no notice of audit or examination of any such
Tax Return has been received; Seller has not given and there has not been given
on its behalf a waiver or extension of any statute of limitations relating to
the payment of Taxes; and no issue has been raised in writing on audit or in any
other proceeding with respect to Taxes of Seller by any federal, state, local or
foreign taxing authority which, if resolved against Seller, would have a
Material Adverse Effect on Seller.
(c) Intentionally Omitted.
(d) For purposes of this Agreement "Taxes" shall mean all taxes,
charges, fees, levies, penalties or other assessments imposed by any United
States federal, state, local or foreign taxing authority, including, but not
limited to, income, excise, property, sales, transfer, franchise, payroll,
gains, withholding, ad valorem, social security or other taxes, including any
interest, penalties or additions attributable to Taxes.
(e) For purposes of this Agreement, "Tax Return" shall mean any
return, report or information return required to be filed with any taxing
authority with respect to Taxes.
(f) After the Closing, Seller shall bear responsibility for and
pay the reasonable costs and expenses relating to the preparation of any Tax
Return relating to any period prior to Closing.
4.13 ERISA
(a) Section 4.13(a) of the Schedule contains a true and complete
list of each employee benefit, compensation or welfare benefit plan, program or
agreement maintained or contributed to or required to be contributed to by
Seller (the "Plans"). Seller has no formal plan or commitment, whether legally
binding or not, to create any additional Plan or modify or change any existing
Plan that would affect any employee or terminated employee of Seller.
(b) With respect to each of the Plans, Seller has heretofore
delivered to Buyer true and complete copies of each of the following documents:
(i) each Plan and related trust, if any, (including all amendments thereto);
(ii) annual report and actuarial report, if required to be filed under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), for the
last two (2) years and the latest financial statement, if any, for each such
Plan; (iii) the most recent summary plan description, together with each summary
of material modifications, required under ERISA; and (iv) the most recent
determination letter received from the IRS with respect to each Plan that is
intended to be qualified under Section 401 of the Code and which requires a
determination of qualification from the IRS.
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(c) All required contributions have been, or will be, made with
respect to each Plan on or prior to the Closing Date or will be properly
recorded on the Closing Balance Sheet as a liability of Seller.
(d) To the best of Seller's knowledge, each of the Plans has been
operated and administered in all material respects in accordance with applicable
laws, including, but not limited to, ERISA and the Code and each of the Plans
that is intended to be "qualified" within the meaning of Section 401(a) of the
Code is so qualified.
(e) Except as set forth in Section 4.13(e) of the Schedule, to
the best of Seller's knowledge, no Plan provides benefits, including, without
limitation, death or medical benefits (whether or not insured), with respect to
current or former employees beyond their retirement or other termination of
service (other than (A) coverage mandated by applicable law, (B) death benefits
or retirement benefits under any "employee pension plan," as that term is
defined in Section 3(2) of ERISA, (C) deferred compensation benefits accrued as
liabilities on the books of Seller or (D) benefits the full cost of which is
borne by the current or former employee (or his beneficiary)).
(f) There are no pending, threatened or anticipated claims (other
than routine claims for benefits) by, on behalf of or against any of the Plans
or any trusts related thereto.
(g) To the best of Seller's knowledge, the consummation of the
transactions contemplated by this Agreement will not (either alone or upon the
occurrence of any additional acts or events) (A) entitle any current or former
employee of Seller to severance pay, employment compensation or any other
payment, benefit or award or (B) accelerate or modify the time of payment or
vesting, or increase the amount of any benefit, award or compensation due any
such employee.
4.14 Ownership of Property
Seller has good and valid title to all Purchased Assets and properties,
whether real or personal, tangible or intangible, and all other assets and
properties reflected in its balance sheet as of October 31, 1996, or acquired
subsequent thereto, subject to no Encumbrances, except (i) those items that
secure liabilities that are reflected in said balance sheet or the notes thereto
or incurred in the ordinary course of business after the date of such balance
sheet, (ii) statutory liens for amounts not yet delinquent or which are being
contested in good faith, (iii) liens and encumbrances on, and rights of
redemptions with respect to, foreclosed real estate, and (iv) such Encumbrances
that do not in the aggregate materially detract from the value or interfere with
the use or operations of the assets and properties subject thereto. Seller as
lessee has the right under valid leases to occupy, use, possess and control all
property leased by Seller, as presently occupied, used, possessed and controlled
by Seller. To the best of Seller's knowledge, the properties and assets owned or
leased by Seller are adequate for the conduct of the current business of Seller.
Giving effect to the transactions contemplated by this Agreement, to the best of
Seller's knowledge, Buyer shall have all assets, personnel and property
necessary and proper to conduct Seller's business consistent with historical
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practice, subject to Buyer securing appropriate licenses and regulatory
approvals to the extent necessary.
4.15 Environmental Protection
Seller has not actually received from any source with respect to any
property ("Operating Property") that it owns (including as a trustee), leases,
or actively participates in the management of, any Environmental Claim to the
effect that Seller, or any Operating Property or Loan Property, or any
predecessor is not in compliance with all environmental or health laws, rules,
Regulations, standards and requirements relating to pollution (including the
discharge of materials into the environment or indoors) or protection of the
environment, including common law ("Environmental Laws"), nor any requests for
information which could result in or help provide a basis for any Environmental
Claim, nor, to the best of Seller's knowledge, are there any facts which could
reasonably be expected to form the basis of an Environmental Claim against
Seller.
4.16 Brokers and Finders
Neither Seller, nor any of Seller's officers, directors, employees or
agents has employed any broker, finder or financial advisor or incurred any
liability for any fees or commissions in connection with the transactions
contemplated hereby, except for legal, accounting and other professional fees
payable by Seller in connection with the Acquisition. Seller shall cause all
legal, accounting and other professional fees and expenses of Seller related to
this transaction to be paid by Seller.
4.17 Insurance
To the best of Seller's knowledge, Seller is insured with reputable
insurers against such risks and in such amounts normally insured against by
companies of the same type and in the same line of business. To the best of
Seller's knowledge, all of the insurance policies, binders or bonds maintained
by Seller are in full force and effect; Seller is not in default thereunder; all
claims thereunder have been filed in due and timely fashion; and all such
policies, binders and bonds will remain in full force and effect after the
Closing Date unaffected by the transactions contemplated hereby to the extent
insurance prepaids are reflected on the Closing Balance Sheet.
4.18 Mortgage Banking Licenses and Qualifications
To the best of Seller's knowledge, Seller has all material
certifications, authorizations, licenses, permits and other approvals
("Licenses") necessary to conduct its current mortgage banking business, and is
in good standing under all applicable federal, state and local laws and
regulations thereunder, as a mortgage lender. A complete list of such Licenses
is set forth in Schedule 4.18. The parties shall cause, at Buyer's sole expense,
all regulatory filings and other actions necessary or desirable in connection
with the Acquisition and change in ownership of the Business of Seller.
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4.19 Intentionally Omitted.
4.20 Intentionally Omitted.
4.21 Intentionally Omitted.
4.22 No Recourse
Except as set forth in Section 4.22 of the Schedule, Seller is not a
party to (A) any agreement or arrangement with (or otherwise obligated to) any
Person, including an Investor or insurer, to repurchase from any such Person any
Mortgage Loan and mortgaged property serviced for others or any mortgage loan
sold by Seller with servicing released ("Servicing Released Loans"), or (B) any
agreement, arrangement or understanding to reimburse, indemnify or hold harmless
any Person or otherwise assume any liability with respect to any Loss suffered
or incurred as a result of any default under or the foreclosure or sale of any
such Mortgage Loan or mortgage property or Servicing Released Loans, except
insofar as (i) such recourse is based upon breach by Seller of a customary
representation, warranty or undertaking or based upon recapture of premium
liability, prepayment refund obligations, first payment default obligations,
refund to Investors upon default by borrower or prepayment, or (ii) Seller
incurs expenses such as legal fees in excess of the reimbursement limits, if
any, set forth in the applicable Mortgage Servicing Agreement.
4.23 Intentionally Omitted.
4.24 Compliance
To the best of Seller's knowledge, Seller has been and is (and
specifically the documentation, origination, purchase, assumption, modification,
sale, servicing of Mortgage Loans (including the maintenance of and transactions
with respect to custodial Account) and maintenance of books and records by it
has been and is) in compliance with all Regulations, orders, writs, decrees,
injunctions and other requirements of any court or governmental authorities
applicable to it, its properties and assets or its conduct of business in all
material respects. To the best of Seller's knowledge, Seller has not done or
failed to do, and has not caused to be done or omitted to be done, any act or
omission, the effect of which would operate to invalidate or materially impair
(i) any approvals of the FHA, VA, FNMA, FHLMC, GNMA or HUD, (ii) any FHA
insurance or commitment of the FHA to insure, (iii) any VA guarantee or
commitment of the VA to guarantee, (iv) any private mortgage insurance or
commitment of any private mortgage insurer to insure, (v) any title insurance
policy, (vi) any hazard insurance policy, (vii) any flood insurance policy
required by the National Flood Insurance Act of 1968, as amended, (viii) any
fidelity bond, direct surety bond, or errors and omissions insurance policy
required by HUD, GNMA, FNMA, FHA, FHLMC, VA or private mortgage insurers, (ix)
any surety or guaranty agreement or (x) any guaranty issued by GNMA to Seller
respecting mortgage backed securities issued by Seller and other like
guaranties. During the twelve month period preceding the date hereof, no Agency,
Investor or private mortgage insurer has (i) claimed that Seller
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has violated or not complied with the applicable underwriting standards with
respect to mortgage loans sold by Seller to such Investor or (ii) imposed
restrictions on the activities (including commitment authority) on Seller.
4.25 Intentionally Omitted.
4.26 Custodial Accounts
Seller has full power and authority to maintain escrow accounts
("Custodial Accounts") for certain serviced loans. Such Custodial Accounts
comply in all respects with (i) all applicable Regulations (including without
limitation Regulations governing the calculation of the amount of the monthly
payments for deposit into Custodial Accounts that mortgagors are required to
make), and (ii) any terms of the Mortgage Loans (and Mortgage Servicing
Agreements) relating thereto. The Custodial Accounts contain the amounts shown
in the records of Seller, which amounts represent all monies received or
advanced by Seller as required by the applicable Mortgage Servicing Agreements,
less amounts remitted by or on behalf of Seller pursuant to applicable Mortgage
Servicing Agreements except for checks in process.
4.27 Accounts Receivable
All accounts receivable included on the Closing Balance Sheet, including
without limitation the amounts that have been advanced by Seller in connection
with servicing the Mortgage Loans pursuant to Mortgage Servicing Agreements
(such as principal, accrued interest, taxes and insurance premiums) are valid
and subsisting amounts owing to Seller, have been acquired in the ordinary
course of business and are carried on the books at values determined in
accordance with GAAP, and are not, to the best of Seller's knowledge, subject to
defenses, setoffs or claims of the mortgagor (other than those already accounted
for) arising from acts or omissions of Seller.
4.28 Data Processing
Seller has good and valid title or valid license to the data processing
software (including documentation, user manuals, upgrades and current releases,
etc.), currently used by it, and the data processing system (software and
hardware), used to support Seller's mortgage servicing business is operating in
the intended manner.
4.29 Inquiries
Section 4.29 of the Schedule contains a true and correct list of all of
the audits, investigations, complaints and inquiries of Seller by an Agency,
HUD, an Investor, or a private mortgage insurer since June 30, 1995, the result
of which audits and investigations claimed a material failure to comply with
applicable Regulations, resulted in a repurchase of Mortgage Loans by Seller,
resulted in indemnification by Seller in connection with the Mortgage Loans,
resulted in rescission of an
22
insurance or guaranty contract or agreement, or resulted in payment of a penalty
to a Agency, HUD, an Investor or a private mortgage insurer, and like adverse
findings. Except for customary ongoing quality control reviews, no such audit or
investigation (each an "Inquiry") is pending or, to the best of Seller's
knowledge, threatened. Seller has made available to Buyer copies of all written
reports and materials received in connection with such audits, investigations,
complaints and inquiries.
4.30 Representations
No breach or violation of any representation, warranty or covenant with
respect to any Mortgage Loans, the ownership of which has been transferred by
Seller to any Person exists which individually, or collectively, would have a
Material Adverse Effect on Seller or any Purchased Assets.
4.31 Advances
There are no pooling, participation, servicing or other agreements to
which Seller is a party which obligate it to make servicing advances with
respect to defaulted or delinquent Mortgage Loans.
4.32 Pools
There are no Pools serviced by Seller.
4.33 Commercial Mortgages
Seller has no commercial loans on its books currently and Seller has no
commitment to make any such loan.
4.34 No Tax-Sharing Agreements
Seller is not a party to any tax sharing agreement or similar
arrangement.
4.35 No Intercompany Accounts
Seller has no intercompany accounts.
4.36 Seller Employees
To the best of Seller's knowledge, each employee of Seller will accept
Buyer's offer of employment after the Closing Date (to be effective as of the
Effective Date). Seller has no agreements, policies, practices or understandings
(written or oral) concerning Seller employee bonus programs, employee incentive
plans or employee benefit plans except as set forth in Schedule 4.11(a). A
complete list of Seller's employees is set forth in Section 4.36 of the
Schedule.
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4.37 Conduct Prior to Closing
Within the four (4) months prior to the Closing Date or on the Closing Date,
except as set forth in Section 4.37 of the Schedule, Seller has conducted its
business only in the ordinary course, and Seller has not:
(a) issued, sold or delivered any shares of its capital stock or
issue or sell any securities convertible into, or options with respect to, or
warrants to purchase or rights to subscribe to, any shares of its capital stock;
(b) effected any recapitalization, reclassification, stock
dividend, stock split or like change in capitalization;
(c) amended its articles of incorporation or by-laws;
(d) merged or consolidated with, or, except as a result of
foreclosure or repossession in the ordinary course of its mortgage banking
business, acquired substantially all of the assets of, any other entity;
(e) sold, transferred, leased or encumbered a material amount of
assets (other than Excluded Assets) except in the ordinary course of business;
(f) materially altered or varied its methods or policies of (i)
underwriting, pricing, originating, warehousing, selling and servicing, or
buying or selling rights to service, its Mortgage Loans, (ii) hedged (which term
includes both buying futures and forward commitments from financial
institutions) its mortgage loan positions or commitments, and (iii) obtained
financing and credit;
(g) granted to any director, officer, employee or consultant any
material increase in compensation or benefits (other than as may be required
under the terms of written agreements in effect on the date hereof and other
than normal increases made in the ordinary course of business to officers or
employees in accordance with customary past practices and policies);
(h) granted any severance or termination pay (other than as may
be required under the terms of written agreements in effect on the date hereof)
to, or entered into or amended any employment or severance agreement with, any
person, other than termination pay paid in the ordinary course of business to
officers or employees in accordance with customary past practices and policies;
(i) adopted any new or amended any existing director, officer or
employee benefit plans (including, without limitation, profit sharing, bonus,
director and officer incentive compensation, retirement, medical,
hospitalization, life or other insurance plans, arrangements and commitments) or
any trust agreement relating thereto;
24
(j) incurred any debt other than in the ordinary course of
business in amounts consistent with past practice;
(k) made any change in accounting principles or methods from
those currently employed, except as required by GAAP or by applicable regulatory
requirements;
(l) granted any mortgage or security interest in, or made any
pledge of, or permitted any lien or encumbrance to be placed on, any of its
assets or properties other than in the ordinary course of business consistent
with past practice;
(m) canceled, waived, released or compromised any material debt
or claim, other than upon payment in full;
(n) failed to maintain in full force and effect all existing
insurance policies and fidelity bonds;
(o) To the best of Seller's knowledge, taken any action, or
failed to take any action, that would result in a material breach or violation
of the representations and warranties of Seller contained in this Agreement or
caused any condition to the transactions contemplated hereby not to be
satisfied;
(p) accelerated, terminated, modified or canceled any material
contract, lease, or license to which Seller is a party;
(q) entered into any employment or collective bargaining
agreement, or modified any existing employment or collective bargaining
agreement; and
(r) agreed to do any of the foregoing included in (a) through
(q).
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer makes the following representations and warranties to Seller, each
of which is true and correct on the date hereof, shall remain true and correct
in all material respects to and including the Closing Date, shall be unaffected
by any investigation heretofore or hereafter made by Seller or any notice to
Seller, and liability in respect thereof shall survive the closing of the
transactions provided for herein.
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5.1 Organization
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Florida. Buyer has the corporate power
and authority to own or lease all of its properties and to carry on its business
as it is now being conducted and is duly licensed and qualified to do business
and is in good standing in each jurisdiction where its ownership or leasing of
property or the conduct of its business requires such licensing or
qualification.
5.2 Authority; No Violation
(a) Buyer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action in respect thereof and no other corporate proceedings
on the part of Buyer are necessary to consummate the transactions so
contemplated. This Agreement has been duly and validly executed and delivered by
Buyer and, assuming this Agreement constitutes a valid and binding agreement of
Seller, constitutes a valid and binding obligation of Buyer, enforceable against
Buyer in accordance with its terms (subject to applicable bankruptcy, insolvency
and similar laws affecting creditors' rights generally and subject, as to
enforceability, to general principles of equity.)
(b) Neither the execution and delivery of this Agreement nor the
consummation by Buyer of the transactions contemplated hereby, nor compliance by
Buyer with any of the terms or provisions hereof, will (i) conflict with or
result in a breach of any provision of the articles of incorporation or by-laws
of Buyer, (ii) subject to making or obtaining the consents, permits,
authorizations, approvals, filings and registrations set forth in Section 5.2 of
the Buyer Schedule, violate any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to Buyer or any of its
properties or assets, or (iii) subject to obtaining or making the con sents,
permits, authorizations, approvals, filings and registrations set forth in
Section 5.2 of the Buyer Schedule, violate, conflict with, result in a breach of
any provisions of, constitute a default (or an event which, with notice or lapse
of time, or both, would constitute a default) under, result in the termination
of, accelerate the performance required by, or result in a right of termination
or acceleration or the creation of any Encumbrance upon any of the properties or
assets of Buyer under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Buyer is a party, or by which its properties
or assets may be bound or affected except for such violations, conflicts,
breaches or defaults which either individually or in the aggregate would not
have a Material Adverse Effect on Buyer. Notwithstanding the foregoing, the
representations and warranties in this subsection (b) shall not relate to or
cover any consents, approvals, filings or registrations, if any, arising from
the regulated nature of Seller or made applicable to Buyer by virtue of Seller
or Buyer's acquisition of the Purchased Assets and business of Seller or such
regulations governing Seller and the mortgage banking industry as a result of
Buyer's purchase of the Purchased Assets.
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5.3 Brokers and Finders
Neither Buyer nor any of its officers, directors, employees or agents
has employed any broker, finder or financial advisor or incurred any liability
for any fees or commissions in connection with the transactions contemplated
hereby, except for legal, accounting and other professional fees payable in
connection with the Acquisition.
5.4 Buyer's Review of Seller's Schedules
Buyer acknowledges that it has reviewed the Seller's schedules attached
to this Agreement, it has had an opportunity to review the books and records of
Seller and it has had an opportunity to ask questions and receive answers
concerning all aspects of the Business. The Buyer is satisfied with the form and
format of the Seller's schedules and accepts the matters accurately disclosed
therein; provided that this representation shall not constitute a release or
waiver of Buyer's claims and causes of action arising from material
misstatements, errors and omissions contained in Buyer's schedules.
5.5 Consents.
To the best of Buyer's knowledge, no consents, permits, authorizations
or approvals of, or filings or registrations with, any governmental or
regulatory authorities, government sponsored agencies or corporations or other
third parties are necessary to be obtained or made by Buyer in connection with
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
5.6 Legal Proceedings.
Buyer is not a party to any, and to the best of Buyer's knowledge, there
are no legal, administrative, arbitral or other proceedings, claims, actions or
governmental investigations of any nature pending, nor to the best knowledge of
Buyer, threatened, challenging the validity of propriety of the transactions
contemplated by this Agreement. Buyer is not subject to any order, judgement,
injunction, rule or decree which would affect the transaction contemplated
hereunder.
5.7 Buyer's Knowledge of Industry.
Buyer represents, warrants and acknowledges that it and its
representative(s) have been provided with full and complete access to all of the
books and records of the Seller and have been provided with access and/or copies
of the Seller's Lease Agreements, all other contracts with major suppliers of
services, and any and all other documents, instruments and reports which they
have requested and that are listed in the schedules of this Agreement. Further,
Buyer (and/or its predecessor entity) acknowledges that it has been involved in
the mortgage banking and brokerage business for a number of years and that it
has familiarity with all aspects of the industry and with the various
transactions engaged in by businesses operating in that industry, such as
Seller. Further,
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Buyer acknowledges that Seller has made no representation or warranty to Buyer
whatsoever in connection with the future profitability of the Business, nor has
Seller made any representation or warranty as to Buyer's ability to retain the
existing customers or referral sources of Seller after Closing.
ARTICLE 6
COVENANTS
6.1 Filings and Consent
(a) Promptly following the execution and delivery hereof, the
parties shall, obtain or file all consents (including Agency and Investor
consents), approvals, permits, authorizations, notices, and registrations
(collectively, "filings and consent solicitations") necessary to consummate the
assignment to Buyer of the Purchased Assets and business of Seller. The parties
shall cooperate in obtaining or making the necessary filings and consent
solicitations. The parties will use their reasonable efforts to cause the
filings and consent solicitations to be made as soon as practicable. The parties
hereto agree that they will consult with each other with respect to the
obtaining of all necessary permits, consents, approvals and authorizations of
all third parties and governmental bodies necessary or advisable to consummate
the transactions contemplated by this Agreement, and each party will keep the
other apprised of the status of matters relating to completion of the
transactions contemplated herein.
(b) Seller and Buyer shall promptly furnish each other with
copies of written communications received by Seller or Buyer, as the case may
be, or delivered by any of them, of any governmental body, Agency, Investor or
private mortgage insurer in respect of the transactions contemplated hereby.
6.2 Press Releases
Seller and Buyer shall cooperate with each other in the development and
distribution of all news releases and other public information disclosures with
respect to the Agreement or the transactions contemplated hereby; provided,
however, prior to the consummation of the Acquisition, no party hereto shall
make any public announcement or disclosure with respect to the transactions
contemplated hereby without the prior approval of the other parties, except
where disclosure is required by law. The parties anticipate issuing a press
release relating to the acquisition upon execution of this Agreement. All press
releases are at Buyer's expenses.
6.3 Intentionally Omitted.
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6.4 Marketing of Competing Products
Seller acknowledges that Buyer markets products that directly compete
with Seller's products.
6.5 Leases
Following the execution of this Agreement, the parties agree to use
their best reasonable efforts to obtain Landlord approval to lease assignments
from Seller to Buyer with respect to all office leases of Seller (the "Lease
Agreements"). Buyer agrees to indemnify and hold Seller (and all guarantors, if
any) harmless from all liability accruing after the Effective Time under all
Lease Agreements and the parties shall use their best efforts to have Seller
(and all guarantors, if any) released from all Lease Agreements.
ARTICLE 7
FURTHER COVENANTS OF SELLER
Seller covenants and agrees as follows:
7.1 Access to Information and Records. During the period prior to the
Closing:
(a) Seller shall, and shall cause its officers, employees,
agents, independent accountants and advisors to, furnish to Buyer, its
officers, employees, agents, independent accountants and advisors, at
reasonable times and at Seller's place of business, all information in
their possession concerning Seller as may be reasonably requested, and
give such persons access to all of the properties, books, records,
contracts and other documents of or pertaining to Seller that Seller or
its officers, employees, agents, independent accountants or advisors
shall have in their custody.
(b) With the prior consent of Seller in each instance (which
consent shall not be unreasonably withheld), Buyer and its officers,
employees, agents, independent accountants and advisors, shall have
access to vendors, customers, and others having business dealings with
Seller for the purpose of performing Buyer's due diligence
investigation.
7.2 Intentionally Omitted.
7.3 Conduct of Business Pending the Closing. From the date hereof until
the Closing, except as otherwise approved in writing in advance by the Buyer
(which approval shall not be unreasonably withheld):
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(a) No Changes. Seller will carry on its business diligently and
in the same manner as heretofore and will not make or institute any
changes in its methods of purchase, sale, management, accounting or
operation.
(b) Maintain Organization. Seller will take such action as may be
necessary to maintain, preserve, renew and keep in favor and effect the
existence, rights and franchises of Seller and will use its reasonable
best efforts to preserve the business organization of Seller intact, to
keep available to Buyer the present employees, and to preserve for Buyer
its present relationships with suppliers and customers and others having
business relationships with Seller.
(c) No Breach. Seller will not knowingly do or omit any act, or
knowingly permit any omission to act, which may cause a breach of any
material contract, commitment or obligation, or any breach of any
representation, warranty, covenant or agreement made by Seller herein,
or which would have required disclosure on Schedule 4.37 had it occurred
after October 31, 1996 and prior to the date of this Agreement.
(d) No Material Contracts. No contract or commitment will be
entered into, and no purchase of raw materials or supplies and no sale
of goods or services (real, personal, or mixed, tangible or intangible)
will be made, by or on behalf of Seller, except contracts, commitments,
purchases or sales which are in the ordinary course of business and
consistent with past practice, are not material to the Seller
(individually or in the aggregate) and would not have been required to
be disclosed in the Disclosure Schedule had they been in existence on
the date of this Agreement.
(e) No Corporate Changes. Seller shall not amend its Articles of
Incorporation or By-laws or make any changes in authorized or issued
capital stock.
(f) Maintenance of Insurance. Seller shall maintain all of the
insurance in effect as of the date hereof.
(g) Maintenance of Property. Seller shall use, operate, maintain
and repair all property of Seller in a normal business manner.
(h) Interim Financials. Seller will provide Buyer with interim
monthly financial statements and other management reports as and when
they are available.
(i) No Negotiations. Seller will not directly or indirectly
(through a representative or otherwise) solicit or furnish any
information to any prospective buyer, commence, or conduct presently
ongoing, negotiations with any other party or enter into any agreement
with any other party concerning the sale of Seller, Seller's assets or
business or any substantial part thereof (other than Excluded Assets) or
any equity securities of Seller (an "acquisition
30
proposal"), and Seller shall immediately advise Buyer of the receipt of
any acquisition proposal.
7.4 Change of Corporate Name. Concurrently with the Closing (or at such
time as all Licenses have been obtained) , Seller shall change its corporate
name to a new name bearing no resemblance to its present name so as to permit
the use of its present name by Buyer.
7.5 Consents. The parties will use their best reasonable efforts prior
to Closing to obtain all consents necessary for the consummation of the
transactions contemplated hereby.
7.6 Other Action. The parties shall use their best reasonable efforts to
cause the fulfillment at the earliest practicable date of all of the conditions
to the parties' obligations to consummate the transactions contemplated in this
Agreement.
7.7 Disclosure. Seller shall have a continuing obligation to promptly
notify Buyer in writing with respect to any matter hereafter arising or
discovered which, if existing or known at the date of this Agreement, would have
been required to be set forth or described in the Disclosure Schedule, but no
such disclosure shall cure any breach of any representation or warranty which is
inaccurate.
ARTICLE 8
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
Each and every obligation of Buyer to be performed on the Closing Date
shall be subject to the satisfaction (or waiver by Buyer) prior to or at the
Closing of each of the following conditions:
8.1 Representations and Warranties True on the Closing Date. Each of the
representations and warranties made by Seller in this Agreement, and the
statements contained in the Disclosure Schedule or in any instrument, list,
certificate or writing delivered by Seller pursuant to this Agreement, shall be
true and correct in all material respects when made and shall be true and
correct in all material respects at and as of the Closing Date as though such
representations and warranties were made or given on and as of the Closing Date,
except for any changes permitted by the terms of this Agreement or consented to
in writing by Buyer.
8.2 Compliance With Agreement. Seller shall have in all material
respects performed and complied with all of its agreements and obligations under
this Agreement which are to be performed or complied with by Seller prior to or
on the Closing Date, including the delivery of the closing documents specified
in Section 10.1.
8.3 Absence of Litigation. No litigation shall have been commenced or
threatened, and no investigation by any Government Entity shall have been
commenced, against Buyer, Seller or any of
31
the affiliates, officers or directors of any of them, with respect to the
transactions contemplated hereby.
8.4 Consents and Approvals. All approvals, consents and waivers that are
required to effect the transactions contemplated hereby shall have been
received, and executed counterparts thereof shall have been delivered to Buyer
prior to the Closing. Notwithstanding the foregoing, receipt of the consent of
any third party to the assignment of a Contract which is not (and is not
required to be) disclosed in the Disclosure Schedule shall not be a condition to
Buyer's obligation to close, provided that the aggregate of all such Contracts
does not represent a material portion of Seller's sales or expenditures. After
the Closing, Seller will continue to use its reasonable best effects to obtain
any such consents or approvals. This is also a Closing condition for Seller.
8.5 Volume of Non Conforming Business. Seller's Volume of Non Conforming
Business must have been (i) at least $2,600,000 in gross loan proceeds advanced
per month on average, for the period 7/1/96 through 10/31/96 and (ii) not
materially less than $2,600,000 in gross loan proceeds advanced per month, on
average, for each of the last two months of 1996.
ARTICLE 9
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
Each and every obligation of Seller to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of the following
conditions:
9.1 Representations and Warranties True on the Closing Date. Each of the
representations and warranties made by Buyer in this Agreement, and the
statements contained in any instrument, certificate or writing delivered by
Buyer pursuant to this Agreement, shall be true and correct in all material
respects when made and shall be true and correct in all material respects at and
as of the Closing Date as though such representations and warranties were made
or given on and as of the Closing Date.
9.2 Compliance With Agreement. Buyer shall have in all material respects
performed and complied with all of Buyer's agreements and obligations under this
Agreement which are to be performed or complied with by Buyer prior to or on the
Closing Date, including the delivery of the closing documents.
9.3 Absence of Litigation. No litigation shall have been commenced or
threatened, and no investigation by any Government Entity shall have been
commenced, against Buyer, Seller or any of the affiliates, officers or directors
of any of them, with respect to the transactions contemplated hereby; provided
that the obligations of Seller shall not be affected unless there is a
reasonable
32
likelihood that as a result of such action, suit, proceeding or investigation
Seller will be unable to retain substantially all the consideration to which it
is entitled under this Agreement.
9.4 Employment Agreement. Buyer shall have entered into an employment
agreement (the "Employment Agreement") with Xxxx Xxxxxxxxx on mutually
satisfactory terms.
9.5 Sale of Excluded Mortgages. Buyer shall have purchased, pursuant to
the agreement referred to in Section 16.13, all Excluded Mortgages offered for
sale by Seller and that qualify for purchase by Buyer (using Buyer's ordinary
standards for loan purchases) and any related liability of Seller to warehouse
lenders in respect of such mortgages purchased by Buyer shall be assumed and
paid by Buyer.
ARTICLE 10
CLOSING
Subject to the satisfaction or waiver of the closing conditions set
forth in this Agreement, the closing of this transaction ("xxx Xxxxxxx") shall
take place at the principal office of Seller, at 11:00 A.M. on a date mutually
acceptable to Buyer and Seller, or at such other place as the parties hereto
shall agree upon. Such date is referred to in this Agreement as the "Closing
Date". Regardless of the Closing Date, the transaction shall be deemed to have
occurred for all purposes as of the Effective Time and the parties shall
cooperate to treat the transaction as having occurred as of the Effective Time,
making appropriate adjustments for all receipts, disbursements, liabilities and
expenses from and after the Effective Time in order to place the parties in the
position as if the Closing actually occurred at the Effective Time.
10.1 Documents to be Delivered by Seller. At the Closing, Seller shall
deliver to Buyer the following documents, in each case duly executed or
otherwise in proper form:
(a) Bills of Sale. Bills of sale and such other instruments of
assignment, transfer, conveyance and endorsement as will be sufficient
in the reasonable opinion of Buyer and its counsel to transfer, assign,
convey and deliver to Buyer the Purchased Assets as contemplated hereby.
(b) Compliance Certificate. A certificate signed by the chief
executive officer of Seller that, to the best of his knowledge, each of
the representations and warranties made by Seller in this Agreement is
true and correct in all material respects on and as of the Closing Date
with the same effect as though such representations and warranties had
been made or given on and as of the Closing Date (except for any changes
permitted by the terms of this Agreement or consented to in writing by
Buyer), and that, to the best of his knowledge,
33
Seller has performed and complied with all of Seller's obligations under
this Agreement which are to be performed or complied with on or prior to
the Closing Date.
(c) Opinion of Counsel. A written opinion of counsel to Seller,
dated as of the Closing Date, addressed to Buyer, substantially in the
form of Exhibit 10.1(c) hereto.
(d) Intentionally Omitted.
(e) Certified Resolutions. A certified copy of the resolutions of
the Board of Directors and the shareholders of Seller authorizing and
approving this Agreement and the consummation of the transactions
contemplated by this Agreement.
(f) Real Estate Leases. The Real Estate Lease Assignment and
Assumption Agreement duly executed by Seller (also to be executed by
Buyer).
(g) Other Documents. All other documents, instruments or writings
required to be delivered to Buyer at or prior to the Closing pursuant to
this Agreement and such other certificates of authority and documents as
Buyer may reasonably request.
10.2 Documents to be Delivered by Buyer. At the Closing, Buyer shall
deliver to Seller the following documents, in each case duly executed or
otherwise in proper form:
(a) Assumption of Liabilities. Such undertakings and instruments
of assumption as will be reasonably sufficient in the opinion of Seller
and its counsel to evidence the assumption of Assumed Liabilities as
provided for in Article 2.
(b) Compliance Certificate. A certificate signed by the chief
executive officer of Buyer that the representations and warranties made
by Buyer in this Agreement are true and correct on and as of the Closing
Date with the same effect as though such representations and warranties
had been made or given on and as of the Closing Date (except for any
changes permitted by the terms of this Agreement or consented to in
writing by Seller), and that Buyer has performed and complied with all
of Buyer's obligations under this Agreement which are to be performed or
complied with on or prior to the Closing Date.
(c) Opinion of Counsel. A written opinion of counsel to Buyer,
dated as of the Closing Date, addressed to Seller, substantially in the
form of Exhibit 10.2(c) hereto.
(d) Certified Resolutions. A certified copy of the resolutions of
the Board of Directors of Buyer authorizing and approving this Agreement
and the consummation of the transactions contemplated by this Agreement.
34
(e) Other Documents. All other documents, instruments or writings
required to be delivered to Seller at or prior to the Closing pursuant
to this Agreement and such other certificates of authority and documents
as Seller may reasonably request.
ARTICLE 11
TERMINATION
11.1 Right of Termination Without Breach. This Agreement may be
terminated without further liability of any party at any time prior to the
Closing:
(a) by mutual written agreement of Buyer and Seller, or
(b) by either if the Closing shall not have occurred on or before
February 15, 1997, provided the terminating party has not, through
breach of a representation, warranty or covenant, prevented the Closing
from occurring on or before such date.
11.2 Termination for Breach.
(a) Termination by Buyer. If (i) there has been a material
violation or breach by Seller of any of its agreements, representations
or warranties contained in this Agreement which has not been waived in
writing by Buyer, or (ii) Seller shall have attempted to terminate this
Agreement under this Article 11 or otherwise without grounds to do so,
then Buyer may, by written notice to Seller at any time prior to the
Closing that such violation, breach, or wrongful termination attempt is
continuing, terminate this Agreement with the effect set forth in
Section 11.2(c) hereof.
(b) Termination by Seller. If (i) there has been a material
violation or breach by Buyer of any of its agreements, representations
or warranties contained in this Agreement which has not been waived in
writing by Seller, or (ii) Buyer shall have attempted to terminate this
Agreement under this Article 11 or otherwise without grounds to do so,
then Seller may, by written notice to Buyer at any time prior to the
Closing that such violation, breach, or wrongful termination attempt is
continuing, terminate this Agreement with the effect set forth in
Section 11.2(c) hereof.
(c) Effect of Termination. Termination of this Agreement pursuant
to this Section 11.2 shall not in any way terminate, limit or restrict
the rights and remedies of any party hereto against any other party
which has violated, breached or failed to satisfy any of the
representations, warranties, covenants, agreements or other provisions
of this Agreement prior to termination hereof. In such event, the
non-breaching party, following written notice of any breach and the
failure to make cure thereof within fifteen (15) calendar days following
35
such notice (such notice specifically setting forth the nature and facts
of the alleged breach), shall be entitled to pursue an action for its
actual monetary damages or grounded in specific performance, and no
other remedy (including, but not limited to, an action for incidental or
consequential damages for lost profits, lost sales or any other
incidental or consequential loss) shall be available to either party.
ARTICLE 12
SELLER'S AND BUYER'S LICENSES
12.1 Buyer's Temporary Operation of Seller's Business Pending License
Transfer
(a) The parties acknowledge that Buyer (which term for purposes
of this Section 12.5 shall include Buyer's Affiliates) may require, but not yet
have, all Licenses necessary to conduct the mortgage banking business and
mortgage brokering business being acquired from Seller. The parties have been
coordinating regarding Buyer's efforts to obtain all necessary licenses but in
certain situations, it is not practical for Buyer to obtain requisite licenses
prior to Closing. Buyer covenants to use reasonable good faith efforts to secure
all appropriate Licenses as soon as possible.
(b) After the Effective Date and until the earlier of (i) Buyer
obtaining all Licenses necessary or appropriate for Buyer's operation of the
mortgage banking and mortgage brokering business consistent with Seller's past
practices or (ii) the close of business on June 30, 1997, Buyer shall be
permitted to operate, manage and supervise Seller's mortgage banking business in
the name of Seller, and to thereby take advantage of Seller's Licenses, to the
extent that Buyer has not yet secured its own Licenses to conduct such business.
Buyer shall pay all costs and expenses relating to, or arising out of, Buyer's
management of Seller's business, including without limitation, providing or
facilitating the credit facilities necessary to fund such business. Unless
otherwise required by law, all personnel involved in Buyer's temporary operation
of Seller's business shall be on Buyer's payroll. Seller shall pay Buyer a
management fee equal to all profits which Seller would otherwise earn from
Buyer's temporary operation of Seller's business and Buyer shall reimburse
Seller for any loss from such temporary operation of Seller's business. Buyer's
temporary operation of Seller's business shall result in Seller making no profit
or loss from such temporary operation, except as otherwise required by law.
Seller shall cooperate with Buyer to facilitate Buyer's temporary operation of
Seller's business. Seller may impose such conditions and restrictions upon
Buyer's temporary operation of Seller's business as Seller shall consider
appropriate, acting reasonably and in good faith, and provided that Seller and
shareholders shall not seek to profit directly or indirectly from the imposition
of such conditions and restrictions. Buyer shall indemnify and hold Seller
harmless from and against all liability, cost and expense incurred by Seller as
the result of Buyer's utilization of Seller's License or otherwise conducting
any business in the name of Seller in accordance herewith.
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ARTICLE 13
INDEMNIFICATION
13.1 Indemnification
(a) From and after the Closing Date, Seller shall indemnify and
hold harmless, Buyer and each of its Affiliates from and against any and all
Losses which any of them may suffer, incur or sustain arising out of or
attributable to (whether or not arising out of third party claims) (i) any
breach of any covenant, representation or warranty made by Seller pursuant to
this Agreement, and (ii) any claim or liability (other than payment of benefits
in the ordinary course), tax, penalty asserted, legal action or administrative
proceeding resulting from or arising in connection with any Plan or Single
Employer Plan that was accrued or incurred prior to the Closing Date.
(b) From and after the Closing Date, Buyer shall indemnify and
hold harmless Seller from and against any and all Losses which Seller may
suffer, incur or sustain arising out of or attributable to (whether or not
arising out of third party claims) the Assumed Liabilities and/or any breach of
any covenant, representation, warranty or agreement made by Buyer pursuant to
this Agreement and/or relating to the operation of the Business by Buyer after
the Effective Date (other than breaches or failure by Seller).
(c) From and after the Closing Date, Seller shall indemnify and
hold Buyer and its affiliates harmless against, and agree to pay, any and all
expenses, costs or losses relating to the Seller or the operation of the
Business prior to the Effective Time (except for such expenses that were
included in the liabilities on the Closing Balance Sheet for which the parties
have made an adjustment in arriving at the Purchase Price).
(d) If any third party makes a claim for which a party seeking
indemnification under this Section 13.1 ("Indemnified Party") seeks indemnity
from the indemnifying party ("Indemnitor"), the Indemnified Party shall as soon
as practicable notify Indemnitor of the details of the claim ("Claim Notice").
After receiving a Claim Notice, Indemnitor may elect, by written
notice to the Indemnified Party, to assume the defense of such claim by using
counsel selected by Indemnitor, acting reasonably. If Indemnitor assumes such
defense and admits that the claim is subject to the Indemnitor's indemnity
obligations, then (i) the claim shall be deemed to be a claim indemnified by the
Indemnitor; (ii) the Indemnified Party may, at its election, participate in the
defense of the claim, but Indemnitor will have no obligation to pay for any
defense costs including attorneys' fees of the Indemnified Party after
Indemnitor assumes the defense of the claim; and (iii) Indemnitor will have the
right, without cost to Indemnified Party, to compromise and settle the claim on
any basis believed reasonable, in good faith, by Indemnitor, and Indemnified
Party shall be bound thereby, provided that
37
Indemnitor can reasonably demonstrate the financial resources to perform under
the terms of the proposed Settlement.
After receiving a Claim Notice, if Indemnitor either does not
assume the defense thereof, or does so under a reservation of rights without
admitting that the claim is subject to the Indemnitor's indemnity obligations,
then: (i) the claim shall not be deemed to be a claim indemnified by the
Indemnitor and neither party shall have waived any rights to assert that the
claim is or is not properly a claim subject to the Indemnitor's indemnity
obligations; (ii) both Indemnitor and Indemnified Party may, at their individual
election, participate in the defense of such claim but Indemnitor will remain
responsible for the costs of defense, including reasonable attorneys' fees of
the Indemnified Party should the claim ultimately be determine to be subject to
Indemnitor's indemnity obligation; and (iii) the Indemnified Party shall have
the right to compromise and settle the claim on any basis believed reasonable,
in good faith, by the Indemnified Party, and the Indemnitor will be bound
thereby should the claim ultimately be determined to be subject to Indemnitor's
indemnity obligation.
(e) For purposes of this Article 13, Losses shall be limited to
actual monetary damages, costs and expenses and shall not include incidental or
consequential damages for lost profits, lost sales or any other incidential or
consequential loss.
ARTICLE 14
POST-CLOSING COVENANTS
14.1 Personnel Matters
After the Closing Date, each employee of Seller that is employed by
Buyer shall be employed as of the Effective Date (with appropriate adjustments
for all salaries and benefits paid by Seller following the Effective Time) on
terms that are comparable to the employment terms, compensation and benefits
provided by Seller immediately prior to the Closing (other than Xxxx Xxxxxxxxx
who shall be employed under the terms of the Employment Agreement).
14.2 Cooperation
Seller shall encourage Seller employees to accept employment with Buyer.
14.3 Guaranties
Within forty-five (45) days following the Closing Date, Buyer shall
exercise its reasonable best efforts to cause the release of all guaranties and
collateral provided by Seller with respect to Assumed Liabilities.
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ARTICLE 15
AMENDMENTS
15.1 Amendment, Extension and Waiver
Subject to applicable law, at any time prior to the consummation of the
transactions contemplated by this Agreement, Seller and Buyer may (a) amend this
Agreement, (b) extend the time for the performance of any of the obligations or
other acts of any other party hereto, (c) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto, or (d) waive compliance with any of the agreements or
conditions contained in this Agreement. This Agreement may not be amended except
by an instrument in writing signed on behalf of each of the parties hereto. Any
agreement on the part of a party hereto to any extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party, but such waiver or failure to insist on strict compliance with such
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
ARTICLE 16
MISCELLANEOUS
16.1 Survival
The representations and warranties set forth herein shall survive the
Closing.
16.2 Expenses
Each party hereto shall bear and pay all costs and expenses incurred by
it in connection with the transactions contemplated hereby, including fees and
expenses of its own financial consultants, accountants and counsel other than as
provided in Section 3.2(d)(iii).
16.3 Entire Agreement
This Agreement, including the documents, schedules and other writings
referred to herein or delivered pursuant hereto, contains the entire agreement
and understanding of the parties with respect to its subject matter. This
Agreement supersedes all prior arrangements and understandings between the
parties, both written or oral with respect to its subject matter.
16.4 Parties in Interest
The Agreement shall be binding upon and shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
assigns; provided, however, that nothing in this
39
Agreement, expressed or implied, is intended to confer upon any other person or
entity, any rights, remedies, obligations or liabilities of any nature
whatsoever under or by reason of this Agreement.
16.5 Assignment
No party hereto may assign any of its rights or obligations hereunder to
any other person, without the prior written consent of the other parties
provided, however, Buyer may assign its rights and obligations (with Buyer
remaining primarily liable to Seller) hereunder to any one or more of its
Affiliates (whether existing on the date hereof or hereafter created).
16.6 Notices
All notices or other communications hereunder shall be in writing and
shall be deemed given if delivered personally or mailed by prepaid registered or
certified mail (return receipt requested), or by overnight courier, cable,
telegram or telex addressed as follows:
(a) If to Seller to:
Xxxx X. Xxxxxxxxx
Equity Mortgage Co., Inc.
0000 XxXxxxxx Xxxx, Xxxxx 000
Xxxxxx Xxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
Copy to:
Xxxxxxx X. Xxxxxx, Esquire
Xxxxxx, Xxxxxxxx & Xxxxxxx
0 Xxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxx Xxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
(b) If to Buyer to:
Xx. Xxxxxx Xxxxxxxx
Industry Mortgage Company
0000 Xxxxxxxxx Xxxx Xxxxx, Xxxxx 000
Xxxxx, XX 00000
Facsimile: (000) 000-0000
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Copy to:
Xxxxxxxx X. Xxxxxx, Esquire
Xxxxxxxx X. Xxxxxx, P.A.
Xxx Xxxxxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
16.7 Captions
The captions contained in this Agreement are for reference purposes only
and are not part of this Agreement.
16.8 Counterparts
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one Agreement. Executed counterparts
which are transmitted by facsimile are intended to be binding and enforceable.
16.9 Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the State of Maryland, without giving effect to the principles of
conflict of laws thereof.
16.10 No Third Party Beneficiaries
There are no third party beneficiaries and no third party shall have any
rights or remedies under this Agreement.
16.11 Ambiguity
It is acknowledged that this Agreement is the product of negotiation
between the parties hereto, and the fact that counsel to a particular party
prepared the draft(s) or final form of this Agreement shall not be relevant in
the construction or interpretation of this Agreement should any provision or
portion of this Agreement be deemed to be ambiguous.
16.12 Number and Gender
Unless the context otherwise requires, whenever used in this Agreement,
the singular shall include the plural, the plural shall include the singular,
and the masculine gender shall include the neuter and feminine gender, and vice
versa.
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16.13 Prior Mortgage Sale Obligation; Dissolution of EMLP
Effective as of the Closing Date, the Seller and Equity Mortgage Limited
Partnership, a Maryland limited partnership whose partnership interests are
directly or indirectly owned by the stockholders of Seller ("EMLP"),
automatically shall be fully released by Buyer and Buyer's Affiliates from their
contractual obligation to sell to Buyer and/or Buyer's Affiliates any dollar
amount of Mortgage Loans. Buyer acknowledges that Seller and EMLP have fully
satisfied all obligations to sell a certain dollar amount of Mortgage Loans to
Buyer and/or Buyer's Affiliates with respect to all prior periods. In addition
to the foregoing, Buyer acknowledges that EMLP, being the registered owner of
certain restricted securities of Buyer, desire to liquidate and dissolve. Buyer
agrees to use its best reasonable efforts to acknowledge such dissolution and to
cause to be issued to the partners of EMLP, based upon their pro-rata
percentages of ownership in EMLP, restricted securities of Buyer (in the
aggregate in like number and character and subject to identical restrictions),
in exchange for the restricted securities of Buyer currently held by EMLP.
IN WITNESS WHEREOF, Seller and Buyer have executed this Agreement as of
the day and year first above written.
EQUITY MORTGAGE CO., INC.
By:
-----------------------------------------
Title:
--------------------------------------
IMC MORTGAGE COMPANY, INC.
By:
-----------------------------------------
Title:
--------------------------------------
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