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AGREEMENT AND PLAN OF MERGER
BETWEEN
BNC MORTGAGE, INC.
AND
BNCM ACQUISITION CO.
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TABLE OF CONTENTS
PAGE
Article I THE MERGER.............................................................................1
SECTION 1.01. The Merger.......................................................................1
SECTION 1.02. Effective Time...................................................................1
SECTION 1.03. Effects of the Merger............................................................2
SECTION 1.04. Certificate of Incorporation.....................................................2
SECTION 1.05. Bylaws...........................................................................2
SECTION 1.06. Directors and Officers...........................................................2
Article II CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES.....................................2
SECTION 2.01. Conversion of Securities.........................................................2
SECTION 2.02. Exchange of Certificates and Cash................................................3
SECTION 2.03. Stock Transfer Books.............................................................5
SECTION 2.04. 2Stock Options; Payment Rights...................................................5
SECTION 2.05. Outstanding Warrants.............................................................5
SECTION 2.06. Dissenting Shares................................................................6
Article III REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........................................6
SECTION 3.01. Organization and Qualifications; Subsidiaries....................................6
SECTION 3.02. Capitalization...................................................................7
SECTION 3.03. Authority Relative to This Agreement.............................................8
SECTION 3.04. No Conflict; Required Filings and Consents.......................................8
SECTION 3.05. Opinion of Financial Advisor.....................................................9
SECTION 3.06. Board Approval...................................................................9
SECTION 3.07. SEC Reports......................................................................9
SECTION 3.08. Absence of Certain Changes......................................................10
SECTION 3.09. Compliance with Laws............................................................10
SECTION 3.10. Litigation......................................................................11
SECTION 3.11. Undisclosed Liabilities.........................................................11
SECTION 3.12. Labor Matters...................................................................11
SECTION 3.13. Proxy Statement.................................................................11
SECTION 3.14. Brokers.........................................................................11
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TABLE OF CONTENTS
(CONTINUED)
PAGE
Article IV REPRESENTATIONS AND WARRANTIES OF MERGER SUB..........................................12
SECTION 4.01. Organization and Qualification..................................................12
SECTION 4.02. Authority Relative to This Agreement............................................12
SECTION 4.03. No Conflict; Required Filings and Consents......................................12
SECTION 4.04. Brokers.........................................................................13
SECTION 4.05. Funds...........................................................................13
SECTION 4.06. Information Supplied............................................................13
SECTION 4.07. Employment Agreement with Xxxxx Xxxxxxx.........................................13
Article V CONDUCT OF BUSINESS PENDING THE MERGER................................................13
SECTION 5.01. Conduct of Business by the Company Pending the Merger...........................14
Article VI ADDITIONAL COVENANTS..................................................................17
SECTION 6.01. Access to Information; Confidentiality..........................................17
SECTION 6.02. Proxy Statement; Schedule 13E-3.................................................17
SECTION 6.03. Action by Stockholders..........................................................18
SECTION 6.04. No Solicitation.................................................................18
SECTION 6.05. Directors' and Officers' Insurance and Indemnification..........................20
SECTION 6.06. Officers........................................................................21
SECTION 6.07. Further Action; Best Efforts....................................................21
SECTION 6.08. Public Announcements............................................................22
SECTION 6.09. Conveyance Taxes................................................................22
SECTION 6.10. Event Notices...................................................................22
Article VII CLOSING CONDITIONS....................................................................23
SECTION 7.01. Conditions to Obligations of Each Party to Effect the Merger....................23
SECTION 7.02. Additional Conditions to Obligations of Merger Sub..............................23
SECTION 7.03. Additional Conditions to Obligations of the Company.............................25
Article VIII TERMINATION, AMENDMENT AND WAIVER.....................................................25
SECTION 8.01. Termination.....................................................................25
SECTION 8.02. Effect of Termination...........................................................27
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TABLE OF CONTENTS
(CONTINUED)
PAGE
SECTION 8.03. Amendment.......................................................................27
SECTION 8.04. Waiver..........................................................................27
SECTION 8.05. Fees, Expenses and Other Payments...............................................28
Article IX GENERAL PROVISIONS....................................................................30
SECTION 9.01. Effectiveness of Representations, Warranties and Agreements.....................30
SECTION 9.02. Notices.........................................................................30
SECTION 9.03. Certain Definitions.............................................................31
SECTION 9.04. Headings........................................................................33
SECTION 9.05. Severability....................................................................33
SECTION 9.06. Entire Agreement................................................................33
SECTION 9.07. Assignment......................................................................34
SECTION 9.08. Parties in Interest.............................................................34
SECTION 9.09. Governing Law...................................................................34
SECTION 9.10. Submission to Jurisdiction; Waiver of Jury Trial................................34
SECTION 9.11. Enforcement of this Agreement...................................................34
SECTION 9.12. Counterparts....................................................................35
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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of February 3, 2000 (the
"AGREEMENT"), between BNC MORTGAGE, INC., a Delaware corporation (the
"COMPANY"), and BNCM ACQUISITION CO., a Delaware corporation (the "MERGER SUB").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of this Agreement and
in accordance with the General Corporation Law of the State of Delaware (the
"DGCL"), Merger Sub will merge with and into the Company (the "MERGER") pursuant
to which each outstanding share of common stock, par value $0.001 per share, of
the Company (the "COMMON STOCK") other than shares owned by Merger Sub), shall
be converted into the right to receive $10.00 in cash per share of Common Stock,
as more fully set forth herein;
WHEREAS, the Board of Directors of the Company, based on the unanimous
recommendation of the Special Committee (as defined in Section 3.07), has
determined that the Merger is advisable and fair to and in the best interests of
the Company and its stockholders (other than Merger Sub and its affiliates and
members of the Management Group (as defined in Section 9.03)) and has approved
this Agreement, the Merger and the other transactions contemplated hereby and
has recommended approval and adoption of this Agreement by the stockholders of
the Company.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the DGCL, at the Effective Time
(as defined in Section 1.02), Merger Sub shall be merged with and into the
Company. Following the Merger, the separate existence of Merger Sub shall cease
and the Company shall continue as the surviving corporation of the Merger (the
"SURVIVING CORPORATION").
SECTION 1.02. Effective Time. As soon as practicable after the satisfaction
or, if permissible, waiver of the conditions set forth in Article VII, the
parties hereto shall cause the Merger to be consummated by filing a certificate
of merger (the "CERTIFICATE OF MERGER") with the Secretary of State of the State
of Delaware and by making any related filings required under the DGCL in
connection with the Merger. The Merger shall become effective at such time as
the Certificate of Merger is duly filed with the Secretary
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of State of the State of Delaware or at such later time as is agreed to by the
parties hereto and as is specified in the Certificate of Merger (the "EFFECTIVE
TIME" or the "CLOSING").
SECTION 1.03. Effects of the Merger. From and after the Effective Time, the
Merger shall have the effects set forth in the DGCL (including, without
limitation, Sections 259, 260 and 261 thereof).
SECTION 1.04. Certificate of Incorporation. The certificate of
incorporation of Merger Sub immediately prior to the Effective Time shall be the
certificate of incorporation of the Surviving Corporation (the "SURVIVING
CERTIFICATE") until thereafter amended in accordance with the DGCL. At the
Effective Time, such certificate shall be amended to change the name of the
Surviving Corporation to "BNC Mortgage Inc."
SECTION 1.05. Bylaws. The bylaws of Merger Sub immediately prior to the
Effective Time shall be the bylaws of the Surviving Corporation until thereafter
amended in accordance with the Surviving Certificate and the DGCL.
SECTION 1.06. Directors and Officers. From and after the Effective Time,
until their respective successors are duly elected or appointed and qualified in
accordance with applicable law, (a) the directors of Merger Sub at the Effective
Time shall be the directors of the Surviving Corporation and (b) the officers of
the Company at the Effective Time shall be the officers of the Surviving
Corporation.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of Merger Sub, the Company or the
holders of any of the following securities:
(a) Each share of the Common Stock issued and outstanding immediately prior
to the Effective Time (other than any shares of Common Stock to be canceled
pursuant to Section 2.01(b) and any Dissenting Shares to the extent provided in
Section 2.06) shall be converted into the right to receive $10.00 in cash,
without interest (the "MERGER CONSIDERATION"). At the Effective Time, each share
of Common Stock shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each certificate previously
evidencing any such share (other than shares to be canceled pursuant to Section
2.01(b) and any Dissenting Shares) shall thereafter represent only the right to
receive, upon the surrender of such certificate in accordance with the
provisions of Section 2.02, an amount in cash per share equal to the Merger
Consideration. The holders of such certificates previously evidencing such
shares of Common Stock outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to such shares of Common Stock except as
otherwise provided herein or by law.
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(b) Each share of capital stock of the Company (i) held in the treasury of
the Company or by any wholly owned subsidiary of the Company or (ii) owned by
Merger Sub or any of its subsidiaries shall automatically be canceled, retired
and cease to exist without any conversion thereof and no payment shall be made
with respect thereto.
(c) Each share of common stock and each share of preferred stock of Merger
Sub outstanding immediately prior to the Effective Time shall be converted into
and become one share of common stock and one share of preferred stock (with the
same rights, limitations and preferences), respectively, of the Surviving
Corporation and such shares shall constitute the only outstanding shares of
capital stock of the Surviving Corporation.
SECTION 2.02. Exchange of Certificates and Cash. (a) Exchange Agent. On or
before the Closing Date, Merger Sub shall enter into an agreement providing for
the matters set forth in this Section 2.02 with a bank or trust company selected
by Merger Sub and reasonably acceptable to the Company (the "EXCHANGE AGENT"),
authorizing such Exchange Agent to act as Exchange Agent in connection with the
Merger. Immediately prior to the Effective Time, Merger Sub shall deposit or
shall cause to be deposited with or for the account of the Exchange Agent, for
the benefit of the holders of shares of Common Stock (other than Dissenting
Shares and shares to be canceled pursuant to Section 2.01(b)), an amount in cash
equal to the Merger Consideration payable pursuant to Section 2.01(a) (such cash
funds are hereafter referred to as the "EXCHANGE FUND").
(b) Exchange Procedures. As soon as practicable after the Effective Time,
the Surviving Corporation will cause the Exchange Agent to mail to each holder
of record of a certificate or certificates which immediately prior to the
Effective Time evidenced outstanding shares of Common Stock (other than
Dissenting Shares and shares to be canceled pursuant to Section 2.01(b)) (the
"CERTIFICATES"), (i) a form letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange Agent and
shall be in such form and have such other provisions as Merger Sub may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by Merger Sub or the Surviving Corporation, together
with a letter of transmittal, duly executed, and such other customary documents
as may be required pursuant to such instructions (collectively, the "TRANSMITTAL
DOCUMENTS"), the holder of such Certificate shall be entitled to receive in
exchange therefor the Merger Consideration for each share of Common Stock
formerly represented by such Certificate, without any interest thereon, less any
required withholding of taxes, and the Certificate so surrendered shall
thereupon be canceled. In the event of a transfer of ownership of shares of
Common Stock which is not registered in the transfer records of the Company, the
Merger Consideration may be issued and paid in accordance with this Article II
to the transferee of such shares if the Certificate evidencing such shares of
Common Stock is presented to the Exchange Agent and is properly endorsed or
otherwise in proper form for transfer. The signature on the Certificate or any
related stock power must be properly
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guaranteed and the person requesting payment of the Merger Consideration must
either pay any transfer or other taxes required by reason of the payment to a
person other than the registered holder of the Certificate so surrendered or
establish to the Surviving Corporation that such tax has been paid or is not
applicable. The Merger Consideration will be delivered by the Exchange Agent as
soon as practicable following surrender of a Certificate and the related
Transmittal Documents. Cash payments may be made by check unless otherwise
required by a depositary institution in connection with the book-entry delivery
of securities. No interest will be payable on such Merger Consideration. Until
surrendered in accordance with this Section 2.02, each Certificate shall be
deemed at any time after the Effective Time to evidence only the right to
receive, upon such surrender, the Merger Consideration for each share of Common
Stock formerly represented by such Certificate. The Exchange Fund shall not be
used for any purpose other than as set forth in this Article II. Any interest,
dividends or other income earned on the investment of cash held in the Exchange
Fund shall be for the account of the Surviving Corporation.
(c) Termination of Exchange Fund. Any portion of the Exchange Fund
(including the proceeds of any investments thereof) which remains undistributed
to the holders of Common Stock for six months following the Effective Time shall
be delivered to the Surviving Corporation, upon demand. Any holders of Common
Stock who have not theretofore complied with this Article II shall thereafter
look only to the Surviving Corporation for payment of the Merger Consideration.
Any amounts remaining unclaimed by holders of Common Stock five years after the
Effective Time (or such earlier date immediately prior to such time as such
amounts would otherwise escheat to or become property of any Governmental
Entity) shall, to the extent permitted by applicable law, become the property of
the Surviving Corporation, free and clear of any claims or interest of any
Person previously entitled thereto.
(d) No Liability. Notwithstanding anything to the contrary in this Article
II, none of Merger Sub, the Surviving Corporation or the Company shall be liable
to any holder of Common Stock for any cash delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(e) Withholding Rights. The Surviving Corporation and the Exchange Agent
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Common Stock such
amounts as the Surviving Corporation or the Exchange Agent is required to deduct
and withhold with respect to the making of such payment under the United States
Internal Revenue Code of 1986, as amended (the "CODE"), or any provision of
state, local or foreign tax law. To the extent that amounts are so withheld by
the Surviving Corporation or the Exchange Agent, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
the shares of Common Stock in respect of which such deduction and withholding
was made by the Surviving Corporation or the Exchange Agent.
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(f) Lost, Stolen or Destroyed Certificates. In the event any Certificates
evidencing shares of Common Stock shall have been lost, stolen or destroyed, the
holder of such lost, stolen or destroyed Certificate(s) shall execute an
affidavit of that fact upon request. The holder of any such lost, stolen or
destroyed Certificate(s) shall also deliver, if reasonably required by the
Surviving Corporation, a reasonable indemnity against any claim that may be made
against Merger Sub, the Surviving Corporation or the Exchange Agent with respect
to the Certificate(s) alleged to have been lost, stolen or destroyed. The
affidavit and any indemnity which may be required hereunder shall be delivered
to the Exchange Agent, who shall be responsible for making payment for such
lost, stolen or destroyed Certificates(s) pursuant to the terms hereof.
SECTION 2.03. Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed, and there shall be no further
registration of transfers of shares of Common Stock thereafter on the records of
the Company. Any Certificates presented to the Exchange Agent or the Surviving
Corporation for any reason at or after the Effective Time shall be exchanged for
the Merger Consideration pursuant to the terms hereof.
SECTION 2.04. Stock Options; Payment Rights. Prior to the Effective Time,
the Board of Directors of the Company (or, if appropriate, any committee
thereof) shall adopt appropriate resolutions and take all other actions
necessary to provide that each outstanding Option heretofore granted under the
Company's 1997 Stock Option, Deferred Stock and Restricted Stock Plan (the
"STOCK OPTION PLAN") or any other plan, whether or not then vested or
exercisable, shall, at or immediately prior to the Effective Time, be canceled,
and each holder thereof shall be entitled to receive a payment in cash from the
Company (which amount shall be subject to any applicable withholding taxes and
shall be paid without interest, the "CASH PAYMENT"), upon cancellation, equal to
the product of (x) the total number of Shares subject or related to such Option,
whether or not then vested or exercisable, and (y) the excess, if any, of the
Merger Consideration over the exercise price or purchase price, as the case may
be, per Share subject or related to such Option. Each such Cash Payment to be
paid to each holder of an outstanding Option shall be paid by the Surviving
Corporation as soon as practicable after the Effective Time. The Stock Option
Plan (and any other plan, program or arrangement other than the Company's
tax-qualified defined contribution plan) providing for the issuance or grant of
any other interest in respect of the capital stock of the Company or any
subsidiary shall terminate as of the Effective Time.
SECTION 2.05. Outstanding Warrants. As soon as practicable following the
date of this Agreement, the Company shall use its reasonable best efforts to
cause all outstanding warrants for Common Stock to be canceled in exchange for
the right to receive at the Effective Time an amount in cash equal to the
product of (i) the total number of shares of Common Stock subject to such
warrant, multiplied by (ii) the excess, if any, of the Merger Consideration over
the exercise price per share of Common Stock subject to such warrant.
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SECTION 2.06. Dissenting Shares. (a) Notwithstanding any other provision of
this Agreement to the contrary, shares of Common Stock that are outstanding
immediately prior to the Effective Time and which are held by stockholders (i)
who shall not have voted in favor of adoption of this Agreement and (ii) who
shall be entitled to and shall have demanded properly in writing appraisal for
such shares in accordance with Section 262 of the DGCL ("DISSENTING SHARES"),
shall not be converted into or represent the right to receive the Merger
Consideration unless such stockholders fail to perfect, withdraw or otherwise
lose their right to appraisal. Such stockholders shall be entitled to receive
payment of the appraised value of such Dissenting Shares in accordance with the
provisions of the DGCL. If, after the Effective Time, any such stockholder fails
to perfect, withdraws or loses its right to appraisal, such shares of Common
Stock shall be treated as if they had been converted as of the Effective Time
into a right to receive the Merger Consideration, without interest thereon, upon
surrender of the Certificate or Certificates that formerly evidenced such shares
of Common Stock in the manner set forth in Section 2.02.
(b) The Company shall give Merger Sub prompt notice of any demands for
appraisal received by it, withdrawals of such demands, and any other instruments
served pursuant to the DGCL and received by the Company and relating thereto.
Merger Sub shall direct all negotiations and proceedings with respect to demands
for appraisal under the DGCL. The Company shall not, except with the prior
written consent of Merger Sub, make any payment with respect to any demands for
appraisal, or offer to settle, or settle, any such demands.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Merger Sub that:
SECTION 3.01. Organization and Qualifications; Subsidiaries. (a) The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all corporate power and all
material licenses, consents, permits and other approvals necessary to carry on
its business as it is now being conducted. The Company is licensed, qualified,
and in good standing in each state in which it originates mortgages if the laws
of such state require licensing or qualification in order to originate mortgage
loans and otherwise conduct business of the type conducted by the Company,
except where the failure to be so qualified or licensed or in good standing has
not had and could not reasonably be expected to have a Company Material Adverse
Effect. The Company has delivered to Merger Sub complete and correct copies of
its Certificate of Incorporation and Bylaws, each as amended to date.
(b) The only subsidiaries of the Company are those set forth in Section
3.01 of the Company Disclosure Schedule. Except as set forth in Section 3.01 of
the Company Disclosure Schedule, each subsidiary of the Company is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation
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and has all corporate power to carry on its business as it is now being
conducted. Each subsidiary of the Company is duly qualified as a foreign
corporation or licensed to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or leased or the nature
of its activities makes such qualification or licensing necessary, except where
the failure to be so qualified or licensed or in good standing has not had and
could not reasonably be expected to have a Company Material Adverse Effect. The
Company has delivered to Merger Sub complete and correct copies of the
organizational documents of each subsidiary, each as amended to date.
(c) All of the outstanding shares of capital stock of each such subsidiary
have been validly issued and are fully paid and non-assessable and are owned by
the Company, by another wholly owned subsidiary of the Company or by the Company
and another such wholly owned subsidiary, free and clear of all pledges, claims,
equities, options, liens, charges, rights of first refusal, encumbrances and
security interests of any kind or nature whatsoever (collectively, "LIENS").
Except for the capital stock of its subsidiaries, the Company does not own,
directly or indirectly, any capital stock or other ownership interest in any
corporation, partnership, limited liability company, joint venture or other
entity.
SECTION 3.02. Capitalization. (a) The authorized capital stock of the
Company consists of 50,000,000 shares of Common Stock and 5,000,000 shares of
preferred stock, par value $0.001 per share ("PREFERRED STOCK") of which 570,000
shares have been designated Series A Junior Participating Preferred Stock. As of
December 31, 1999, (i) 5,042,350 shares of Common Stock were outstanding, all of
which were validly issued, fully paid and nonassessable and not subject to
preemptive rights; (ii) no shares of Preferred Stock were issued and
outstanding; (iii) no shares of Common Stock and no shares of Preferred Stock
were held in the treasury of the Company; (iv) 800,000 shares of Common Stock
were reserved for issuance upon the exercise of outstanding stock options
granted pursuant to the Stock Option Plan; (v) 317,319 shares of Common Stock
were reserved for issuance upon the exercise of outstanding warrants; (vi)
570,000 shares of Series A Junior Participating Preferred Stock were reserved
for issuance upon exercise of the rights associated with the Common Stock; (vii)
no Company Subsidiary owned any shares of the Company's capital stock; and
(viii) there were no securities of any subsidiary of the Company or any other
Person outstanding which are convertible into or exercisable or exchangeable for
capital stock of the Company. Except as set forth above, no shares of capital
stock or other voting securities of the Company have been issued, are reserved
for issuance or are outstanding.
(b) Except as otherwise disclosed in Section 3.02 of the Company Disclosure
Schedule, there are no existing rights, options, warrants, calls, subscriptions,
convertible securities or other securities, agreements, commitments, or
obligations which would require the Company or any of its subsidiaries to issue
or sell shares of Common Stock, Preferred Stock or any other equity securities,
or securities convertible into or exchangeable or exercisable for shares of
Common Stock, Preferred Stock or any other equity or debt securities of the
Company or any of its subsidiaries. Except as disclosed in Section 3.02 of the
Company Disclosure Schedule, the Company has no commitments or
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obligations to purchase or redeem any shares of Common Stock. Section 3.02 of
the Company Disclosure Schedule contains a complete and accurate list of all
outstanding Options and warrants and the exercise price thereof.
(c) Upon the Company taking the actions referred to in Sections 2.04 and
2.05, no holder of Options and no holder of warrants will have any rights to
receive shares of capital stock of the Surviving Corporation upon exercise of
outstanding Options or warrants.
SECTION 3.03. Authority Relative to This Agreement. The Company has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the Company
and the consummation by the Company of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action by the
Company (other than, with respect to the Merger, the adoption of this Agreement
by the holders of a majority of the aggregate voting power of the issued and
outstanding shares of Common Stock (such vote being collectively referred to as
the "COMPANY STOCKHOLDER APPROVAL"), and the filing and recordation of
appropriate merger documents as required by, and in accordance with, the DGCL).
This Agreement has been duly and validly executed and delivered by the Company
and, assuming the due authorization, execution and delivery by Merger Sub,
constitutes a valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other similar laws affecting the rights of creditors generally and by general
principles of equity.
SECTION 3.04. No Conflict; Required Filings and Consents. (a) Except as
otherwise disclosed in Section 3.04 of the Company Disclosure Schedule, the
execution and delivery of this Agreement by the Company do not, and the
performance of this Agreement and the consummation of the transactions
contemplated hereby will not, (i) conflict with or violate the Company's
Certificate of Incorporation or its Bylaws, or the certificate of incorporation,
bylaws or other equivalent organizational documents of any of its subsidiaries
or (ii) conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to the Company or any subsidiary of the Company or by which
any property or asset of the Company or any subsidiary of the Company is bound
or affected, (iii) conflict with, or violate, or cause a default under any loan
or credit agreement, note, bond, mortgage, indenture, lease, license or other
agreement, instrument, contract or permit applicable to the Company or any of
its subsidiaries or their respective properties or assets, or (iv) result in the
creation of a Lien on any assets or properties of the Company or any subsidiary
of the Company, except, in the case of clauses (ii) and (iii), for any such
conflicts, violations, breaches, defaults or other occurrences which would not,
individually or in the aggregate, have a Company Material Adverse Effect.
(b) The execution and delivery of this Agreement by the Company do not, and
the performance of this Agreement and the consummation of the Merger and the
other transactions contemplated hereby by the Company will not, require any
consent,
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approval, authorization or permit of, or filing with or notification to, any
governmental body, agency or official (each a "GOVERNMENTAL ENTITY"), except for
(i) any applicable requirements of the Securities Exchange Act of 1934 (the
"EXCHANGE ACT"), (ii) the pre-merger notification requirements, if any, of the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended, and the rules
and regulations thereunder (the "HSR ACT"), (iii) the filing and recordation of
appropriate merger and similar documents as required by the DGCL and (iv) the
change of control notifications to, and approvals from, state and federal
mortgage licensing agencies and authorities listed in Section 3.04 of the
Company Disclosure Schedule.
SECTION 3.05. Opinion of Financial Advisor. Friedman, Billings, Xxxxxx &
Co., Inc. (the "COMPANY FINANCIAL ADVISOR") has delivered to the Special
Committee (as defined below) its opinion that, as of the date hereof, the
consideration to be received by the stockholders of the Company (other than
Merger Sub and its affiliates and members of the Management Group) pursuant to
the Merger is fair to such stockholders from a financial point of view.
SECTION 3.06. Board Approval. (a) The Board of Directors of the Company,
based on the unanimous recommendation of the Special Committee of the Board of
Directors of the Company (the "SPECIAL COMMITTEE"), at a meeting duly called and
held and at which a quorum was present and voting, unanimously (i) determined
that this Agreement and the Merger are advisable and fair to and in the best
interests of the Company's stockholders (other than Merger Sub and its
affiliates and members of the Management Group), (ii) approved this Agreement,
the Merger and the other transactions contemplated hereby, and (iii) resolved to
recommend approval and adoption of this Agreement by the Company's stockholders.
Such approval is sufficient to render inapplicable to the Merger, this Agreement
and the transactions contemplated hereby the provisions of Section 203 of the
DGCL or any antitakeover provision in the Company's Certificate of Incorporation
and Bylaws.
(b) The Company has taken all action necessary to render the rights issued
pursuant to the Rights Agreement, dated as of October 13, 1998, between the
Company and U.S. Stock Transfer Corporation (the "RIGHTS AGREEMENT")
inapplicable to the Offer, the Merger, this Agreement and the transactions
contemplated hereby. Prior to the Effective Time, the Company shall have taken
all action necessary to cause the Rights Agreement to terminate immediately
prior to the Effective Time.
SECTION 3.07. SEC Reports. (a) Since the date the Company became subject to
the reporting requirements of the Exchange Act, the Company has filed all
required forms, reports and documents with the Securities and Exchange
Commission (the "SEC") required to be filed by it pursuant to the federal
securities laws and the SEC rules and regulations thereunder (collectively, the
"COMPANY SEC DOCUMENTS"), all of which have complied as of their respective
filing dates in all material respects with all applicable requirements of the
Securities Act of 1933 (the "SECURITIES ACT") and the Exchange Act, and the
rules promulgated thereunder. None of the Company SEC Documents at the time
filed contained any untrue statement of a material fact or omitted
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to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
(b) The financial statements of the Company included in the Company SEC
Documents (including the notes thereto) at the time filed complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, were prepared in
accordance with generally accepted accounting principles (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present in all material respects the consolidated
financial position of the Company and its consolidated subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (and include, in the case of any unaudited interim
financial statements, reasonable accruals for normal year-end adjustments). No
subsidiaries of the Company are required to file periodic reports with the SEC
under the Exchange Act.
SECTION 3.08. Absence of Certain Changes. Except as specifically disclosed
in the Company SEC Documents filed prior to the date hereof or as set forth in
Section 3.08 of the Company Disclosure Schedule, since September 30, 1999 the
Company and its subsidiaries have conducted their business only in the ordinary
course, and during such period there has not been: (a) any event, change, effect
or development that has had or could reasonably be expected to have a Company
Material Adverse Effect between September 30, 1999 and the date hereof; (b) any
declaration, setting aside or payment of any dividend or other distribution in
respect of the capital stock of the Company or any repurchase, redemption or
other acquisition by the Company or any of its subsidiaries of any capital stock
of the Company; (c) any damage, destruction or loss, whether or not covered by
insurance that has had or could reasonably be expected to have a Company
Material Adverse Effect; (d) any change in accounting methods, principles or
practices by the Company or its subsidiaries affecting the consolidated assets,
liabilities, results of operations or business of the Company, except insofar as
have been required by a change in generally accepted accounting principles; (e)
any making or rescission of any material express or deemed election relating to
Taxes, settled or compromised any material claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy relating to Taxes,
or except as may be required by applicable law, made any change to any of its
material methods of reporting income or deductions for federal income tax
purposes from those employed in the preparation of its most recently filed
federal income tax return; or (f) any action, event, occurrence or transaction
that would have been prohibited by Section 5.01 hereof.
SECTION 3.09. Compliance with Laws. Except as set forth in the Company SEC
Documents filed prior to the date hereof: (a) neither the Company nor any of its
subsidiaries is subject to any material judgment, injunction, order or decree;
and (b) neither the Company nor any of its subsidiaries is in violation of any
applicable material law, rule, regulation, judgment, injunction, order or
decree, including without limitation, any federal, state or local law applicable
to the origination, purchase or sale of residential
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mortgage loans in the jurisdictions in which the Company and such subsidiaries
conduct such business, except for violations which could not reasonably be
expected to have a Company Material Adverse Effect.
SECTION 3.10. Litigation. Except as disclosed in the Company SEC Documents
filed prior to the date hereof, there is no claim, suit, action or proceeding
pending or, to the knowledge of the Company, threatened against the Company or
any of its subsidiaries which individually or in the aggregate has had or could
reasonably be expected to have a Company Material Adverse Effect.
SECTION 3.11. Undisclosed Liabilities. Except as and to the extent
specifically disclosed in the Company SEC Documents or accrued on the September
30, 1999 balance sheet included in the Company SEC Documents, or as set forth in
Section 3.11 of the Company Disclosure Schedule, and except for liabilities
incurred in the ordinary course of business and otherwise not in contravention
of this Agreement, the Company and each of its subsidiaries does not have any
material liabilities or obligations of any nature (whether absolute, contingent
or otherwise).
SECTION 3.12. Labor Matters. Neither the Company nor any of its
subsidiaries is a party to or otherwise bound by any collective bargaining
agreement, contract or other agreement or understanding with a labor union or
labor organization, nor is any such contract or agreement presently being
negotiated.
SECTION 3.13. Proxy Statement. The Proxy Statement will comply in all
material respects with the Exchange Act, except that no representation is made
by the Company with respect to information supplied by or on behalf of Merger
Sub, any affiliate of Merger Sub specifically for inclusion in the Proxy
Statement. None of the information supplied by the Company specifically for
inclusion in the Proxy Statement shall, at the time the Proxy Statement is
mailed or at the time of the Company Stockholders' Meeting or at the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that the Company makes no representation or
warranty as to any of the information relating to and supplied by or on behalf
of Purchaser specifically for inclusion in the Proxy Statement. The letter to
stockholders, notice of meeting, proxy statement and form of proxy to be
distributed to stockholders in connection with the Merger, and any schedule
required to be filed with the SEC in connection therewith, together with any
amendments or supplements thereto, are collectively referred to herein as the
"PROXY STATEMENT."
SECTION 3.14. Brokers. No broker, finder or investment banker (other than
the Company Financial Advisor) is entitled to any brokerage, finder's or other
fee or commission in connection with this Agreement, the Merger and the other
transactions contemplated hereby based upon arrangements made by or on behalf of
the Company.
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The Company has provided Merger Sub a copy of the agreement between the Company
and the Company Financial Advisor pursuant to which such fees are payable.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MERGER SUB
Merger Sub hereby makes to the Company the representations and warranties
set forth below:
SECTION 4.01. Organization and Qualification. Merger Sub is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has the requisite power and authority and all necessary
governmental approvals to own, lease and operate its properties and to carry on
its business as it is now being conducted. Merger Sub is duly qualified or
licensed and in good standing to do business in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of its
business makes such qualification or licensing necessary, except for such
failures to be so qualified or licensed and in good standing that would not,
individually or in the aggregate, have a Merger Sub Material Adverse Effect.
SECTION 4.02. Authority Relative to This Agreement. Merger Sub has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Merger Sub
and the consummation by it of the transactions contemplated hereby have been
duly and validly authorized by the Board of Directors of Merger Sub and no other
corporate proceedings on the part of Merger Sub are necessary to authorize this
Agreement or to consummate such transactions (other than the filing and
recordation of appropriate merger documents as required by the DGCL). This
Agreement has been duly and validly executed and delivered by Merger Sub and,
assuming the due authorization, execution and delivery by the Company,
constitutes the legal, valid and binding obligation of Merger Sub, enforceable
against it in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other similar laws affecting the rights of creditors generally and by general
principles of equity.
SECTION 4.03. No Conflict; Required Filings and Consents. (a) The execution
and delivery of this Agreement by Merger Sub do not, and the performance of this
Agreement and the consummation of the transactions contemplated hereby will not,
(i) conflict with or violate the Certificate of Incorporation or bylaws of
Merger Sub, (ii) conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to Merger Sub or by which any of its properties or
assets are bound or affected, (iii) conflict with, or violate, or cause a
default under any loan or credit agreement, note, bond, mortgage, indenture,
lease, license or other agreement, instrument, contract or permit applicable to
Merger Sub, its properties or assets, or (iv) result in the creation of a Lien
on any assets or properties of Merger Sub except, in the case of clauses (ii)
and (iii), for
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any such conflicts, violations, breaches, defaults or other occurrences which
would not, individually or in the aggregate, have a Merger Sub Material Adverse
Effect
(b) The execution and delivery of this Agreement by Merger Sub do not, and
the performance of this Agreement and the consummation of the Merger and the
other transactions contemplated hereby by Merger Sub will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Entity, except (i) for (A) any applicable requirements, if
any, of the Exchange Act and state takeover laws, (B) the pre-merger
notification requirements, if any, of the HSR Act and (C) filing and recordation
of appropriate merger and similar documents as required by the DGCL and (ii)
where the failure to obtain such consents, approvals, authorizations or permits,
or to make such filings or notifications, would not, individually or in the
aggregate, have a Merger Sub Material Adverse Effect.
SECTION 4.04. Brokers. No broker, finder or investment banker other than
Xxxxxx Brothers Inc. and its affiliates is entitled to any brokerage, finder's
or other fee or commission in connection with this Agreement, the Merger and the
other transactions contemplated hereby based upon arrangements made by or on
behalf of Merger Sub or the members of the Management Group.
SECTION 4.05. Funds. Merger Sub has or will have at Closing sufficient
funds to consummate the transactions contemplated in this Agreement. Merger Sub
has executed a commitment letter with an affiliate of Xxxxxx Brothers Holdings
Inc., which, together with contributions to be made to Merger Sub by the
Management Group and Xxxx X. Xxxxxxx, will provide for such funds.
SECTION 4.06. Information Supplied. None of the information supplied or to
be supplied by Merger Sub specifically for inclusion in the Proxy Statement
shall at the time the Proxy Statement is mailed or at the time of the Company
Stockholders' Meeting or at the Effective Time contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
SECTION 4.07. Employment Agreement with Xxxxx Xxxxxxx. Xxxxx Xxxxxxx and
Merger Sub have entered into a valid and binding employment agreement pursuant
to which Xx. Xxxxxxx has agreed to serve as an executive officer of the
Surviving Corporation at the Effective Time. Such agreement is enforceable
against Merger Sub in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
and other similar laws affecting the rights of creditors generally and by
general principles of equity
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
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SECTION 5.01. Conduct of Business by the Company Pending the Merger. The
Company covenants and agrees as to itself and its subsidiaries that, between the
date of this Agreement and the Effective Time, unless Merger Sub shall have
consented within five (5) days after receipt of notice from the Company of such
proposed action, and except as expressly contemplated or permitted by this
Agreement:
(a) the Board of Directors of the Company shall direct the management of
the Company to take or refrain from taking, as the case may be, such action so
that the Company and its Subsidiaries shall carry on their respective businesses
in the usual, regular and ordinary course in all material respects, in
substantially the same manner as heretofore conducted, and shall use all
reasonable efforts to preserve intact their present lines of business, maintain
their rights and franchises and preserve their relationships with customers,
suppliers, regulators, distributors, creditors, lessors, employees and others
having business dealings with them to the end that their ongoing businesses
shall not be impaired in any material respect at the Effective Time;
(b) the Board of Directors of the Company shall direct the management of
the Company to take or refrain from taking, as the case may be, such action so
that the Company shall not, and shall not permit any of its subsidiaries to
alter the fundamental nature of its business or enter into material new lines of
business outside the origination, purchase and of residential mortgage loans and
activities incident thereto;
(c) the Board of Directors of the Company shall direct the management of
the Company to take or refrain from taking, as the case may be, such action so
that the Company shall not, and shall not permit any of its subsidiaries to
incur or commit to any capital expenditures other than capital expenditures
incurred or committed to in the ordinary course of business consistent with past
practice and with the Company's current business plan (a copy of which has been
provided to Merger Sub);
(d) the Company shall not, and shall not permit any of its subsidiaries to,
and shall not propose to, (i) declare, set aside or pay any dividends on or make
other distributions in respect of any of its capital stock, except dividends by
wholly owned subsidiaries of the Company, (ii) split, combine, subdivide or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for, shares of its capital stock, except for any such transaction by a wholly
owned subsidiary of the Company, or (iii) repurchase, redeem or otherwise
acquire any shares of its capital stock or any securities convertible into or
exercisable for any shares of its capital stock;
(e) the Board of Directors of the Company shall direct the management of
the Company to take or refrain from taking, as the case may be, such action so
that the Company shall not, and shall not permit any of its subsidiaries to,
issue, deliver, sell, transfer, pledge or otherwise encumber or authorize or
propose the issuance, delivery, sale, transfer, pledge or encumbrance of, any
shares of its capital stock, any voting debt or any securities convertible into
or exercisable for, or any rights, warrants or options to acquire, any such
shares or voting debt, or enter into any agreement with respect to any of
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the foregoing, other than (i) the issuance of Common Stock upon the exercise of
warrants, Options or in connection with other stock-based benefits plans, in
each case, outstanding on the date hereof in accordance with their current terms
and (ii) issuances by a wholly owned subsidiary of the Company of capital stock
to such subsidiary's parent or another wholly owned subsidiary of the Company;
(f) except as required by applicable law, the Company and its subsidiaries
shall not amend or propose to amend their respective certificates of
incorporation, bylaws or other governing documents;
(g) the Board of Directors shall direct the management of the Company to
not, and to not permit any of the Company's subsidiaries to, acquire or agree to
acquire by merging or consolidating with, or by purchasing a substantial equity
interest in or a substantial portion of the assets of, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof or otherwise acquire or agree to acquire any
assets (other than the acquisition of assets used in the operations of the
business of the Company and its subsidiaries in the ordinary course); provided,
however, that the foregoing shall not prohibit (x) internal reorganizations or
consolidations involving existing subsidiaries of the Company, (y) the creation
of new subsidiaries of the Company organized to conduct or continue activities
otherwise permitted by this Agreement, or (z) any transaction authorized under
Section 6.04; and provided, further, that upon consultation with Merger Sub the
Company may renew or enter into new warehouse line of credit facilities on
substantially the same terms as such existing facilities, including, without
limitation, as to the amount of such facilities;
(h) the Board of Directors of the Company shall direct the management of
the Company to take or refrain from taking, as the case may be, such action so
that the Company shall not, and shall not permit any subsidiary of the Company
to, sell, lease, encumber or otherwise dispose of, or agree to sell, lease,
encumber or otherwise dispose of, any of its assets (including capital stock of
subsidiaries of the Company) which are material, individually or in the
aggregate, to the Company and its subsidiaries, taken as a whole; provided,
however, that the foregoing shall not prohibit sale of residential mortgage
loans in the ordinary course of business or pursuant to existing agreements or
the granting of Liens on residential mortgage loans in connection with
borrowings under the Company's warehouse line of credit facilities;
(i) the Board of Directors of the Company shall direct the management of
the Company to take or refrain from taking, as the case may be, such action so
that the Company shall not, and shall not permit any of its subsidiaries to, (i)
other than in connection with actions permitted by this Agreement or in
connection with the origination, purchase and sale of residential mortgage loans
in the ordinary course of business, and activities incident thereto, make any
loans, advances or capital contributions to, or investments in, any other
Person, other than the Company or a wholly-owned subsidiary of the Company or
(ii) pay, discharge or satisfy any claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or
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otherwise), or settle any litigation, other than indebtedness, issuances of debt
securities, guarantees, loans, advances, capital contributions, investments,
payments, discharges or satisfactions incurred or committed to in the ordinary
course of business consistent with past practice;
(j) the Board of Directors of the Company shall direct the management of
the Company to take or refrain from taking, as the case may be, such action so
that the Company shall not, and shall not permit any of its subsidiaries to,
take any action that would result in (x) any of the representations and
warranties set forth in Article III which is qualified as to materiality being
untrue, (y) any of the representations and warranties set forth in Article III
which is not so qualified being untrue in any material respect, or (z) any of
the conditions to the Merger set forth in Article VII not being satisfied;
(k) except as disclosed in the Company SEC Documents filed prior to the
date of this Agreement, or as required by a Governmental Entity, the Board of
Directors shall direct the management of the Company not to change the Company's
methods of accounting in effect at June 30, 1999, except as required by changes
in United States Generally Accepted Accounting Principles as concurred in by the
Company's independent auditors;
(l) the Board of Directors of the Company shall direct the management of
the Company to take or refrain from taking, as the case may be, such action so
that the Company shall not, and shall not permit its subsidiaries to, (i) enter
into, adopt, amend (except as may be required by applicable law), renew (except
on substantially the same terms) or terminate any Benefit Plan, or any other
employee benefit agreement, arrangement, plan or policy between the Company or
any of its subsidiaries and one or more of its directors or officers, (ii)
increase or accelerate the compensation or fringe benefits of any of its
directors, officers or employees, (iii) grant any stock options, stock
appreciation rights, restricted stock, restricted stock units or performance
units or shares other than as required by existing agreements with individual
employees, or enter into any contract, agreement, commitment or arrangement to
do any of the foregoing or (iv) enter into or renew any contract, agreement,
commitment or arrangement providing for the payment to any director, officer or
employee of such party of compensation or benefits contingent, or the terms of
which are materially altered, upon the occurrence of any of the transactions
contemplated by this Agreement;
(m) the Board of Directors of the Company shall direct the management of
the Company to take or refrain from taking, as the case may be, such action so
that the Company shall not, and shall not permit any subsidiary to, make or
rescind any material express or deemed election relating to Taxes, settle or
compromise any material claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to Taxes, or except as
may be required by applicable law, make any change to any of its material
methods of reporting income or deductions for federal income tax purposes from
those employed in the preparation of its most recently filed federal income tax
return; and
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(n) the Board of Directors of the Company shall not take any action that is
inconsistent with, or in contravention of, the directions it gives or is
required to give to the management of the Company in compliance with this
Section 5.01; this Section 5.01 (other than Subsections 5.01(d) and (f)) shall
be breached only if the Board of Directors of the Company takes such
inconsistent or contravening action, fails to take action to direct the
management of the Company as required under this Section 5.01 (such action to be
accomplished by reason of resolutions adopted by the Board of Directors as of
the date hereof), or as a result of action or inaction taken by any member of
the Management Group if such action or inaction was taken with the actual
knowledge of a majority of the members of the Special Committee and the Board of
Directors fails to supervise the compliance by the Management Group with such
directions consistent with the provisions of the DGCL
ARTICLE VI
ADDITIONAL COVENANTS
SECTION 6.01. Access to Information; Confidentiality. From the date hereof
to the Effective Time, the Company shall (and shall cause its subsidiaries and
the officers, directors, employees, auditors and agents of the Company and of
each of its subsidiaries to) afford the officers, employees and agents of Merger
Sub (the "MERGER SUB REPRESENTATIVES") reasonable access upon reasonable notice
during normal business hours to its officers, employees, agents, properties,
offices, plants and other facilities, books and records, and shall furnish such
Merger Sub Representatives with all financial, operating and other data and
information as may from time to time be reasonably requested. Merger Sub agrees
to be bound by the terms of the Confidentiality Agreement, dated as of October
19, 1999, between the Company and Xxxxxx Brothers Inc. (the "CONFIDENTIALITY
AGREEMENT").
SECTION 6.02. Proxy Statement; Schedule 13E-3. (a) As soon as practicable
after the date of this Agreement, the Company shall prepare and file with the
SEC the Proxy Statement, in form and substance reasonably satisfactory to Merger
Sub, relating to the meeting of the Company's stockholders to be held in
connection with the Merger. Merger Sub shall furnish to the Company such
information concerning itself as the Company may reasonably request in
connection with the preparation of the Proxy Statement. The Proxy Statement will
comply in all material respects with applicable federal securities laws, except
that no representation is made by the Company with respect to information
supplied by Merger Sub for inclusion in the Proxy Statement. As promptly as
practicable after the Proxy Statement has been cleared by the SEC, the Company
shall mail the Proxy Statement to its stockholders. The Proxy Statement shall
include the opinion of the Company Financial Advisor referred to in Section 3.05
hereof.
(b) The information provided by each of the Company and Merger Sub for use
in the Proxy Statement shall not, at (i) the time the Proxy Statement (or any
amendment thereof or supplement thereto) is first mailed to the stockholders of
the Company or (ii) the time of the Company stockholders' meeting contemplated
by such Proxy Statement,
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contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein not misleading. If at any time prior to the Effective Time any event or
circumstance relating to any party hereto, or their respective officers or
directors, should be discovered by such party which should be set forth in an
amendment or a supplement to the Proxy Statement, such party shall promptly
inform the Company and Merger Sub thereof and take appropriate action in respect
thereof.
(c) As soon as practicable after the date of this Agreement, Merger Sub,
members of the Management Group and the Company shall file with the SEC a Rule
13E-3 Transaction Statement on Schedule 13E-3 ("SCHEDULE 13E-3"), with respect
to the Merger. Each of the parties hereto agrees to use its reasonable best
efforts to cooperate and to provide each other with such information as any of
such parties may reasonably request in connection with the preparation of the
Schedule 13E-3. The information provided by each of the Company and Merger Sub
for use in the Schedule 13E-3 shall not, at the time the Schedule 13E-3 is filed
with the SEC, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein not misleading. Each party hereto agrees promptly to
supplement, update and correct any information provided by it for use in the
Schedule 13E-3 if and to the extent that it is or shall have become incomplete,
false or misleading.
SECTION 6.03. Action by Stockholders. Except as otherwise required by the
fiduciary duties of the Board of Directors of the Company under applicable law
(as determined in good faith by the Special Committee after consulting with its
outside legal counsel): (a) the Company, acting through its Board of Directors,
shall, in accordance with applicable law, the Company's Certificate of
Incorporation and Bylaws, duly call, give notice of, convene and hold a special
meeting of stockholders (the "COMPANY STOCKHOLDERS' MEETING") as soon as
reasonably practicable after the date of this Agreement for the purpose of
adopting this Agreement and (b) the Company will, through the Board of Directors
based on the recommendation of the Special Committee, recommend to its
stockholders the adoption of this Agreement. Merger Sub and the Management Group
shall vote all shares of Common Stock owned by them in favor of the adoption of
this Agreement.
SECTION 6.04. No Solicitation. (a) The Company agrees that, prior to the
Effective Time, it shall not, and shall not authorize or permit any of its
subsidiaries or any of its or its subsidiaries' directors, officers, employees,
investment bankers, attorneys or other agents or representatives to directly or
indirectly, solicit, initiate or encourage any inquiries or the making of any
proposal or provide any information about the Company or its subsidiaries with
respect to any merger, consolidation or other business combination involving the
Company or its subsidiaries or their respective assets or capital stock (a
"TAKEOVER PROPOSAL") or negotiate, explore or otherwise engage in discussions
with any corporation, partnership, person or other entity or group (other than
Merger Sub, any of its affiliates or representatives) (collectively, a "PERSON")
with respect to any Takeover
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Proposal or enter into any agreement, arrangement or understanding requiring it
to abandon, terminate or fail to consummate the Merger or any other transactions
contemplated by this Agreement; provided, however, that if the Board of
Directors of the Company or the Special Committee determines in good faith,
after consultation with outside counsel, that it is advisable to do so in order
to act in a manner consistent with its fiduciary duties to the Company's
stockholders under applicable law, the Company may, in response to what the
Board of Directors in good faith reasonably believes may be a Superior Proposal
(as defined below), which proposal was not solicited by it and which did not
otherwise result from a breach of this Section 6.04, and subject to providing
prior written notice of its decision to take such action to Merger Sub and
compliance with the other requirements of this Section 6.04, (i) furnish
information with respect to the Company and its subsidiaries to any Person
making a Superior Proposal pursuant to a customary confidentiality agreement and
(ii) participate in discussions or negotiations regarding and execute any
agreements (including but not limited to any Acquisition Agreement), in
connection with such Superior Proposal.
(b) Except as expressly permitted by this Agreement, neither the Board of
Directors of the Company nor the Special Committee shall (i) withdraw or modify
, or propose publicly to withdraw or modify, in a manner adverse to Merger Sub,
the approval or recommendation by the Board of Directors of the Company or such
committee of the Merger or this Agreement, (ii) approve or recommend, or propose
publicly to approve or recommend any Takeover Proposal, or (iii) cause the
Company to enter into any Acquisition Agreement.
(c) In addition to the obligations of the Company set forth in paragraphs
(a) and (b) of this Section 6.04, the Company shall promptly (and in any event
within one day) advise Merger Sub orally and in writing of any request for
information or any Takeover Proposal, the material terms and conditions of such
request or Takeover Proposal (and any amendments or proposed amendments thereto)
and the identity of the person making such request or Takeover Proposal.
(d) Nothing contained in this Section 6.04 shall prohibit the Company or
its Board of Directors, upon the recommendation of the Special Committee, from
taking and disclosing to the Company's stockholders a position with respect to a
tender or exchange offer by a third party pursuant to Rules 14d-9 and 14e-2(a)
promulgated under the Exchange Act or from making such disclosure to the
Company's stockholders or otherwise which, in the judgment of the Special
Committee upon advice of legal counsel, is advisable under applicable law or
rules of any stock exchange; provided, however, that, except as contemplated by
clause (b) of this Section 6.04, neither the Company nor the Board of Directors
nor the Special Committee thereof shall withdraw or modify, or propose publicly
to withdraw or modify, its position with respect to this Agreement or the Merger
or approve or recommend, or propose publicly to approve or recommend, a Takeover
Proposal.
(e) For purposes of this Agreement:
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(i) "SUPERIOR PROPOSAL" means any proposal made by a third party to
acquire, directly or indirectly, including pursuant to a tender offer, exchange
offer, merger, consolidation, business combination, recapitalization,
reorganization, liquidation, dissolution or similar transaction, for
consideration to the Company's stockholders consisting of cash and/or
securities, at least 15% of the shares of the Company's capital stock then
outstanding or all or substantially all of the assets of the Company, on terms
which the Board of Directors, upon the recommendation of the Special Committee
(based upon the advice of its financial advisor), determines in its good faith
reasonable judgment to be more favorable to the Company's stockholders than the
Merger and for which financing, to the extent required, is then committed.
(ii) "ACQUISITION AGREEMENT" means any letter of intent, agreement in
principle, acquisition agreement or other similar agreement, contract or
commitment related to any Takeover Proposal.
SECTION 6.05. Directors' and Officers' Insurance and Indemnification.
(a) From and after the consummation of the Merger, the parties shall, and
shall cause the Surviving Corporation to, indemnify, defend and hold harmless
any person who is now, or has been at any time prior to the date hereof, or who
becomes prior to the Effective Time, an officer or director (the "INDEMNIFIED
PARTY") of the Company and its subsidiaries against all losses, claims, damages,
liabilities, costs and expenses (including attorneys' fees and expenses),
judgments, fines, losses, and amounts paid in settlement, with the written
approval of the Surviving Corporation (which approval shall not be unreasonably
withheld), in connection with any actual or threatened action, suit, claim,
proceeding or investigation (each a "CLAIM") to the extent that any such Claim
is based on, or arises out of, (i) the fact that such person is or was a
director, officer, employee or agent of the Company or any subsidiaries or is or
was serving at the request of the Company or any of its subsidiaries as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, or (ii) this Agreement, or any of the
transactions contemplated hereby, in each case to the extent that any such Claim
pertains to any matter or fact arising, existing, or occurring prior to or at
the Effective Time, regardless of whether such Claim is asserted or claimed
prior to, at or after the Effective Time, to the full extent permitted under
Delaware law or the Company's Certificate of Incorporation, Bylaws or
indemnification agreements in effect at the date hereof.
(b) Merger Sub and the Company agree that all rights to indemnification and
all limitations on liability existing in favor of the Indemnified Party as
provided in the Company's Certificate of Incorporation and Bylaws as in effect
as of the date hereof shall survive the Merger and shall continue in full force
and effect, without any amendment thereto, to the extent such rights are
consistent with the DGCL; provided that in the event any claim or claims are
asserted or made within such six year period, all rights to indemnification in
respect of any such claim or claims shall continue until disposition of any and
all such claims; provided further, that any determination required to be made
with respect to whether an Indemnified Party's conduct complies with the
standards set
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forth under Delaware law, the Company's Certificate of Incorporation or Bylaws
or such agreements, as the case may be, shall be made by independent legal
counsel selected by the Indemnified Party and reasonably acceptable to the
Surviving Corporation; and, provided further, that nothing in this Section 6.05
shall impair any rights or obligations of any present or former directors or
officers of the Company.
(c) The parties shall cause the Surviving Corporation to maintain the
Company's existing officers' and directors' liability insurance policy ("D&O
INSURANCE") for a period of not less than five (5) years after the Effective
Date; provided, that the Surviving Corporation may substitute therefor policies
of substantially similar coverage and amounts containing terms no less
advantageous to such former directors or officers ("SUBSTANTIALLY SIMILAR D&O
INSURANCE") so long as such substitution does not result in gaps or lapses in
coverage; provided, further, if the existing D&O Insurance expires or is
cancelled during such period, Merger Sub or the Surviving Corporation will use
its best efforts to obtain Substantially Similar D&O Insurance; provided,
however, that if the aggregate annual premiums for such D&O Insurance (or
successor insurance policy) at any time during such period exceed 500% of the
per annum rate of premiums currently paid by the Company for such insurance on
the date of this Agreement or $250,000, then the parties will cause the
Surviving Corporation to, and the Surviving Corporation will, provide the
maximum coverage that shall then be available at an annual premium equal to 500%
of such rate (provided, however, that in no event shall the Company be required
to pay any annual premiums in excess of $250,000).
(d) The provisions of this Section 6.05 are intended to be in addition to
the rights otherwise available to the current officers and directors of the
Company by law, charter, statute, bylaw or agreement, and shall operate for the
benefit of, and shall be enforceable by, the Indemnified Parties, their heirs
and personal representatives, and shall be binding on the Surviving Corporation
and its respective successors and assigns.
SECTION 6.06. Officers. Immediately prior to the Effective Time, the
Company shall take all action necessary to appoint as officers of the Company
the Persons designated by Merger Sub.
SECTION 6.07. Further Action; Best Efforts.
(a) Upon the terms and subject to the conditions hereof, each of the
parties hereto shall (i) make promptly its respective filings and thereafter
make any other required submissions under the HSR Act with respect to the Merger
and the other transactions contemplated hereby, and (ii) use its reasonable best
efforts to take, or cause to be taken, all appropriate action, and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations or otherwise to consummate and make effective the Merger
and the other transactions contemplated hereby.
(b) Notwithstanding the provisions of Section 6.06(a), nothing contained in
this Agreement shall obligate Merger Sub to take any action to consummate the
Merger and the other transactions contemplated hereby, the consummation of which
is dependent or
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conditioned on the receipt of any governmental or regulatory approval or
consent, in the event that the approval or consent so received specifically
includes conditions or restrictions in addition to those imposed by laws and
regulations of general applicability as in effect from time to time (including
conditions in addition to those imposed by existing laws and regulations which
require the prior approval of any governmental or regulatory agency to the
taking of any action or the consummation of any transaction), the direct or
indirect effect of which is or would be, to materially restrict, limit or
otherwise subject to penalty Merger Sub in the ownership of its assets or the
conduct of its business. For purposes of the foregoing, a condition, restriction
or limitation arising out of any such approval or consent shall be deemed to be
a material restriction or limitation on Merger Sub (regardless of whether Merger
Sub is a party to or otherwise legally obligated by such consent or approval) to
the extent that the taking of an action or the consummation of a transaction by
Merger Sub would result in Merger Sub, the Company or any subsidiary of the
Company being in material breach or violation of such consent or approval or
otherwise causing such consent or approval to terminate or expire.
(c) In case at any time after the Effective Time any further action is
necessary to carry out the purposes of this Agreement, the proper officers and
directors of each party to this Agreement shall use their reasonable best
efforts to take all such action.
SECTION 6.08. Public Announcements. Merger Sub and the Company shall
consult with each other before issuing any press release or otherwise making any
public statements with respect to this Agreement or the transactions
contemplated hereby and shall not issue any such press release or make any such
public statement without the prior consent of the other party, which consent
shall not be unreasonably withheld; provided, however, that a party may, without
the prior consent of the other party, issue such press release or make such
public statement as may be required by law, regulation or any listing agreement
or arrangement to which the Company or Merger Sub is a party with a national
securities exchange or the Nasdaq Stock Market if it has used all reasonable
efforts to consult with the other party and to obtain such party's consent but
has been unable to do so in a timely manner.
SECTION 6.09. Conveyance Taxes. Merger Sub and the Company shall cooperate
in the preparation, execution and filing of all returns, questionnaires,
applications, or other documents regarding any real property transfer or gains,
sales, use, transfer, value added, stock transfer and stamp taxes, any transfer,
recording, registration and other fees, and any similar taxes which become
payable in connection with the transactions contemplated by this Agreement that
are required or permitted to be filed on or before the Effective Time.
SECTION 6.10. Event Notices. From and after the date of this Agreement
until the Effective Time, the Company shall promptly notify Merger Sub of (i)
the occurrence or nonoccurrence of any event, the occurrence or nonoccurrence of
which has resulted in, or could reasonably be expected to result in, any
condition to the Merger set forth in Article VII, not being satisfied, (ii) the
Company's failure to comply with any covenant or agreement to be complied with
by it pursuant to this Agreement which has resulted in,
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or could reasonably be expected to result in any condition to the Merger set
forth in Article VII, not being satisfied and (iii) any representation or
warranty made by the Company contained in this Agreement that is qualified as to
materiality becoming untrue or inaccurate in any respect or any such
representation or warranty that is not so qualified as to materiality becoming
untrue or inaccurate in any material respect. The Company's delivery of any
notice pursuant to this Section 6.10 shall not cure any breach of any
representation or warranty of the Company contained in this Agreement or
otherwise limit or affect the remedies available hereunder to Merger Sub, and
the inadvertent failure to promptly deliver said notice shall not be deemed a
breach of this Agreement.
ARTICLE VII
CLOSING CONDITIONS
SECTION 7.01. Conditions to Obligations of Each Party to Effect the Merger.
The respective obligations of each party to effect the Merger and the other
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of the following conditions, any or all of which may
be waived, in whole or in part, to the extent permitted by applicable law:
(a) Stockholder Approval. The Company Stockholder Approval shall have been
obtained.
(b) No Order. No Governmental Entity or federal or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is in effect and which
materially restricts, prevents or prohibits consummation of the Merger or the
other transactions contemplated by this Agreement; provided, however,, that the
parties shall use their reasonable best efforts (subject to Section 6.06(b)) to
cause any such decree, judgment, injunction or other order to be vacated or
lifted.
(c) HSR Act. Any waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated, and no action shall
have been instituted by the Department of Justice or the Federal Trade
Commission challenging or seeking to enjoin the consummation of the Merger,
which action shall not have been withdrawn or terminated.
SECTION 7.02. Additional Conditions to Obligations of Merger Sub. The
obligation of Merger Sub to effect the Merger is also subject to satisfaction or
waiver of the following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Company contained in this Agreement shall, if qualified by
materiality, be true and correct, and if not so qualified, be true and correct
in all material respects, in each case as of the Effective Time as though made
on and as of the Effective Time, except (i) for
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changes specifically permitted by this Agreement and (ii) that those
representations and warranties which address matters only as of a particular
date shall remain true and correct as of such date; provided, however, that any
such representation or warranty shall not be deemed to be false or incorrect as
a result of action or inaction taken by any member of the Management Group
between the date of this Agreement and the Closing Date if such action or
inaction was taken without the actual knowledge of a majority of the Special
Committee of the Board of Directors of the Company or with the actual knowledge
of the Board of Directors if the Board instructs the Management Group not to
take any such action, so long as the Board of Directors continues to exercise
its duties to supervise management of the Company consistent with the provisions
of the DGCL.
(b) Agreement and Covenants. The Company shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it at or prior to the Effective
Time.
(c) Dissenting Shares. On the Closing Date, Dissenting Shares shall
aggregate no more than 18% of the then outstanding shares of Common Stock.
(d) Company Material Adverse Effect. Subsequent to the date of this
Agreement, there shall not have occurred an event or events, other than events
affecting the credit markets generally or the ability of financial institutions
to raise capital (including the Credit Market Events) which, individually or in
the aggregate, has had or could reasonably be expected to have a Company
Material Adverse Effect; provided, however, that this condition shall not be
deemed to have been breached if the Company Material Adverse Effect is
significantly the result of (i) any action or inaction taken by a member of the
Management Group specifically identified under Article V and taken in
contravention of the directions to be given to the management of the Company by
the Board of Directors pursuant to Article V (such action to be accomplished by
reason of resolutions adopted by the Board of Directors as of the date hereof)
or (ii) any action or inaction not subject to Article V taken by a member of the
Management Group and (A) said member (i) acted in a manner inconsistent with, or
failed to act in a manner consistent with, the business judgment rule as
interpreted in accordance with Delaware law or (ii) reasonably believed that
such action or inaction should have been communicated to the Special Committee
and did not so communicate to the Special Committee prior to taking such action
or inaction or (B) such action or inaction was taken without the actual
knowledge of a majority of the Special Committee and out of the ordinary course
of business consistent with past practices.
(e) Market Material Adverse Effect. On the Closing Date, a Market Material
Adverse Effect shall not have occurred and be continuing.
(f) Officer's Certificate. Merger Sub shall have received a certificate of
an appropriate officer of the Company to the effect that the conditions set
forth in Section 7.02(a), (b), (c) and (d) have been satisfied at the Effective
Time.
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(g) Third Party Consents. The Company and its subsidiaries shall have
obtained all third party consents identified with an asterisk in Section 3.04 of
the Company Disclosure Schedule and the same shall be in full force and effect
at the closing.
(h) Management. On the Closing Date, Xxxxx Xxxxxxx shall continue to
actively serve as an executive officer of the Company.
(i) Litigation. There shall be no claim, suit, action or proceeding pending
or, to the knowledge of the Company, threatened against the Company or any of
its subsidiaries which questions or challenges the validity of this Agreement,
the transactions contemplated hereby or any action taken or to be taken by the
Company or which attempts to restrain, enjoin or prohibit the transactions
contemplated hereby.
SECTION 7.03. Additional Conditions to Obligations of the Company. The
obligation of the Company to effect the Merger is also subject to the
satisfaction or waiver of the following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of Merger Sub contained in this Agreement shall, if qualified by
materiality, be true and correct, and if not so qualified, be true and correct
in all material respects, in each case as of the Effective Time as though made
on and as of the Effective Time, except (i) for changes specifically permitted
by this Agreement and (ii) that those representations and warranties which
address matters only as of a particular date shall remain true and correct as of
such date.
(b) Agreement and Covenants. Merger Sub shall have performed or complied in
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it at or prior to the Effective
Time.
(c) Officer's Certificate. The Company shall have received a certificate of
an appropriate officer of Merger Sub to the effect that the conditions set forth
in Section 7.03(a) and (b) have been satisfied at the Effective Time.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, whether before or
after adoption of this Agreement by the stockholders of the Company:
(a) by mutual written consent of the Company (acting through the Special
Committee) and Merger Sub;
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(b) by either Merger Sub or the Company if the Effective Time shall not
have occurred on or before July 31, 2000; provided, however, that the right to
terminate this Agreement under this Section 8.01(b) shall not be available to
the party whose failure to fulfill any obligation under this Agreement shall
have been the cause of, or resulted in, the failure of the Effective Time to
occur on or before such date;
(c) by either Merger Sub or the Company, if any permanent injunction,
order, decree, ruling or other action by any Governmental Entity preventing the
consummation of the Merger shall have become final and nonappealable;
(d) by Merger Sub, if (i) the Board of Directors of the Company (acting
through the Special Committee) withdraws, modifies or changes its approval or
recommendation of this Agreement in a manner adverse to Merger Sub or shall have
resolved to do so, (ii) the Board of Directors of the Company shall have
recommended to the stockholders of the Company a Takeover Proposal or shall have
resolved to do so, or (iii) a tender offer or exchange offer for at least 20% of
the outstanding shares of capital stock of the Company is commenced and the
Board of Directors of the Company (acting through the Special Committee) fails
to recommend against acceptance of such tender offer or exchange offer by its
stockholders (including by taking no position with respect to the acceptance of
such tender offer or exchange offer by its stockholders);
(e) by Merger Sub or the Company, if this Agreement shall fail to receive
the Company Shareholder Approval for adoption at the Company Stockholders'
Meeting or any adjournment or postponement thereof;
(f) by Merger Sub, upon a breach of any material representation, warranty,
covenant or agreement on the part of the Company set forth in this Agreement, or
if any representation or warranty of the Company that is qualified as to
materiality shall have become untrue, or if any representation or warranty of
the Company that is not so qualified shall have become untrue in any material
respect, in each case such that the conditions to the Merger set forth in
Article VII would not be satisfied (a TERMINATING COMPANY BREACH"); provided,
however, that, if such Terminating Company Breach is curable by the Company
through the exercise of its reasonable best efforts and for so long as the
Company continues to exercise such reasonable best efforts, Merger Sub may not
terminate this Agreement under this Section 8.01(f);
(g) by the Company, upon a breach of any material representation, warranty,
covenant or agreement on the part of Merger Sub set forth in this Agreement, or
if any representation or warranty of Merger Sub that is qualified as to
materiality shall have become untrue, or if any representation or warranty of
Merger Sub that is not so qualified shall have become untrue in any material
respect, in each case such that the conditions to the Merger set forth in
Article VII would not be satisfied (a TERMINATING MERGER SUB BREACH"); provided,
however, that, if such Terminating Merger Sub Breach is curable by Merger Sub
through the exercise of its reasonable best efforts and for so long as Merger
Sub continues to exercise such reasonable best efforts, the Company may not
terminate this Agreement under this Section 8.01(g);
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(h) by the Company, to allow the Company to enter into an Acquisition
Agreement in respect of a Superior Proposal if the Board of Directors of the
Company (upon recommendation of the Special Committee) determines, following
receipt of advice of independent legal counsel, that failure to do so would
cause the Board of Directors of the Company to breach its fiduciary duties under
applicable law; provided, however, that the Company may not terminate this
Agreement pursuant to this Section 8.01(h) until five business days have elapsed
following delivery to Merger Sub of written notice of such determination of the
Company (which written notice will inform Merger Sub of the material terms and
conditions of the Superior Proposal) and the Company shall and shall cause its
legal and financial advisors to, during such five business day period, negotiate
in good faith with Merger Sub to make such adjustments to the terms and
conditions of this Agreement as would enable the Company to proceed with the
transactions contemplated herein; and provided, further, however, that such
termination under this Section 8.01(h) shall not be effective until the Company
has made payment to Merger Sub of the amounts required to be paid pursuant to
Section 8.05(b).
SECTION 8.02. Effect of Termination. Except as provided in Section 8.05 or
Section 9.01(b), in the event of the termination of this Agreement pursuant to
Section 8.01, this Agreement shall forthwith become void, there shall be no
liability on the part of any party hereto, or any of their respective officers
or directors, to the other and all rights and obligations of any party hereto
shall cease, subject to the remedies of the parties set forth in Sections
8.05(b) and (c); provided, however, that nothing herein shall relieve any party
from liability for the willful breach of any of its representations, warranties,
covenants or agreements set forth in this Agreement; provided further, however,
that the Company shall not be deemed to have willfully breached its
representations, warranties, covenants or agreements set forth in this Agreement
as a result of action or inaction taken by any member of the Management Group
between the date of this Agreement and the Closing Date if such action or
inaction was taken without the actual knowledge of a majority of the Special
Committee of the Board of Directors of the Company, or with the actual knowledge
of the Board of Directors if the Board instructs the Management Group not to
take such action, so long as the Board of Directors continues to exercise its
duties to supervise management of the Company consistent with the provisions of
the DGCL.
SECTION 8.03. Amendment. Before or after adoption of this Agreement by the
stockholders of the Company, this Agreement may be amended by the parties hereto
at any time prior to the Effective Time; provided, however, that (a) any such
amendment shall, on behalf of the Company, have been approved by the Special
Committee and (b) after adoption of this Agreement by the stockholders of the
Company, no amendment which under applicable law may not be made without the
approval of the stockholders of the Company may be made without such approval.
This Agreement may not be amended except by an instrument in writing signed by
the parties hereto.
SECTION 8.04. Waiver. At any time prior to the Effective Time, either the
Company (acting through the Special Committee), on the one hand, or Merger Sub,
on the other, may (a) extend the time for the performance of any of the
obligations or other acts of the other party hereto, (b) waive any inaccuracies
in the representations and
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warranties of the other party contained herein or in any document delivered
pursuant hereto and (c) waive compliance by the other party with any of the
agreements or conditions contained herein. Any such extension or waiver shall be
valid only if set forth in an instrument in writing signed by the party or
parties to be bound thereby and, with respect to extensions or waivers granted
by the Company, if the Special Committee shall have approved such waiver or
extension.
SECTION 8.05. Fees, Expenses and Other Payments. (a) Subject to paragraphs
(b) and (c) of this Section 8.05, all costs and expenses (including any expenses
related to any claims or litigation in connection with the transactions
contemplated by this Agreement, or any settlement thereof), including, without
limitation, fees and disbursements of counsel, financial advisors and
accountants and other out-of-pocket expenses, incurred or to be incurred by the
parties hereto (which in the case of Merger Sub includes those incurred or to be
incurred by its equity investors) in connection with the transactions
contemplated hereby (with respect to such party, its "EXPENSES"), shall be borne
solely and entirely by the party which has incurred such costs and expenses;
provided, however, that all costs and expenses related to printing and mailing
the Proxy Statement shall be borne by the Company.
(b) The Company agrees that, if (i) the Company shall terminate this
Agreement pursuant to Section 8.01(h), (ii) Merger Sub shall terminate this
Agreement pursuant to Section 8.01(d)(i) or 8.01(d)(ii), or (iii) (A) Merger Sub
shall terminate this Agreement pursuant to Section 8.01(e) or Section 8.01(f),
(B) prior to the time of such termination, any person shall have made a public
announcement or otherwise communicated to the Company and its stockholders with
respect to a Takeover Proposal with respect to the Company, and (C) within six
(6) months after the date this Agreement is terminated, the Company enters into
a definitive agreement with respect to a Takeover Proposal or a Takeover
Proposal is consummated, then in accordance with Section 8.05(d), after such
termination, or in the case of clause (iii) upon the entering into an agreement
with respect to, or consummation of such Takeover Proposal, the Company shall
pay to Merger Sub an amount equal to Merger Sub's documented Expenses in
connection with this Agreement and the transactions contemplated hereby (which
amount shall not exceed $500,000) and a termination fee in the amount of
$1,500,000 (the "TERMINATION FEE" and together with such Expenses, the
"TERMINATION AMOUNT"); provided, however, that in no event shall the Company be
obligated to pay more than one Termination Amount.
(c) The Company agrees that it shall pay to Merger Sub an amount equal to
Merger Sub's documented Expenses directly related to this Agreement and the
transactions contemplated hereby (which amount shall not exceed $500,000) if
this Agreement is terminated pursuant to Section 8.01(f) based upon a breach of
a covenant or agreement or of any of the warranties and representations
contained in Sections 3.01 (Organization and Qualification; Subsidiaries), 3.02
(Capitalization), 3.03 (Authority Relative to this Agreement), 3.05 (Opinion of
Financial Advisor), 3.06 (Board Approval), 3.13 (Proxy Statement) or 3.14
(Brokers).
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(d) Except as otherwise provided in this Agreement, any payment required to
be made pursuant to Section 8.05(b) or Section 8.05(c) shall be made to Merger
Sub by the Company not later than ten business days after delivery to the
Company by Merger Sub of notice of demand for payment and shall be made by wire
transfer or immediately available funds to an account designated by Merger Sub.
(e) Merger Sub agrees that it shall pay to the Company an amount equal to
the Company's documented Expenses directly related to this Agreement and the
transactions contemplated hereby (which amount shall not exceed $500,000) if
this Agreement is terminated pursuant to Section 8.01(g). Any payment required
to be made pursuant to this Section 8.05(e) shall be made to the Company by
Merger Sub not later than ten business days after delivery to Merger Sub by the
Company of notice of demand for payment and shall be made by wire transfer or
immediately available funds to an account designated by the Company.
(f) The parties hereto acknowledge that the agreements contained in this
Section 8.05 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, neither the Company nor Merger
Sub would enter into this Agreement; accordingly, if either party fails to pay
promptly the Termination Amount and/or expenses as applicable, and, in order to
obtain such payment, the receiving party commences a suit which results in a
judgment against the paying party for the Termination Amount and/or expenses, as
applicable, the paying party shall pay to the receiving party its expenses
incurred in connection with such suit, together with interest on the Termination
Amount and/or expenses, as applicable, at the prime rate published as the
average rate in the "Money Rates" section of The Wall Street Journal on the date
such payment was required to be made.
(g) Subject to the following sentences, the payments required by this
Section 8.05 shall constitute liquidated damages in full and complete
satisfaction of, and shall be the sole and exclusive remedy of the parties for
any loss, liability, damage or claim arising out of or in conjunction with the
transactions contemplated in this Agreement, including any termination of this
Agreement pursuant to Section 8.01 and shall not constitute a penalty.
Notwithstanding the foregoing sentence, if (i) this Agreement is terminated by
Merger Sub as a result of a willful breach of any representation, warranty,
covenant or agreement by the Company and no Termination Fee is required to be
paid pursuant to Section 8.05, Merger Sub may pursue any remedies available to
it at law or in equity and shall be entitled to recover such additional amounts
as Merger Sub may be entitled to receive at law or in equity or (ii) this
Agreement is terminated by the Company as a result of a willful breach of any
representation, warranty, covenant or agreement by Merger Sub, the Company may
pursue any remedies available to it at law or in equity and shall be entitled to
recover such amounts as the Company may be entitled to receive at law or in
equity.
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ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Effectiveness of Representations, Warranties and Agreements.
(a) Except as set forth in Section 9.01(b), the representations, warranties and
agreements of each party hereto shall remain operative and in full force and
effect, regardless of any investigation made by or on behalf of any other party
hereto, any person controlling any such party or any of their respective
officers or directors, whether prior to or after the execution of this
Agreement.
(b) The representations, warranties and agreements in this Agreement shall
terminate at the Effective Time or upon the termination of this Agreement
pursuant to Article VIII, except that the agreements set forth in Articles I, II
and IX and Section 6.05 shall survive the Effective Time and those set forth in
Sections 8.02 and 8.05 and Article IX shall survive termination.
SECTION 9.02. Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing (including telecopy or
similar writing) and shall be effective (i) if given by telecopy, when such
telecopy is transmitted to the telecopy number specified in this Section 9.02
and the appropriate telecopy confirmation is received or (ii) if given by any
other means, when delivered at the address specified in this Section 9.02 (or at
such other address for a party as shall be specified by like notice):
(a) If to Merger Sub:
c/o BNC Mortgage, Inc.
0000 XxXxx Xxxxxx
Xxxxxx, XX 00000-0000
Attention: Xx. Xxxxx X. Xxxxxxx
Telecopy: (000) 000-0000
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with copies to:
Xxxxxx Brothers Inc.
0 Xxxxx Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx XxXxxxx, Senior Vice President,
Xxxxx Xxxxxx, Senior Vice President
Telecopy: (000) 000-0000
Weil, Gotshal & Xxxxxx LLP
0000 X. Xxxxxx, X.X., Xxxxx 000
Xxxxxxxxxx, XX. 00000
Attention: W. Xxxxxxx Xxxx, Esq.
Telecopy: (000) 000-0000
Troop, Steuber, Pasich, Reddick, & Xxxxx, LLP
0000 Xxxxxxx Xxxx Xxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxx, Esq.
Telecopy: (000) 000-0000
if to the Company to:
BNC Mortgage, Inc.
0000 XxXxx Xxxxxx
Xxxxxx, XX 00000-0000
Attention: Special Committee of the Board of Directors
Telecopy: (000) 000-0000
with a copy to:
Xxxxxxxxxxx & Xxxxxxxx LLP
0000 Xxxxxxxx Xxxx.
Xxxxxxx Xxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Telecopy: (000) 000-0000
SECTION 9.03. Certain Definitions. For purposes of this Agreement, the
term:
(a) "AFFILIATE" means a person that, directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control
with, the first mentioned person;
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(b) "BUSINESS DAY" means any day other than a day on which (i) banks in the
State of New York are authorized or obligated to be closed or (ii) the SEC or
The Nasdaq National Market is closed;
(c) "COMPANY MATERIAL ADVERSE EFFECT" shall mean any change or effect that
is (after giving effect to any appropriate reserves for such matter on the
financial statements included in the Company SEC Documents filed prior to the
date hereof) materially adverse to the business, prospects, results of
operations, assets, liabilities or financial condition of the Company and its
subsidiaries, taken as a whole, or any event, matter, condition or effect which
precludes the Company from performing its material obligations under this
Agreement or the consummation of the transactions contemplated herein.
(d) "CONTROL" (including the terms "controlled," "controlled by" and "under
common control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the management or
polices of a person or entity, whether through the ownership of stock or as
trustee or executor, by contract or credit arrangement or otherwise; and
(e) "CREDIT MARKET EVENTS" means any of the following events: (i) a
limitation (whether or not mandatory) by any United States Government Entity
which affects the extension of credit by banks or other United States financial
institutions; (ii) interest rate increases by the Federal Reserve Bank of the
United States; (iii) the implementation of previously announced proposed changes
to capital requirements for sub-prime originators and investors; (iv) a
disruption or adverse change in the financial or capital markets generally; (v)
an event or events that affects the "repo market" or comparable "lending market"
for financing debt obligations secured by residential mortgage loans or affects
the ability of mortgage lenders generally to finance residential mortgage loans
through the "repo market" or "lending market" with traditional counterparties;
or (vi) an event or events that affects the "securities market" for securities
backed by residential mortgage loans or mortgage lenders generally not being
able to sell securities backed by residential mortgage loans.
(f) "MANAGEMENT GROUP" means collectively, Xxxxx X. Xxxxxxx, Xxxxx X.
Xxxxx, Xx Xxxxxx, Xxxx Xxxxxx-Haeghen, Xxxxxx Xxxx and Xxxxx Xxxxxxxx.
(g) "MARKET MATERIAL ADVERSE EFFECT" means the occurrence of any of the
following: (i) a limitation (whether or not mandatory) by any United States
Governmental Entity which materially and adversely affects, or any other event
which materially affects, the extension of credit by banks or other United
States financial institutions, other than interest rate increases by the Federal
Reserve Bank of the United States, and other than the implementation of any
previously announced proposed changes to capital requirements for sub-prime
originators and investors the effect of which would be to materially impair the
Company's ability to conduct its business; (ii) a material disruption or
material adverse change in the financial or capital markets generally, the
effect of which effectively bars access by financial services entities to said
markets; (iii) an event
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or events that results in the effective absence of a "repo market" or comparable
"lending market" for financing debt obligations secured by residential mortgage
loans or in the inability of mortgage lenders generally to finance residential
mortgage loans through the "repo market" or "lending market" with traditional
counterparties; or (iv) an event or events that results in the effective absence
of a "securities market" for securities backed by residential mortgage loans or
in mortgage lenders generally not being able to sell securities backed by
residential mortgage loans.
(h) "MERGER SUB MATERIAL ADVERSE EFFECT" means a material adverse effect on
the financial condition of Merger Sub and its subsidiaries, taken as a whole, or
any event, matter, condition or effect which precludes Merger Sub from
performing its material obligations under this Agreement or the consummation of
the transactions contemplated herein
(i) "OPTION" means any stock option, stock appreciation right or any other
award providing for the issuance or grant of any other interest in respect of
the capital stock of the Company or any subsidiary of the Company.
(j) "PERSON" means any person or any corporation, partnership, limited
liability company or other legal entity.
(k) "SUBSIDIARY" or "SUBSIDIARIES" of any person means any corporation,
partnership, joint venture or other legal entity of which such person (either
alone or through or together with any other subsidiary) owns, directly or
indirectly, at least a majority of the securities or other interests having by
their terms ordinary voting power to elect a majority of the Board of Directors
or others performing similar functions with respect to such corporation or other
organization.
SECTION 9.04. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 9.05. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
SECTION 9.06. Entire Agreement. This Agreement and the other documents
delivered in connection herewith constitutes the entire agreement of the parties
and
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supersedes all prior agreements and undertakings between the parties with
respect to the subject matter hereof.
SECTION 9.07. Assignment. This Agreement shall not be assigned by operation
of law or otherwise and any purported assignment shall be null and void,
provided that Merger Sub may assign its rights, but not its obligations, under
this Agreement to any of its subsidiaries.
SECTION 9.08. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied (other than the provisions of Section 6.05, which provisions
are intended to benefit and may be enforced by the beneficiaries thereof), is
intended to or shall confer upon any person any right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement.
SECTION 9.09. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without regard
to the conflict of laws rules thereof.
SECTION 9.10. Submission to Jurisdiction; Waiver of Jury Trial. (a) Each
party hereto irrevocably agrees that any legal action or proceeding with respect
to this Agreement or for recognition and enforcement of any judgment in respect
hereof brought by the other party hereto or its successors or assigns may be
brought and determined in the Court of Chancery, or other courts, of the State
of Delaware, and each party hereto hereby irrevocably submits with regard to any
such action or proceeding for itself and in respect to its property, generally
and unconditionally, to the nonexclusive jurisdiction of the aforesaid courts.
Each party hereto hereby irrevocably waives, and agrees not to assert, by way of
motion, as a defense, counterclaim or otherwise, in any action or proceeding
with respect to this Agreement, (i) the defense of sovereign immunity, (ii) any
claim that it is not personally subject to the jurisdiction of the courts for
any reason other than the failure to serve process in accordance with this
Section 9.10, (iii) that it, or its property, is exempt or immune from
jurisdiction of any such court or from any legal process commenced in such
courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise),
and (iv) to the fullest extent permitted by applicable law, that (x) the suit,
action or proceeding in any such court is brought in an inconvenient forum, (y)
the venue of such suit, action or proceeding is improper and (z) this Agreement,
or the subject matter hereof, may not be enforced in or by such courts.
(b) The parties hereto waive all right to trial by jury in any action or
proceeding to enforce or defend any rights under this Agreement and any document
executed in connection herewith.
SECTION 9.11. Enforcement of this Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached.
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It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof, this being in addition to any other remedy to
which they are entitled at law or in equity.
SECTION 9.12. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
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IN WITNESS WHEREOF, the Company and Merger Sub have caused this Agreement
to be executed as of the date first written above by their respective officers
thereunto duly authorized.
COMPANY:
BNC MORTGAGE, INC.
By: /s/ Xxxx Xxxxxxx
------------------------------------
Name:
Title:
MERGER SUB:
BNCM ACQUISITION CO.
By: /s/ Xxxx X. Xxxxxx
------------------------------------
Name:
Title:
