EXHIBIT 2.1
EXECUTION COPY
STOCK PURCHASE AGREEMENT
dated as of June 13, 2002
among
COLUMBIA NATIONAL HOLDINGS, INC.,
COLUMBIA NATIONAL, INCORPORATED
and
AMERICAN HOME MORTGAGE HOLDINGS, INC.
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms..........................................
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale..............................................
SECTION 2.02. Purchase Price for the Shares..................................
SECTION 2.03. Closing........................................................
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE COMPANY
SECTION 3.01. Incorporation and Authority of the Seller......................
SECTION 3.02. Incorporation and Qualification of the Company.................
SECTION 3.03. Capital Stock of the Company; Subsidiaries.....................
SECTION 3.04. Ownership of Shares............................................
SECTION 3.05. Share Ownership................................................
SECTION 3.06. No Conflict....................................................
SECTION 3.07. Possession of Shares...........................................
SECTION 3.08. Consents and Approvals.........................................
SECTION 3.09. Financial Information..........................................
SECTION 3.10. Absence of Undisclosed Liabilities.............................
SECTION 3.11. Absence of Certain Changes or Events...........................
SECTION 3.12. Litigation.....................................................
SECTION 3.13. Compliance with Laws...........................................
SECTION 3.14. Licenses and Permits...........................................
SECTION 3.15. Books and Records..............................................
SECTION 3.16. Intellectual Property Rights...................................
SECTION 3.17. Real Property..................................................
SECTION 3.18. Contracts......................................................
SECTION 3.19. Insurance......................................................
SECTION 3.20. Accounts; Lockboxes; Safe Deposit Boxes........................
SECTION 3.21. Employee Benefit Matters; Labor Matters........................
SECTION 3.22. Taxes..........................................................
SECTION 3.23. Brokers........................................................
SECTION 3.24. Counsel........................................................
SECTION 3.25. Absence of Certain Activities..................................
SECTION 3.26. Taxable Income.................................................
ARTICLE IV
MORTGAGE BANKING REPRESENTATIONS OF THE SELLER AND THE COMPANY
SECTION 4.01. Portfolios and Listed Agreements...............................
SECTION 4.02. Enforceability of Listed Agreements............................
SECTION 4.03. Compliance with Listed Agreements..............................
SECTION 4.04. Advances.......................................................
SECTION 4.05. No Recourse....................................................
SECTION 4.06. Portfolio Representations and Warranties.......................
SECTION 4.07. Loan Level.....................................................
SECTION 4.08. Pipeline Mortgage Loan.........................................
SECTION 4.09. Mortgage Banking Licenses and Qualification....................
SECTION 4.10. Mortgage Banking Compliance....................................
SECTION 4.11. Custodial Accounts.............................................
SECTION 4.12. Environmental Matters..........................................
SECTION 4.13. Pool Certification.............................................
SECTION 4.14. Servicing......................................................
SECTION 4.15. Ongoing Servicing Operations...................................
SECTION 4.16. ARM Loans......................................................
SECTION 4.17. Tax Service Contracts; Flood Contracts and Certifications......
SECTION 4.18. Release/Reconveyance Processing................................
SECTION 4.19. Investor Remittances and Reporting.............................
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER
SECTION 5.01. Incorporation and Authority....................................
SECTION 5.02. No Conflict....................................................
SECTION 5.03. Consents and Approvals.........................................
SECTION 5.04. Absence of Litigation..........................................
SECTION 5.05. Investment Purpose.............................................
SECTION 5.06. Financing......................................................
SECTION 5.07. Brokers........................................................
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Conduct of Business Prior to the Closing.......................
SECTION 6.02. Business Covenants.............................................
SECTION 6.03. Transition.....................................................
SECTION 6.04. Investigation..................................................
SECTION 6.05. Access to Information..........................................
SECTION 6.06. Books and Records..............................................
SECTION 6.07. Confidentiality Agreement......................................
SECTION 6.08. Regulatory and Other Authorizations; Consents..................
SECTION 6.09. Transfer Tax...................................................
SECTION 6.10. FIRPTA Certificates............................................
SECTION 6.11. Certain Tax Matters............................................
SECTION 6.12. Use of Name....................................................
SECTION 6.13. Notification of Material Change................................
SECTION 6.14. Further Action.................................................
SECTION 6.15. Directors' and Officers' Liability.............................
SECTION 6.16. Purchaser Offering.............................................
SECTION 6.17. Restructuring..................................................
ARTICLE VII
EMPLOYEE MATTERS
SECTION 7.01. Continuation of Benefits.......................................
SECTION 7.02. Service Recognition............................................
SECTION 7.03. Succession.....................................................
SECTION 7.04. Survival.......................................................
ARTICLE VIII
TAX
SECTION 8.01. Tax Return Filings.............................................
SECTION 8.02. Cooperation....................................................
SECTION 8.03. Tax Sharing Agreements.........................................
ARTICLE IX
CONDITIONS TO CLOSING
SECTION 9.01. Conditions to Obligations of the Seller........................
SECTION 9.02. Conditions to Obligations of the Purchaser.....................
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
SECTION 10.01. Termination...................................................
SECTION 10.02. Effect of Termination.........................................
SECTION 10.03. Waiver........................................................
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01. Non-Survival of Representations, Warranties, Covenants
and Agreements.............................................
SECTION 11.02. Expenses......................................................
SECTION 11.03. Notices.......................................................
SECTION 11.04. Public Announcements..........................................
SECTION 11.05. Headings......................................................
SECTION 11.06. Severability..................................................
SECTION 11.07. Entire Agreement; Consequential Damages.......................
SECTION 11.08. Assignment....................................................
SECTION 11.09. No Third-Party Beneficiaries..................................
SECTION 11.10. Amendment; Waiver.............................................
SECTION 11.11. Governing Law.................................................
SECTION 11.12. Time of Essence...............................................
SECTION 11.13. Counterparts..................................................
SECTION 11.14. Waiver of Jury Trial..........................................
STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of June 13,
2002, among Columbia National Holdings, Inc., a corporation organized and
existing under the laws of the State of Delaware (the "Seller"), American Home
Mortgage Holdings, Inc., a corporation organized and existing under the laws of
the State of Delaware (the "Purchaser"), and Columbia National, Incorporated, a
corporation organized and existing under the laws of the State of Maryland (the
"Company").
W I T N E S S E T H:
WHEREAS, the Seller owns all of the issued and outstanding shares
(the "Shares") of common stock, without par value, of the Company; and
WHEREAS, the Seller wishes to sell to the Purchaser, and the
Purchaser wishes to acquire from the Seller, the Shares, upon the terms and
subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants hereinafter set forth, and intending to be legally
bound hereby, the Company, the Seller and the Purchaser hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Action" means any claim, suit, action, inquiry, proceeding or
investigation by or before any court, arbitrator or administrative, governmental
or regulatory authority or body.
"Advances" means unreimbursed amounts that have been advanced by the
Company and its Subsidiaries with respect to Mortgage Loans (including, without
limitation, payments of principal, interest, taxes and insurance, ground rents,
assessments, attorneys' fees, property preservation fees and similar charges)
pursuant to any Servicing Agreement or Master Servicing Agreement.
"Affiliate" of a specified Person means a Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by or is
under common control with such specified Person.
"Agency" means FHA, FHLMC, FNMA, GNMA, HUD, VA or a State Agency, as
applicable.
"ALTA" means the American Land Title Association or any successor.
"Approved Mortgagee" has the meaning specified in Section 4.06(s).
"Assets" of any Person means all assets and properties of every
kind, nature, character and description (whether real, personal or mixed,
whether tangible or intangible, whether absolute, accrued, contingent, fixed or
otherwise and wherever situated), including the goodwill related thereto, owned
or leased by such Person, including without limitation cash, cash equivalents,
accounts and notes receivable, chattel paper, documents, instruments, general
intangibles, real estate, equipment, inventory, goods and Intellectual Property
Rights.
"Balance Sheet" means the consolidated balance sheet of the Company
and its Subsidiaries as of December 31, 2001.
"Business" means the business of origination, sale and servicing of
residential mortgage loans throughout the United States as currently conducted
by the Company and its Subsidiaries.
"Business Combination" means any merger, consolidation or
combination, or any sale, dividend, split or other disposition of capital stock
or other equity interests, or any sale, dividend or other disposition of all or
substantially all of the Assets, of the Company.
"Business Day" means a day of the year on which banks are not
required or authorized to be closed in the State of New York.
"Closing" has the meaning specified in Section 2.03(a).
"Closing Date" has the meaning specified in Section 2.03(a).
"Company" has the meaning specified in the introduction.
"Company Group" means any combined or consolidated group of which
the Company or any of its Subsidiaries is currently a member.
"Company Property" has the meaning specified in Section 4.12(b).
"Confidentiality Agreement" means the letter agreement between the
Company and the Purchaser dated July 31, 2001.
"Contract Party" means any Person, other than an Investor, who is a
party to a Servicing Agreement, Master Servicing Agreement, Mortgage Sale
Agreement or Correspondent/Broker Agreement.
"control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as a trustee or
executor (in each case, acting in a fiduciary capacity), of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, as trustee or executor (in each
case, acting in a fiduciary capacity), by contract or credit arrangement or
otherwise.
"Co-op Lease" means, with respect to a Co-op Loan, the proprietary
lease with respect to a dwelling unit occupied by the Mortgagor and relating to
the stock allocated to such dwelling unit.
"Co-op Loan" means a Mortgage Loan secured by the pledge of the
evidence of ownership allocated to a dwelling unit in a residential cooperative
housing corporation and a collateral assignment of the related Co-op Lease.
"Correspondent/Broker Agreement" means any agreement between the
Company or any Subsidiary, on the one hand, and a broker, correspondent or other
originator or purchaser of mortgage loans, on the other hand, pursuant to which
such broker, correspondent or mortgage loan originator or purchaser may sell
mortgage loans to the Company or its Subsidiary or deliver mortgage loan
applications to the Company or its Subsidiary.
"Custodial Accounts" has the meaning specified in Section 4.11(a).
"December Statements" means the consolidated financial statements of
the Company and its Subsidiaries as of December 31, 2001.
"Disclosure Schedule" means the Disclosure Schedule dated as of the
date hereof delivered to the Purchaser by the Seller.
"Employee Plans" has the meaning specified in Section 3.21(a).
"Encumbrance" means any and all pledges, liens, security interests,
mortgages, charges, adverse claims of ownership or uses, or other understandings
or arrangements or other restrictions on title or transfer of any nature
whatsoever.
"Environmental Claim" means any and all legally enforceable
administrative, regulatory or judicial actions, suits, demands, demand letters,
directives, orders, claims, liens, investigations, requests for information,
proceedings, or written notices of noncompliance or violation by any person
(including, without limitation, any governmental authority) alleging liability
or potential liability (including, without limitation, potential responsibility
for or liability for enforcement, investigatory costs, cleanup costs,
governmental response costs, removal costs, remedial costs, natural resources
damages, closure costs, supplemental environmental projects, property damages,
personal injuries, penalties, and leaking underground storage tanks) arising out
of, based on or resulting from (A) the presence, or Release or threatened
Release, of any Hazardous Materials at any location owned, operated, leased or
managed by Company, or (B) circumstances forming the basis of any violation or
alleged violation of any Environmental Law or Environmental Permit, or (C) any
and all claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting from
the presence or Release of any Hazardous Materials.
"Environmental Law" means all applicable legally enforceable
foreign, Federal, state and local laws (including common law), statutes,
ordinances, codes, rules, requirements, regulations, orders, judgments, decrees,
injunctions, or agreements with or by any governmental authority relating to
pollution, the environment (including, without limitation, air, surface water,
groundwater, land surface or subsurface strata) or protection of human health as
it relates to the environment including, without limitation, laws and
regulations relating to Releases of Hazardous Materials, or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials or relating to management of
asbestos or polychlorinated biphenyls in buildings, structures, or equipment,
including, without limitation, as amended, the United States Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. ss. 9601 et
seq. ("CERCLA"), Emergency Planning & Community Right to Know Act, 42 U.S.C. ss.
11001 et seq., Solid Waste Disposal Act and Resource Conservation and Recovery
Act, 42 U.S.C. ss. 6901, et seq. ("RCRA"), Clean Air Act, 42 U.S.C. ss. 7401, et
seq., Federal Water Pollution Control Act, 33 U.S.C. ss. 1251, et seq., Oil
Pollution Act of 1990, 33 U.S.C. ss. 2701, et seq., and Toxic Substances Control
Act, 15 U.S.C. ss. 2601 et seq.
"Environmental Permit" means all permits, licenses, approvals,
consents, variances, waivers, exceptions, and any other authorizations from
governmental authorities which are required in respect of a business, its
operations, facilities, assets or other activities or real and personal
properties under any applicable Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"executive officer" means an officer of the Seller or the Company
with a position of Executive Vice President or higher.
"Extended Financing Date" has the meaning specified in Section
6.02(c).
"Extended Warehouse Loans" means those Mortgage Loans in the
Warehouse Loan Portfolio that are not readily salable under existing Investment
Commitments due to one or more failures to conform to all of the terms and
conditions of such Investment Commitments.
"FHA" means the Federal Housing Administration or any successor
thereto.
"FHA Loans" means Mortgage Loans which are insured or are eligible
to be insured by FHA.
"FHLMC" means Xxxxxxx Mac or any successor thereto.
"FNMA" means Xxxxxx Mae or any successor thereto.
"Financial Statements" has the meaning specified in Section 3.09.
"Foreclosure" means the acquisition of title to a Mortgaged Property
in a foreclosure sale or by a deed in lieu of foreclosure or pursuant to any
other comparable procedure allowed under applicable Regulation.
"GAAP" means generally accepted accounting principles in the United
States.
"GNMA" means the Government National Mortgage Association or any
successor thereto.
"Hazardous Material" means (A) any petroleum or any by-products or
fractions thereof, asbestos in any form that is or could become friable, urea
formaldehyde foam insulation, polychlorinated biphenyls, lead, lead based paint,
radon or other radioactive material, and (B) any chemicals, materials or
substances, including, without limitation, waste materials, raw materials,
byproducts, coproducts or finished products, which are defined as, or regulated
as, or included in the definition of, "hazardous substances," "hazardous
wastes," "hazardous materials," "extremely hazardous substances," "restricted
hazardous wastes," "toxic substances," "toxic pollutants," "pollutants,"
"contaminants," "solid wastes," "special wastes," or words of similar import
under any Environmental Law.
"HUD" means the United States Department of Housing and Urban
Development or any successor thereto.
"Indemnified Parties" has the meaning specified in Section 6.15(b).
"Insurer" means a Person who (i) insures or guarantees all or any
portion of the risk of loss on any Mortgage Loan, including, without limitation,
FHA, FHLMC, FNMA, GNMA, VA and any private mortgage insurer, pool insurer and
provider of standard hazard insurance, flood insurance, earthquake insurance or
title insurance with respect to any Mortgage Loan or related Mortgaged Property
or (ii) provides, with respect to a Listed Agreement or an applicable
Regulation, any fidelity bond, direct surety bond or errors and omissions
policy.
"Intellectual Property Rights" means all material (a) patent and
patent applications, (b) trademarks, service marks, logos, trade names and
corporate names and registrations and applications for registration thereof, (c)
copyrights, whether registered or unregistered, and registrations and
applications for registration thereof and (d) trade secrets, formulas,
inventions, know-how, and other material proprietary business and intellectual
property rights which are employed in the conduct of the Business as it is now
being conducted.
"Interim Financial Statements" has the meaning specified in Section
3.09.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended.
"Investment Commitment" means the optional or mandatory commitment
of a Person to purchase a Mortgage Loan or a portion of a Mortgage Loan.
"Investor" means any Person, other than the Company and its
Subsidiaries that (i) owns or has a beneficial interest in a Mortgage Loan, (ii)
is a party to an Investment Commitment or (iii) with respect to Mortgage Loans
that have been pooled or securitized, the trustee, custodian, Agency or other
Person imposing obligations in connection with the sale, pooling, securitization
or servicing of the Mortgage Loans.
"Investor Requirements" means any material outstanding contractual,
legal and regulatory obligation of the Company or any Subsidiary to any
Investor, including but not limited to, the representations, warranties and
covenants made by the Company or any Subsidiary to any Investor, and any
Investor Regulation.
"IRS" means the Internal Revenue Service.
"knowledge of the Seller" means the actual knowledge of any director
or executive officer of the Seller or the Company, after due and reasonable
investigation or inquiry.
"Liabilities" means any and all debts, losses, liabilities, offsets,
claims, damages, obligations, payments and accounts payable (including, without
limitation, those arising out of any award, demand, assessment, settlement,
judgment or compromise relating to any Action), and accruals for out-of-pocket
costs and expenses (including, without limitation, reasonable attorneys' fees
and expenses incurred in investigating, preparing or defending any Action).
"Licenses" has the meaning specified in Section 3.14.
"Listed Agreement" means any Servicing Agreement, Master Servicing
Agreement, Mortgage Sale Agreement, Investment Commitment or
Correspondent/Broker Agreement.
"Master Servicing" means master servicing services in respect of
Mortgage Loans, including, without limitation, one or more of the following
functions (or a portion thereof): (i) to supervise and oversee the performance
of services of the obligations under servicing agreements, and (ii) to cause
Mortgage Loans to be serviced in the event a service is terminated.
"Master Servicing Agreement" means an agreement pursuant to which
the Company or any Subsidiary provides Master Servicing.
"Material Adverse Effect" means any change in, or effect on, the
Business as currently conducted by the Company that is materially adverse to the
Assets, business, income, results of operations or financial condition of the
Company and its Subsidiaries, taken as a whole, or the ability of the Company to
perform all of its material obligations under this Agreement; provided that
Material Adverse Effect shall not include any change in, or effect on, the
Business, the Company or any Subsidiary which relates to or arises out of (i)
interest rates, the United States economy in general or political conditions in
the United States, (ii) the announcement of this Agreement or the transactions
contemplated hereby, (iii) changes in applicable laws or Regulations that affect
the Business, the Company or any Subsidiary in general, or (iv) the mortgage
lending and financial institution industry in general.
"Material Contract" has the meaning specified in Section 3.18.
"Mortgage" means, with respect to a Mortgage Loan, a mortgage, deed
of trust or other security instrument creating a lien upon real property (or, in
the case of a Co-op Loan, a security interest in the stock of the residential
housing corporation and the related Co-op Lease) and any other property
described therein which secures a Mortgage Note, together with any assignment,
reinstatement, extension, endorsement or modification thereof.
"Mortgage Licenses" has the meaning specified in Section 4.09(a).
"Mortgage Loan" means a residential mortgage loan evidenced by a
Mortgage Note and secured by a Mortgage that is (i) owned by the Company or any
Subsidiary or (ii) owned by an Investor and subject to a Servicing Agreement or
Master Servicing Agreement.
"Mortgage Loan Documents" means the credit and closing packages,
custodial documents and escrow documents (including, without limitation, the
Mortgage Note, the Mortgage, any assignment or endorsement of any such Mortgage
Note or Mortgage, the title insurance policy, and any private mortgage insurance
policy), and all other documents (i) in the possession of the Company or any
Subsidiary specifically pertaining to a Mortgage Loan, (ii) reasonably necessary
for prudent servicing of a Mortgage Loan or (iii) reasonably necessary to
establish the eligibility of the Mortgage Loan for insurance by an Insurer or
sale to an Investor, in each case as required by applicable Regulations.
"Mortgage Note" means, with respect to a Mortgage Loan, a promissory
note or notes, or other evidence of indebtedness, with respect to such Mortgage
Loan secured by a Mortgage or Mortgages, together with any assignment,
reinstatement, extension, endorsement or modification thereof.
"Mortgage Pool" means a group of Mortgage Loans that have been
pledged, granted or sold to secure or support payments on specific
mortgage-backed securities or specific participation certificates.
"Mortgage Sale Agreement" means an agreement pursuant to which the
Company or any Subsidiary has sold or otherwise conveyed Mortgage Loans and
under which the Company or any Subsidiary has a repurchase or indemnity
obligation in the event of breach by the Company or its Subsidiary of a
representation, warranty or undertaking contained therein.
"Mortgaged Property" means the improved real property that secures a
Mortgage Note and that is subject to a Mortgage, which is related to a Mortgage
Loan.
"Mortgagor" means any and all obligors under a Mortgage Note and/or
Mortgage Loan Document.
"Person" means an individual, corporation, partnership, limited
liability company, joint venture, person (including, without limitation, a
"person" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended), trust, association or other entity.
"Pipeline Mortgage Loan" mean a to be originated residential
mortgage loan for which the Company has either (i) received a related
application or (ii) issued the commitment to fund with respect thereto.
"Pre-Closing Tax Period" means any taxable period (or portion
thereof) ending on or before the close of business of the Closing Date.
"Purchase Price" has the meaning specified in Section 2.02.
"Purchaser" has the meaning specified in the introduction.
"Purchaser Offering" means an equity offering by the Purchaser that
results in gross proceeds to the Purchaser of at least $30 million and such
other conditions described in Section 1.01 of the Disclosure Schedule.
"Qualified Plans" has the meaning specified in Section 3.21(c).
"Regulation" means any (i) Federal, state or local law, rule or
regulation, (ii) requirement of an Insurer or (iii) requirement of an Agency or
Investor, in each case with respect to the origination, insuring, purchase,
sale, pooling, securitization or servicing of a Mortgage Loan or the filing of a
claim in respect thereof.
"Release" means any release, spill, pour, emission, leak, injection,
deposit, disposal, discharge, dispersal, leaching, migration or other movement
of Hazardous Materials into or through the environment (including, without
limitation, air, soil, subsurface, surface water, groundwater or property).
"REO" means any residential real property owned by the Company, any
Subsidiary or an Investor as a result of a Foreclosure.
"Restructuring" has the meaning specified in Section 6.17.
"Retained Name" has the meaning specified in Section 6.12.
"Seller" has the meanings specified in the introduction.
"Servicing" means Mortgage Loan servicing services, including,
without limitation, one or more of the following functions (or a portion
thereof): (i) the administration and collection of payments for the reduction of
principal and/or the application of interest on a Mortgage Loan; (ii) the
collection of payments on account of taxes and insurance; (iii) the remittance
of appropriate portions of collected payments; (iv) the provision of full escrow
administration; (v) the pursuit of foreclosure and alternate remedies against a
related Mortgaged Property; and (vi) the administration and liquidation of an
REO.
"Servicing Agreement" means an agreement pursuant to which the
Company or any Subsidiary provides Servicing.
"Servicing Portfolio" means those Mortgage Loans subject to
Servicing Agreements.
"Servicing Requirements" means prudent practice and industry
standards together with any material contractual, legal or regulatory obligation
of the Company or any Subsidiary relating to the Mortgage Loans or any Mortgage
Loan previously serviced by the Company or any Subsidiary.
"Shares" has the meaning specified in the recitals.
"State Agency" means any state agency or other entity with authority
to regulate the mortgage-related activities of the Company or any Subsidiary or
to determine the investment or servicing requirements with regard to mortgage
loan origination, purchasing, Servicing or master servicing performed by the
Company or any Subsidiary.
"Subsidiary" and "Subsidiaries" have the meanings specified in
Section 3.03(b).
"Tangible Personal Property" means machinery, equipment, vehicles
and other tangible personal property.
"Tax" or "Taxes" means all Federal, state, local or foreign net
income, gross income, gross receipts, gains, sales, use, employment, franchise,
profits, excise, property, ad valorum, transfer, license, alternative, or add-on
minimum, premium, environmental or windfall value-added or other taxes, fees,
stamp taxes and duties, assessments or charges of any kind whatsoever (whether
payable directly or by withholding), together with any interest and penalties,
additions to tax or additional amounts with respect thereto, imposed by any
Taxing Authority.
"Taxing Authority" means any governmental or regulatory authority,
body or instrumentality exercising any authority to impose, regulate or
administer the imposition of Taxes.
"Tax Returns" means Tax returns, information returns, reports and
forms, including, in each case, any amendments thereto, required to be filed
with any Taxing Authority.
"Transfer Tax" has the meaning specified in Section 6.09.
"VA" means the United States Department of Veterans Affairs and any
successor thereto.
"VA Loans" means Mortgage Loans which are guaranteed or are eligible
to be guaranteed by the VA.
"Warehouse Loan Portfolio" means those Mortgage Loans owned by the
Company or any Subsidiary and held for sale.
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale. On the terms and subject to the
conditions set forth in this Agreement, at Closing the Purchaser shall purchase
from the Seller, and the Seller shall sell, assign, transfer and deliver to the
Purchaser, the Shares, free and clear of any Encumbrance.
SECTION 2.02. Purchase Price for the Shares. The purchase price for
the Shares shall be $37,000,000 (the "Purchase Price").
SECTION 2.03. Closing. (a) Subject to the terms and conditions of
this Agreement, the purchase and sale of the Shares contemplated hereby shall
take place at a closing at the offices of Shearman & Sterling, 000 Xxxxxxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx, at 10:00 a.m., local time (the "Closing"), on the
first Business Day after all conditions to each party's obligations, as set
forth in Article VIII, shall have been satisfied or waived or on such other date
or at such other place as the Seller and the Purchaser may mutually agree upon
in writing (the day on which the Closing takes place being the "Closing Date").
(b) At the Closing, the Seller shall deliver or cause to be
delivered to the Purchaser (i) certificates evidencing the Shares duly endorsed
in blank or accompanied by stock powers duly executed in blank in proper form
for transfer (with all required stock transfer tax stamps affixed) and (ii) the
certificates of the Seller required to be delivered pursuant to Section 9.02(a).
(c) At the Closing, the Purchaser shall deliver or cause to be
delivered to the Seller (i) the Purchase Price by wire transfer of immediately
available funds to the bank account designated by the Seller in writing at least
two Business Days prior to the Closing Date (or by such means as are otherwise
agreed upon by the Purchaser and the Seller) and (ii) the certificate of the
Purchaser required to be delivered pursuant to Section 9.01(a).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE COMPANY
The Company and the Seller hereby, jointly and severally, represent
and warrant to the Purchaser that, except as disclosed in the Disclosure
Schedule (it being agreed that disclosure under any particular Section of the
Disclosure Schedule shall be deemed adequate for all Sections of the Disclosure
Schedule where disclosure would be applicable, so long as it is reasonable to
infer such applicability):
SECTION 3.01. Incorporation and Authority of the Seller. The Seller
is a corporation duly incorporated, validly existing and in good standing under
the laws of its jurisdiction of incorporation and has all necessary corporate
power and authority to enter into this Agreement, to carry out its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by the Seller and the Company and the
consummation by the Seller and the Company of the transactions contemplated
hereby have been duly authorized by all necessary corporate actions on the part
of the Seller and the Company, and no other corporate proceedings on the part of
the Seller and the Company are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Seller and the Company and, assuming due
authorization, execution and delivery by the Purchaser, this Agreement
constitutes a legal, valid and binding obligation of the Seller and the Company
enforceable against the Seller and the Company in accordance with its terms.
SECTION 3.02. Incorporation and Qualification of the Company. The
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Maryland. The Company has all necessary
corporate power and authority to own, operate or lease the Assets now owned,
operated or leased by it, and to carry on the Business as it is now being
conducted by it. The Company is duly qualified as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
properties owned, operated or leased by it or the nature of its activities makes
such qualification necessary, except for such failures to be so qualified or in
good standing which, when taken together with all other such failures, would not
result in a Material Adverse Effect.
SECTION 3.03. Capital Stock of the Company; Subsidiaries. (a) The
authorized capital stock of the Company consists of 3,000 shares of common
stock. As of the date hereof, 3,000 shares of common stock of the Company, which
constitute the Shares, were issued and outstanding. The Shares have been duly
authorized and validly issued, are fully paid and non-assessable and were not
issued in violation of any preemptive rights. There are no options, calls,
warrants, subscription rights or rights of conversion or other rights,
agreements, arrangements or commitments of any character relating to the capital
stock of the Company or obligating the Company to issue or sell any additional
shares of its capital stock, or securities convertible into or exchangeable for
such shares, or obligating the Company to issue or grant any such option, call,
warrant, subscription right, right of conversion or other right, agreement,
arrangement or commitment.
(b) A true and complete list of all subsidiaries of the Company
(each a "Subsidiary" and, collectively, the "Subsidiaries"), listing the name
and jurisdiction of incorporation or organization of each such Subsidiary, is
set forth in Section 3.03(b) of the Disclosure Schedule. Each Subsidiary is
validly existing as either (i) a corporation duly incorporated or (ii) a limited
liability company duly organized and in good standing under the laws of its
jurisdiction of incorporation or organization, as the case may be, has the full
power and authority to own, operate or lease the Assets now owned, operated or
leased by such Subsidiary and to carry on its business in all material respects
as currently conducted by such Subsidiary, is duly qualified as a foreign
corporation or a foreign limited liability company, as the case may be, to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned, operated or leased or the nature of its activities makes
such qualification necessary, except for such failures which, when taken
together with all other such failures, would not have a Material Adverse Effect.
Each Subsidiary is wholly owned by the Company or a Subsidiary.
SECTION 3.04. Ownership of Shares. The Seller has good and
marketable title to the Shares, free and clear of all Encumbrances. Upon
delivery of the Shares by the Seller at the Closing, and payment of the Purchase
Price by the Purchaser as herein provided, and assuming the Purchaser shall have
purchased the Shares for value in good faith and without notice of adverse
claims, the Purchaser will receive good and marketable title to the Shares, free
and clear of all Encumbrances created, or resulting from the ownership of the
Shares, by the Seller.
SECTION 3.05. Share Ownership. The Seller is the record and
beneficial owner of all of the Shares. The Seller does not own any securities
issued by or other obligations, or has any right to acquire any Shares or other
securities, of the Company or any Subsidiary which are not listed in Section
3.05 of the Disclosure Schedule. None of the Shares are subject to any rights by
any other party.
SECTION 3.06. No Conflict. Assuming all consents, approvals,
authorizations and other actions described in Section 3.06 have been obtained
and all filings and notifications listed in Section 3.06 of the Disclosure
Schedule have been made, except as may result from any facts or circumstances
relating solely to the Purchaser, the execution, delivery and performance of
this Agreement by the Seller do not and will not (a) violate or conflict with
the partnership agreement, charter or by-laws of the Seller, the Company or any
Subsidiary, (b) except as would not, individually or in the aggregate, result in
a Material Adverse Effect, conflict with or violate any law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award applicable to
the Seller, the Company or any Subsidiary, or (c) except as would not,
individually or in the aggregate, result in a Material Adverse Effect, result in
any breach of, or constitute a default (or event which with the giving of notice
or lapse of time, or both, would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of any Encumbrance on any of the Assets of the Company or any
Subsidiary pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument to which the
Company or any Subsidiary is a party or by which any of such Assets or
properties is bound or affected.
SECTION 3.07. Possession of Shares. The Shares and all certificates
representing the Shares are now, and at all times during the term hereof shall
be, owned by the Seller and held by the Seller or by a nominee or custodian for
the sole and exclusive benefit of the Seller.
SECTION 3.08. Consents and Approvals. The execution and delivery of
this Agreement by the Seller do not, and the performance of this Agreement by
the Seller will not, require any consent, approval, authorization or other
action by, or filing with or notification to, any governmental or regulatory
authority, except (a) where failure to obtain such consent, approval,
authorization or action, or to make such filing or notification, would not
prevent the Seller from performing any of its obligations under this Agreement
and would not result in a Material Adverse Effect and (b) as may be necessary as
a result of any facts or circumstances relating solely to the Purchaser.
SECTION 3.09. Financial Information. Schedule 3.09 of the Disclosure
Schedule sets forth (i) true and complete copies of the December Statements,
together with the related auditor's reports and (ii) true and complete copies of
the consolidated balance sheet, income statement and statement of cash flow of
the Company and its Subsidiaries for the quarter ended March 31, 2002 (the
"Interim Financial Statements") (collectively, the "Financial Statements"). The
Financial Statements have been prepared from, are in accordance with and
accurately reflect, the books and records of the Company and its Subsidiaries,
comply in all material respects with applicable accounting requirements, have
been prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except as stated in the notes thereto), and fairly present, in
all material respects, the consolidated financial position and the consolidated
results of operations and cash flows (and changes in financial position, if any)
of the Company and its Subsidiaries as of the times and for the periods referred
to therein.
SECTION 3.10. Absence of Undisclosed Liabilities. As of the date of
this Agreement and as of the Closing, there are and shall be no Liability of the
Company or any Subsidiary (whether absolute, accrued, contingent or otherwise)
which would result in a Material Adverse Effect, except Liabilities (a)
described in Section 3.10 of the Disclosure Schedule or otherwise disclosed in
the Disclosure Schedule or this Agreement, (b) as, and to the extent, reflected
or reserved against in the December Statements or the notes thereto or the
Interim Financial Statements or the notes thereto, (c) with respect to matters
otherwise addressed by any of the representations, warranties, covenants or
agreements made by the Seller in this Agreement, (d) adequately covered by
insurance, indemnification, contribution or comparable arrangements, (e) with
respect to the matters addressed in Section 3.22 (which shall be governed solely
by the terms of such Section 3.22), (f) under this Agreement or any document
entered into in connection herewith or (g) incurred in the ordinary course of
business since the date of the Interim Financial Statements and prior to the
Closing which would not result in a Material Adverse Effect.
SECTION 3.11. Absence of Certain Changes or Events. Since the
Interim Financial Statements through the date of this Agreement, each of the
Company and its Subsidiaries has conducted its respective business only in the
ordinary course and consistent with past practice, and neither the Company nor
any Subsidiary has:
(a) suffered any Material Adverse Effect;
(b) incurred any liability or obligation (absolute, accrued,
contingent or otherwise) except immaterial items incurred in the ordinary course
of business and consistent with past practice, none of which exceeds $200,000
(counting obligations or liabilities arising from one transaction or a series of
similar transactions, and all periodic installments or payments under any lease
or other agreement providing for periodic installments or payments, as a single
obligation or liability), or materially increased, or experienced any change in
any assumptions underlying or methods of calculating, any bad debt, contingency
or other reserves;
(c) paid, discharged or satisfied any claim, liability or obligation
(whether absolute, accrued, contingent or otherwise) in excess of $200,000,
other than the payment, discharge or satisfaction in the ordinary course of
business and consistent with past practice of liabilities and obligations
reflected or reserved against in the Interim Financial Statements or incurred in
the ordinary course of business and consistent with past practice since the date
of the Interim Financial Statements;
(d) permitted or allowed any of its Assets to be subjected to any
material Encumbrance, except for liens for current taxes not yet due and
Mortgages and the servicing thereof in the ordinary course of business;
(e) sold, transferred, or otherwise disposed of any of its material
property or assets (real, personal or mixed, tangible or intangible), other than
Mortgages, the Servicing thereof and REOs in the ordinary course of business;
(f) disposed of, or permitted to lapse any rights to the use of, any
material Intellectual Property Rights, or disposed of, or disclosed to any
Person other than representatives of the Purchaser, any material Intellectual
Property Rights not theretofore a matter of public knowledge;
(g) made any single capital expenditure or commitment in excess of
$200,000 for additions to property, plant, equipment or intangible capital
assets or made aggregate capital expenditures and commitments in excess of
$200,000 (on a consolidated basis) for additions to property, plant, equipment
or intangible capital assets;
(h) declared, paid or set aside for payment any dividend or other
distribution in respect of its capital stock or redeemed, purchased or otherwise
acquired, directly or indirectly, any shares of capital stock or other
securities of the Company or any Subsidiary; or
(i) agreed, whether in writing or otherwise, to take any actions
described in this Section 3.11.
SECTION 3.12. Litigation. There are no Actions pending or, to the
knowledge of the Seller, threatened against the Company, its Subsidiaries, or
any Assets of the Company or its Subsidiaries, before any court, arbitrator or
administrative, governmental or regulatory authority or body that, individually
or in the aggregate, are reasonably likely to result in a Material Adverse
Effect, and none of the Company, the Subsidiaries, nor any Assets of the Company
or its Subsidiaries, are subject to any order, writ, judgment, injunction,
decree, determination or award resulting in a Material Adverse Effect.
SECTION 3.13. Compliance with Laws. Except as would not have a
Material Adverse Effect, the Company and its Subsidiaries have complied in a
timely manner with all applicable laws, rules and regulations, ordinances,
judgments, decrees, orders, writs and injunctions of all United States Federal,
state, local and foreign governments and agencies thereof that affect the
business or Assets of the Company or any Subsidiary, and no written notice,
charge, claim, action or assertion has been received by the Company or any
Subsidiary or has been filed, commenced or, to the knowledge of the Seller,
threatened against the Company or any Subsidiary alleging any violation of any
of the foregoing.
SECTION 3.14. Licenses and Permits. Each of the Company and its
Subsidiaries has all governmental licenses, permits and authorizations
(collectively, "Licenses"), necessary to carry on the Business as it is now
being conducted by the Company and its Subsidiaries, except for such Licenses
the absence of which would not result in a Material Adverse Effect. All such
Licenses are in full force and effect, except as would not result in a Material
Adverse Effect. To the knowledge of the Seller, neither the Company nor any
Subsidiary has received any written notice that any such License will be
revoked, cancelled, rescinded or materially modified or will not be renewed.
SECTION 3.15. Books and Records. The books of account, minute books,
stock record books and other records of the Company and its Subsidiaries are
complete and correct in all material respects and have been maintained in
accordance with sound business practices, including the maintenance of an
adequate system of internal controls. The minute books of the Company contain
accurate and complete records of all meetings of, and corporate actions taken
by, the stockholders of the Company, the Company's Board of Directors and all
committees of the Company's Board of Directors, and no meeting of the
stockholders of the Company, the Company's Board of Directors or such committees
has been held for which minutes have not been prepared and are not contained in
such minute books. True and complete copies of all minute books and all stock
record books of the Company and each Subsidiary have heretofore been delivered
to the Purchaser.
SECTION 3.16. Intellectual Property Rights. (a) Section 3.16 of the
Disclosure Schedule lists all trademarks, patents and copyrights of the Company
and its Subsidiaries included in the Intellectual Property Rights which are
registered or the subject of pending applications for registration.
(b) Except as would not result in a Material Adverse Effect, (i) all
the Intellectual Property Rights are owned by the Company or a Subsidiary or are
licensed to the Company or a Subsidiary, and (ii) no Action has been made or
asserted or is pending (nor, to the knowledge of the Seller, has any such Action
been threatened) against the Company or any Subsidiary either (A) based upon,
challenging or seeking to deny or restrict the use by the Company or any
Subsidiary of any of the Intellectual Property Rights, or (B) alleging that any
services provided or products manufactured or sold, or Intellectual Property
Rights used, are being provided, manufactured, sold or used in violation of any
intellectual property rights of any third Person. The Seller is not aware of any
third Person's intellectual property rights that infringe upon the Intellectual
Property Rights or other rights of the Company or a Subsidiary or of any
Intellectual Property Right or any product or service sold by the Company or a
Subsidiary that violates or infringes upon any intellectual property right owned
by, or other right of, a third Person.
SECTION 3.17. Real Property. (a) Neither the Company nor any
Subsidiary owns any real property, other than REOs.
(b) Section 3.17(b) of the Disclosure Schedule lists (i) all real
property leased by the Company and its Subsidiaries from a third Person and each
parcel of real property currently leased by the Company and its Subsidiaries to
a third Person and (ii) the identity of the lessor and lessee of each such
parcel of real property. The Seller has made available to the Purchaser copies
of the leases and subleases set forth in Section 3.17(b) of the Disclosure
Schedule.
SECTION 3.18. Contracts. Schedule 3.18 of the Disclosure Schedule
sets forth a complete list of the following written material contracts of the
Company and its Subsidiaries (collectively, the "Material Contracts"):
(a) contracts containing any provision or covenant prohibiting or
materially limiting the ability of the Company or its Subsidiaries to
engage in any business activity or compete with any Person;
(b) material partnership, joint venture, shareholders' or other
similar contracts with any Person; and
(c) all other contracts that (i) involve the payment or potential
payment, pursuant to the terms of such contract, by or to the Company or
any Subsidiary of more than $200,000 and (ii) cannot be terminated within
180 days after giving notice of termination without resulting in any
material cost or penalty to the Company or any Subsidiary.
Each Material Contract to which any of the Company or any Subsidiary
is a party or is bound is valid, binding and enforceable against the Company or
the Subsidiary and, in accordance with its terms and is in full force and
effect, except those the absence of which are not reasonably likely to have a
Material Adverse Effect. Neither the Company nor the Subsidiary is in default
under any of the Material Contracts, and no event has occurred which, with
notice or lapse of time, or both, would constitute such a default, except for
any defaults which are not reasonably likely to have a Material Adverse Effect.
Neither the Company nor the Subsidiary has received any written claim from any
other party to any Material Contract that the Company or the Subsidiary has
breached any obligations to be performed by it thereunder, or is otherwise in
default or delinquent in performance thereunder, except any of the foregoing
which are not reasonably likely to have a Material Adverse Effect.
SECTION 3.19. Insurance. Section 3.19 of the Disclosure Schedule
sets forth (a) a true and complete list and description of all insurance
policies, other insurance arrangements and other contracts or arrangements for
the transfer or sharing of insurance risks by the Company or its Subsidiaries in
force on the date hereof with respect to the business or assets of the Company
or its Subsidiaries, together with a statement of the aggregate amount of claims
paid out to the Company or its Subsidiaries during the last three calendar
years, unless otherwise specified therein, and claims pending, under each such
insurance policy or other arrangement through the date hereof and (b) a
description of such risks that the Company or its Subsidiaries, or the
respective Board of Directors or officers thereof, have designated as being
self-insured. The Company and its Subsidiaries have policies of insurance of the
type and in amounts customarily carried by Persons conducting businesses or
owning assets similar to those of the Company and its Subsidiaries. All such
policies are in full force and effect, all premiums due thereon have been paid
by the Company or its Subsidiaries, and the Company and its Subsidiaries are
otherwise in compliance in all material respects with the terms and provisions
of such policies. Furthermore, (a) neither the Company nor any Subsidiary has
received any written notice of cancellation or non-renewal of any such policy or
arrangement nor is the termination of any such policies or arrangements
threatened in writing, (b) there is no claim pending under any of such policies
or arrangements as to which coverage has been questioned, denied or disputed by
the underwriters of such policies or arrangements, (c) neither the Company nor
any Subsidiary has received any written notice from any of its insurance
carriers that any insurance premiums will be increased in the future or that any
insurance coverage presently provided for will not be available to the Company
or any Subsidiary in the future on substantially the same terms as now in effect
and (d) none of such policies or arrangements provides for any retrospective
premium adjustment, experienced-based liability or loss sharing arrangement
affecting the Company or any Subsidiary. To the knowledge of the Seller, neither
the Company or the Seller is aware of any facts or circumstances which are
reasonably likely to result in any claims for medical expenses, with respect to
any employee of the Company or any of its Subsidiaries, which are not covered by
insurance.
SECTION 3.20. Accounts; Lockboxes; Safe Deposit Boxes. Section 3.20
of the Disclosure Schedule lists (a) the name of each bank, savings and loan
association, or other financial institution, in which the Company or any
Subsidiary has an account and (b) the location of all lockboxes and safe deposit
boxes of the Company and its Subsidiaries.
SECTION 3.21. Employee Benefit Matters; Labor Matters. (a) Section
3.21(a) of the Disclosure Schedule includes a complete list of all employee
benefit plans, programs, agreements and other arrangements, including without
limitation all employee benefit plans within the meaning of Section 3(3) of the
ERISA and all other employee benefit, employment, bonus, incentive, pension,
profit sharing, thrift, equity-based compensation, restricted stock, stock
purchase, stock option, retirement, savings, deferred compensation, termination,
severance, change in control, retention, group insurance, fringe benefit and
other similar plans, programs, agreements or arrangements, providing benefits to
any former, current or future employee, officer or director of the Company or
any of its Subsidiaries or any beneficiary or dependent thereof, and whether
covering one Person or more than one Person, sponsored or maintained by the
Company or any of its Subsidiaries or to which the Company or any of its
Subsidiaries contributes or is obligated to contribute for the benefit of
present or former employees or directors (the "Employee Plans").
(b) With respect to each Employee Plan, the Company has made
available to the Purchaser a true, correct and complete copy of: (i) each
writing constituting a part of such Employee Plan, including, without
limitation, all plan documents, benefit schedules, trust agreements, and
insurance contracts and other funding vehicles; (ii) the three most recently
filed Annual Reports (Form 5500 Series), including all attachments and Schedules
thereto, if any; (iii) the current summary plan description (and any summaries
of material modifications with respect thereto), if any; (iv) the most recent
annual financial report, if any; (v) the most recent actuarial valuation report,
if any; and (vi) the most recent determination letter issued by the IRS, or a
copy of any currently pending application for such a determination letter, if
any. Neither the Company nor any of its Subsidiaries has undertaken or committed
in a legally binding manner to make any material amendments to Employee Plans,
or to adopt or approve any new material Employee Plans.
(c) Section 3.21(c) of the Disclosure Schedule identifies each
Employee Plan that is intended to be a "qualified plan" within the meaning of
Section 401(a) of the Internal Revenue Code ("Qualified Plans"). The IRS has
issued a favorable determination letter with respect to each Qualified Plan that
has not been revoked, and, to the Company's knowledge, there are no existing
circumstances nor any events that have occurred that could reasonably be
expected to adversely affect the qualified status of any Qualified Plan or the
tax-exempt status of any related trust and that would result in a material
liability to the Company or any of its Subsidiaries. Neither any Employee Plan
nor any trust maintained in connection therewith is intended to meet the
requirements of Section 501(c)(9) of the Internal Revenue Code. No Employee Plan
is subject to Title IV of ERISA or Section 412 of the Internal Revenue Code.
(d) Except as would not result in a material liability to the
Company or any of its Subsidiaries, each Employee Plan has been maintained,
operated and administered in accordance with its terms and applicable law in all
material respects, including but not limited to ERISA and the Internal Revenue
Code. With respect to each Employee Plan, no event has occurred and there exists
no condition or set of circumstances in connection with which the Company or its
Subsidiaries have been or could be subject to any liability to any Person (other
than liability for contributions to, or benefits payable under, such Employee
Plans in the ordinary course) that would have a Material Adverse Effect.
(e) Neither the Company nor any of its Subsidiaries has any material
liability for life, health, medical or other welfare benefits to former
employees, or to beneficiaries or dependents thereof, except for health
continuation coverage as required by Section 4980B of the Internal Revenue Code
or Part 6 of Subtitle B of Title I of ERISA.
(f) There are no pending or, to the knowledge of the Seller,
threatened claims (other than claims for benefits in the ordinary course),
lawsuits, arbitrations or other alternate dispute resolution proceedings which
have been asserted or instituted against any Employee Plan, any fiduciaries
thereof with respect to their duties to the Employee Plans or the assets of any
of the trusts under any of the Employee Plans which could reasonably be expected
to result in any material liability of the Company or any of its Subsidiaries to
any Employee Plan participant or beneficiary, the Pension Benefit Guaranty
Corporation, the Department of Treasury, or the Department of Labor.
(g) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (either alone or in
conjunction with any other act) result in, cause the accelerated vesting or
delivery of, or increase the amount or value of, any payment or benefit to any
employee of the Company or any of its Subsidiaries (including forgiveness of
indebtedness), or require the Company or any of its Subsidiaries to fund any
benefits, by contribution to a "rabbi" trust or similar trust or otherwise. No
Employee Plan provides for the reimbursement of any excise taxes imposed under
Section 4999 of the Internal Revenue Code.
(h) Neither the Company nor any of its Subsidiaries is a party to
any collective bargaining agreement or other labor union contract applicable to
Persons employed by the Company or any of its Subsidiaries, and no such
agreement is being negotiated by the Company or any of its Subsidiaries. As of
the date hereof, there is no labor dispute, strike or work stoppage against the
Company or any of its Subsidiaries pending or, to the knowledge of the Seller,
threatened in writing that may materially interfere with the respective business
activities of the Company or its Subsidiaries. As of the date hereof, to the
knowledge of the Seller, except as would not result in a material liability to
the Company or any of its Subsidiaries, neither the Company nor any of its
Subsidiaries, nor their representatives or employees, has committed any unfair
labor practice in connection with the operation of the respective businesses of
the Company or its Subsidiaries, and there is no charge or complaint pending or
threatened against the Company or its Subsidiaries by the National Labor
Relations Board or any comparable State agency.
SECTION 3.22. Taxes. (a) The Company, its Subsidiaries and each
Company Group have timely filed, or caused to be filed or, with respect to Tax
Returns the due date for filing of which is after the date of this Agreement and
before the Closing Date, will timely file, all Tax Returns required to be filed
and all such Tax Returns are, or in the case of Tax Returns not yet filed, will
be, true, correct and complete in all material respects. All material Taxes
attributable to a Pre-Closing Tax Period, whether or not shown to be payable on
each such Tax Return, have been timely paid, and, with respect to Taxes the due
date for payment of which is after the date of this Agreement and before the
Closing Date will be timely paid.
(b) No deficiency for any material amount of Tax has been asserted
or assessed by a Taxing Authority against the Company, any Subsidiaries or any
Company Group.
(c) There are no material liens for Taxes with respect to any of the
Assets of the Company or any Subsidiary, other than statutory liens for Taxes
not yet due and Taxes being contested in good faith.
(d) (i) No material Tax Return of the Company, any Subsidiary or any
Company Group is currently under audit or examination by any Taxing Authority,
and (ii) no notice of an audit or examination of any Tax Returns of the Company,
its Subsidiaries or any Company Group has been received by the Company or any
Subsidiary from a Taxing Authority, in each case, for any Tax year for which the
applicable statute of limitations has not expired.
(e) The most recent audited financial statements for the Company
reflect an adequate reserve for all Taxes payable by the Company and the
Subsidiaries and any consolidated or combined group of which the Company or any
Subsidiary is a common parent and each Company Group for all taxable periods and
portions thereof through the date of such financial statements, except as would
not result in a Material Adverse Effect.
(f) No material issues relating to Taxes were raised by the relevant
Taxing Authority in any completed audit or examination that can reasonably be
expected to recur in a later taxable period. None of the Company, any Subsidiary
nor any Company Group has requested any extension of time within which to file
any Tax Return, which Tax Return has not yet been filed.
(g) None of the Company, any Subsidiary or any other member of a
Company Group is a party to or is bound by any Tax sharing agreement, Tax
indemnity obligation, advance pricing agreement or closing agreement with any
third party or any Taxing Authority.
(h) Except as set forth in the Financial Statements, none of the
Company, any Subsidiary nor any Company Group will be required to include in a
taxable period ending after the Closing Date any taxable income attributable to
income that accrued, but was not recognized, in a Pre-Closing Tax Period, as a
result of an adjustment under Section 481 of the Code, the installment method of
accounting, the long-term contract method of accounting, the cash method of
accounting, any comparable provision of state, local, or foreign Tax law.
(i) (i) No consent under Section 341 of the Code has been made with
respect to the Company or any Subsidiary, or any property held by the Company or
any Subsidiary, (ii) no property of the Company or any Subsidiary is "tax exempt
use property" within the meaning of Section 168(h) of the Code, (iii) neither
the Company nor any Subsidiary is a party to any lease made pursuant to Section
168(f)(8) of the Internal Revenue Code of 1954, and (iv) none of the assets of
the Company or any Subsidiary is subject to a lease under Section 7701(h) of the
Code or under any predecessor section thereof.
(j) None of the Company, any Subsidiary nor any other member of a
Company Group has constituted either a "distributing corporation" or a
"controlled corporation" (within the meaning of Section 355(a)(1)(A) of the
Code) in a distribution of stock qualifying for tax-free treatment under Section
355 of the Code (i) within the one-year period ending on the date of this
Agreement or (ii) which could otherwise constitute part of a "plan" or "series
of related transactions" (within the meaning of Section 355(e) of the Code) in
conjunction with the purchase of Shares contemplated by this Agreement.
(k) The Company is not a United States real property holding company
within the meaning of Section 897 of the Code.
(l) The Company and each Subsidiary have treated all rights to the
portion of the interest payments on the Mortgage Loans retained or acquired by
the Company or any Subsidiary in excess of the designated Servicing fee as
stripped coupons in accordance with Section 1286 of the Code and have reported
all income and timely paid all Taxes with respect thereto.
(m) The Company and each Subsidiary have correctly and timely filed
(i) all information reporting returns relating to mortgage interest received
under Section 6050H of the Code, (ii) all information reporting returns relating
to foreclosures and abandonment of property under Section 6050J of the Code, and
(iii) all other customary information reporting returns relating to payments
made under any applicable Servicing Agreement.
(n) Neither the Company nor any Subsidiary currently owns, or has
ever owned, any REMIC "residual interest" within the meaning of Section
860G(a)(2) of the Code.
(o) As of December 31, 2000, the Company and its Subsidiaries had
available net operating loss carryforwards of $76.4 million for Federal income
tax purposes and $76.4 million for state income tax purposes. Prior to the
consummation of the transactions contemplated in this Agreement, none of the net
operating loss carryforwards of the Company or its Subsidiaries are subject to
limitation under Section 382 of the Code or any similar provision of state law.
(p) The Company and each of its Subsidiaries have complied in all
material respects with all applicable laws relating to the payment and
withholding of Taxes (including withholding of Taxes pursuant to Sections 1441,
1442, 3121 and 3402 of the Code or any comparable provision of any state, local
or foreign laws) and have, within the time and in the manner prescribed by
applicable law, withheld from and paid over to the proper Taxing Authorities all
material amounts required to be so withheld and paid over such laws.
(q) Neither the Company nor any Subsidiary has been a member of an
affiliated group (within the meaning of Section 1504(a) of the Code) filing a
consolidated Federal income Tax Return (other than a group the common parent of
which was the Seller) for any taxable period for which the statute of
limitations for any Tax has not expired.
SECTION 3.23. Brokers. No broker, finder or investment banker, other
than Xxxxxx, Xxxxxxx & Co. LLC, is entitled to any brokerage, finder's or other
fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Company or the
Seller.
SECTION 3.24. Counsel. The fees and expenses of Shearman & Sterling,
counsel to the Company and the Seller, shall be paid by the Company.
SECTION 3.25. Absence of Certain Activities. Since January 1, 2001
through the date of this Agreement, there has not been any of the following:
(a) any corporate reorganizations and/or spin-offs of any divisions of
the Company or its Subsidiaries;
(b) any split, combination or reclassification of any of the shares of
outstanding capital stock of the Company or any Subsidiary or any
creation of any class of capital stock;
(c) incurrence of debt by the Seller; and
(d) any dividend or distribution by the Company on its shares of
outstanding capital stock to the Seller.
SECTION 3.26. Taxable Income. To the knowledge of the Seller, the
net operating loss carryforwards of the Company and its Subsidiaries will not be
used to offset taxable income of any member of the Company Group other than the
Company and its Subsidiaries for the 2001 Tax year, and as of the date of this
Agreement, the net operating loss carryforwards of the Company and its
Subsidiaries are not reasonably expected to be used to offset taxable income of
any member of the Company Group other than the Company and its Subsidiaries for
the 2002 Tax year.
ARTICLE IV
MORTGAGE BANKING REPRESENTATIONS OF THE SELLER AND THE COMPANY
The Company and the Seller hereby, jointly and severally, represent
and warrant to the Purchaser that, except as disclosed in the Disclosure
Schedule (it being agreed that disclosure under any particular Section of the
Disclosure Schedule shall be deemed adequate for all Sections of the Disclosure
Schedule where disclosure would be applicable, so long as it is reasonable to
infer such applicability):
SECTION 4.01. Portfolios and Listed Agreements. (a) Section 4.01(a)
of the Disclosure Schedule contains a list of all Servicing Agreements to which
the Company or any Subsidiary is a party as of the date hereof.
(b) Section 4.01(b) of the Disclosure Schedule contains a list of
all Master Servicing Agreements to which the Company or any Subsidiary is a
party as of the date hereof.
(c) Section 4.01(c) of the Disclosure Schedule contains a list of
all Mortgage Sale Agreements to which the Company or any Subsidiary is a party
as of the date hereof.
(d) Section 4.01(d) of the Disclosure Schedule contains a list of
all Investment Commitments to which the Company or any Subsidiary is a party as
of the date hereof.
(e) Section 4.01(e) of the Disclosure Schedule contains a list of
all Correspondent/Broker Agreements to which the Company or any Subsidiary is a
party as of the date hereof.
(f) Other than as listed in Section 4.01(f) of the Disclosure
Schedule, neither the Company nor any Subsidiary is a party to any other written
Material Contracts related to the Business.
SECTION 4.02. Enforceability of Listed Agreements. (a) The Seller
has previously made available to the Purchaser true and complete copies of all
Listed Agreements. Each Listed Agreement and the Regulations applicable thereto
set forth all the material terms and conditions of the Company's or its
Subsidiary's rights against and obligations to the Agencies, Contract Parties,
Investors and Insurers, as applicable, and there are no written or oral
agreements that modify, supplement or amend any such Listed Agreement other than
such modifications, supplements or amendments which would not materially and
adversely affect the rights of the Company or its Subsidiary under the related
Listed Agreement. Each of the Listed Agreements is a valid and binding
obligation of the Company or its Subsidiary and the other party thereto, is in
full force and effect in all material respects, and is enforceable against the
Company or its Subsidiary and the other party thereto, in accordance with its
terms, except as such enforceability may be affected by bankruptcy, insolvency,
fraudulent conveyance, reorganization and other similar laws relating to or
affecting creditors' rights generally and general principles of equity (whether
considered in a proceeding in equity or at law).
(b) There is no pending or, to the knowledge of the Seller,
threatened cancellation or partial termination of any Listed Agreement which
would have a Material Adverse Effect.
(c) The rights of the Company or its Subsidiary under each of the
Listed Agreements are owned by or for the account of the Company or its
Subsidiary, free and clear of any Encumbrances, including, without limitation,
the right to receive servicing fees, excess servicing fees, master servicing
fees or other compensation, if any.
SECTION 4.03. Compliance with Listed Agreements. (a) There is no
material default or breach by the Company or any Subsidiary under any Listed
Agreement, and no event has occurred which, with the passage of time or the
giving of notice or both, would constitute such a material default or breach by
the Company or any Subsidiary under any such Listed Agreement or would permit
termination or modification of any such Listed Agreement by a third party
without the consent of the Company or its Subsidiary.
(b) There exists no material breach of a representation and warranty
by the Company or any Subsidiary set forth in a Listed Agreement (each of which
was made as of the date specified in such Listed Agreement) which gives rise to
a remedy against the Company or any Subsidiary under such Listed Agreement.
SECTION 4.04. Advances. There are no pooling, participation,
Servicing or other agreements to which the Company or any Subsidiary is a party
which obligate it to make Advances with respect to defaulted or delinquent
Mortgage Loans, other than as provided in the Servicing Agreements and the
Master Servicing Agreements identified in Section 4.01(a) or Section 4.01(b),
respectively, of the Disclosure Schedule. Each Advance is a valid and subsisting
amount owing to the Company or its Subsidiary under the Mortgage Loan pursuant
to which such Advance was made, is carried on the books of the Company at values
determined in accordance with GAAP and, to the knowledge of the Seller, is not
subject to any setoff or claim of the account debtor arising from acts or
omissions of the Company or its Subsidiary.
SECTION 4.05. No Recourse. Except as provided in the Listed
Agreements and the applicable Regulations, and except with respect to GNMA
so-called "VA no bid" loans, neither the Company nor any Subsidiary is a party
to (a) any agreement, arrangement or obligation with or to any Person, including
any Agency, Contract Party or Investor, to repurchase from any such Person any
Mortgage Loan or Mortgaged Property serviced for others or (b) to the knowledge
of the Seller, any agreement, arrangement or understanding to reimburse,
indemnify or hold any such Person harmless or otherwise assume liability with
respect to any loss, cost or expense suffered or incurred as a result of the
Foreclosure or sale of any such Mortgage Loan or Mortgaged Property, except
insofar as (i) such recourse is based upon (A) a breach (or condition equivalent
to a breach) by the Company or its Subsidiary of a representation, warranty,
covenant or undertaking or (B) the Company's or its Subsidiary's act or omission
in respect of such Mortgage Loan or Mortgaged Property or in connection with
such Foreclosure or sale or (ii) the Company or its Subsidiary incurs expenses
in excess of the reimbursement limits, if any, set forth in a Listed Agreement
or applicable Regulation.
SECTION 4.06. Portfolio Representations and Warranties. With respect
to each Mortgage Loan:
(a) immediately prior to the transfer and assignment contemplated by
this Agreement, either the Company or its Subsidiary is the sole owner and
holder of such Mortgage Loan, free and clear of any and all Encumbrances
(other than Investment Commitments and Encumbrances securing indebtedness
reflected on the Balance Sheet);
(b) (i) the related Mortgage is a valid, subsisting and enforceable
lien on the related Mortgaged Property (provided that with respect to each
Co-op Loan, the Mortgage Instrument is a valid and subsisting first
perfected security interest in the stock in the residential housing
corporation and the Co-op Lease that were pledged to secure such Co-op
Loan), and (ii) the related Mortgaged Property (or, with respect to a
Co-op Loan, the stock in the residential housing corporation and the Co-op
Lease that were pledged to secure such Co-op Loan) is free and clear of
all Encumbrances having priority over the first lien of the related
Mortgage (except for Encumbrances covered by title insurance and except
for liens for real estate taxes and assessments not yet due and payable,
covenants, conditions, restrictions, rights of way, easements, and other
matters of public record acceptable to mortgage lending institutions
generally, and other matters to which like properties are commonly subject
that do not materially interfere with the benefits of the security
intended to be provided by the Mortgage Loan Documents or the use,
enjoyment, value or marketability of the related Mortgaged Property) and,
if the related Mortgaged Property is a condominium unit, any lien for
common charges permitted by statute (other than liens for which a
statutory tax priority is provided) and, in the case of a Co-op Loan, (1)
the lien of the residential housing corporation for unpaid maintenance
fees, (2) any mortgage or security instrument creating a lien on the Co-op
property, and (3) the rights of the residential housing corporation under
the proprietary lease, recognition agreements, by-laws, rules and
regulations;
(c) to the knowledge of the Seller, none of the Company, the
Subsidiaries nor any prior holder of the related Mortgage or the related
Mortgage Note has (A) satisfied, canceled or subordinated the related
Mortgage or the related Mortgage Note in whole or in part or (B) released
the related Mortgaged Property in whole or in part from the lien of the
related Mortgage;
(d) all material Taxes, governmental assessments, insurance
premiums, and water, sewer and municipal charges previously due and owing
relating to the related Mortgaged Property for which an escrow is
required, have been paid as required pursuant to Regulations, or an escrow
of funds in an amount sufficient to pay for every such item which remains
unpaid has been established as required pursuant to Regulations, to the
extent permitted by law;
(e) there is no proceeding pending or threatened in writing for the
total or partial condemnation of the related Mortgaged Property and the
related Mortgaged Property is undamaged by water, fire, earthquake or
earth movement, windstorm, flood, tornado or similar casualty, in either
such case, so as to affect materially and adversely the value of the
related Mortgaged Property as security for such Mortgage Loan or the use
for which the premises were intended;
(f) except for such Mortgage Loans secured by cooperative unit
shares or leasehold interests, each title insurance policy relating to a
Mortgage Loan reflects that the related Mortgaged Property consists of a
fee simple estate or leasehold in real property and, to the knowledge of
the Seller, all of the improvements which are included for the purpose of
determining the appraised value of the related Mortgaged Property lie
wholly within the boundaries and building restriction lines of such
property and no improvements on adjoining properties encroach upon the
Mortgaged Property (unless insured against under the applicable title
insurance policy or such encroachments are of a type generally acceptable
to Mortgage Lenders);
(g) such Mortgage Loan meets, or is exempt from, applicable state or
Federal laws, regulations and other requirements pertaining to usury, and
such Mortgage Loan is not usurious;
(h) all inspections, licenses and certificates required to be made
or issued with respect to all occupied portions of the related Mortgaged
Properties in the aggregate and, with respect to the use and occupancy of
the same, including, but not limited to, certificates of occupancy, have
been made or obtained from the appropriate authorities, except as would
not materially and adversely affect the value of the Mortgaged Properties
in the aggregate;
(i) except for any Mortgage Loans set forth in Section 4.06(i) of
the Disclosure Schedule, no payment required under such Mortgage Loan is
more than 30 days past due and such Mortgage Loan had no more than one
such delinquency in the preceding twelve months;
(j) (i) the related Mortgage Note, the related Mortgage and the
other agreements executed in connection therewith are genuine, and each is
the legal, valid and binding obligation of the maker thereof, enforceable
in accordance with its terms except as such enforcement may be limited by
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and by general equity
principles (regardless of whether such enforcement is considered in a
proceeding in equity or at law), and (ii) to the knowledge of the Seller,
all parties to the related Mortgage Note and the related Mortgage had
legal capacity to execute such Mortgage Note and such Mortgage and the
related Mortgage Note and the related Mortgage has been duly and properly
executed by the related Mortgagor;
(k) any and all requirements of any Federal, state or local law with
respect to the origination and Servicing of such Mortgage Loan, including,
without limitation, truth-in-lending, real estate settlement procedures,
consumer credit protection, equal credit opportunity or disclosure laws
applicable to such Mortgage Loan, have been complied with in all material
respects;
(l) the proceeds of such Mortgage Loan have been fully disbursed and
there is no requirement for future advances thereunder, and all costs,
fees and expenses incurred in making, closing or recording such Mortgage
Loan have been paid except recording fees the amount of which has been
collected and will be paid in connection with a related Mortgage not
recorded but which is in the process of being recorded or fees which are
not the Company's or its Subsidiary's responsibility;
(m) such Mortgage Loan (except any such Mortgage Loan secured by
related Mortgaged Property located in any state as to which an opinion of
counsel of the type customarily rendered in such state in lieu of title
insurance is instead received) is covered by an ALTA mortgagee title
insurance policy or other generally acceptable form of policy of insurance
acceptable to FNMA or FHLMC, issued by a title insurer acceptable to FNMA
or FHLMC, insuring the originator, its successors and assigns, as to the
first priority lien of the related Mortgage in the original principal
amount of such Mortgage Loan and subject only to (i) the lien of current
real property taxes and assessments not yet due and payable, (ii)
covenants, conditions and restrictions, rights-of-way, easements and other
matters of public record as of the date of recording of the related
Mortgage generally acceptable to mortgage lending institutions in the area
in which the related Mortgaged Property is located or specifically
referred to in the appraisal performed in connection with the origination
of such Mortgage Loan, (iii) Encumbrances created pursuant to any Federal,
state or local law, regulation or ordinance affording liens for the costs
of clean up of hazardous substances or hazardous wastes or for other
environmental protection purposes and (iv) such other matters to which
like properties are commonly subject which do not individually, or in the
aggregate, materially interfere with the benefits of the security intended
to be provided by the related Mortgage;
(n) the related Mortgaged Property securing such Mortgage Loan is
insured against loss by fire and such hazards as are covered under a
standard extended coverage endorsement, in an amount which is not less
than the lesser of 100% of the insurable value of the related Mortgaged
Property and the outstanding principal balance of such Mortgage Loan; if
upon origination of such Mortgage Loan, the improvements on the related
Mortgaged Property were in an area identified in the Federal Register by
the Federal Emergency Management Agency as having special flood hazards, a
flood insurance policy meeting the requirements of the current guidelines
of the Federal Insurance Administration is in effect with a generally
acceptable insurance carrier, in an amount representing coverage not less
than the least of (i) the outstanding principal balance of such Mortgage
Loan, (ii) the full insurable value and (iii) the maximum amount of
insurance which was available under the Flood Disaster Protection Act of
1973, as amended; and the related Mortgage obligates the related Mortgagor
thereunder to maintain all such insurance at such Mortgagor's cost and
expense. To the knowledge of the Seller, all insurance policies described
in this subsection are in full force and effect, all premiums due and
owing with respect to such insurance policies have been paid, there has
been no act or omission, or event or condition, that may result in the
invalidation, revocation or cancellation or any such insurance policies,
and there are no defenses, counterclaims or rights of set-off with
regarding to any such insurance policies;
(o) there is (i) no material default, breach, violation or event of
acceleration existing under the related Mortgage or the related Mortgage
Note, (ii) to the knowledge of the Seller, no event which, with the
passage of time or with notice and the expiration of any grace or cure
period, would constitute a material default, breach, violation or event of
acceleration, and (iii) no foreclosure action threatened or commenced with
respect to such Mortgage Loan;
(p) neither the related Mortgage Note nor the related Mortgage is
subject to any right of rescission, setoff, counterclaim or defense, nor
will the operation of any of the terms of the related Mortgage Note or the
related Mortgage, or the exercise of any right thereunder, render the
related Mortgage Note or the related Mortgage unenforceable, in whole or
in part, or subject it to any right of rescission, setoff, counterclaim or
defense, including the defense of usury, and no such right of rescission,
setoff, counterclaim or defense has been asserted with respect thereto,
except, in the case of the exercise of rights under a Mortgage Note or a
Mortgage, as a result of limitations imposed by so-called single-action
laws or similar laws in effect in any state or homestead or other
exemptions permitted by Regulations;
(q) to the knowledge of the Seller, the related Mortgagor with
respect to such Mortgage Loan is not a debtor in any state or Federal
bankruptcy or insolvency proceeding;
(r) the related Mortgaged Property is located in the United States
and consists of a single parcel of real property upon which is built a one
to four family residential property which may include a detached home,
townhouse, condominium unit, a unit in a planned unit development or, in
the case such Mortgage Loan is secured by cooperative unit shares, leases
or occupancy agreements; and
(s) such Mortgage Loan was originated by either: (i) a savings and
loan association, savings bank, commercial bank, credit union, insurance
company, or similar institution which is supervised and examined by a
Federal or state authority; (ii) a supervised or non-supervised mortgagee
approved by the secretary of HUD pursuant to Sections 203 and 211 of the
National Housing Act (an "Approved Mortgagee") or (iii) a loan
correspondent mortgagee approved by the secretary of HUD pursuant to
Sections 203 and 211 of the National Housing Act and sponsored by an
Approved Mortgagee.
SECTION 4.07. Loan Level.
(a) The terms of each Mortgage Loan have not been impaired, waived,
altered or modified in any material respect from the date of origination except
by a written instrument, which written instrument has been recorded if
recordation is necessary to protect the interests of the owner thereof. The
substance of any such waiver, alteration or modification has been communicated
to and approved in writing by: (i) the relevant Investor, to the extent required
by the relevant Investor Requirements; and (ii) the applicable Insurer, to the
extent required by the relevant policies, and its terms are reflected in the
Mortgage Loan Documents. Except as authorized by the applicable Investor, where
the Investor's authorization is required, neither the company nor any Subsidiary
has: (i) subordinated the lien of any Mortgage Loan to any other mortgage or
lien or given any other mortgage or lien equal priority with the lien of a
mortgage loan; or (ii) executed any instrument of release, cancellation or
satisfaction with, in whole or in part, respect to any Mortgage Loan. No
Mortgagor has been released, in whole or in part, except in connection with an
assumption agreement, approved by the Investor and the applicable Insurer, to
the extent required by the relevant policy, and which assumption is part of the
Mortgage Loan Documents;
(b) All outstanding Mortgage Loans sold by the Company or the
Subsidiaries complied in all material respects with Investor Requirements on the
date of sale;
(c) The Company and any of the Subsidiaries have at all times been
and are in compliance in all material respects with the Servicing Requirements
relating to the Mortgage Loans and Mortgage Loans previously serviced by any of
them;
(d) The Company and its Subsidiaries have not advanced funds, or
induced, solicited or knowingly received any advance of funds by a party other
than the Mortgagor, directly or indirectly, for the payment of any amount
required under the Mortgage Loan. No advance of funds for payment of any amount
required under the Mortgage Loan was received from the Mortgagor, except for
interest accruing from the date of the Mortgage Note or date of disbursement of
the Mortgage Loan proceeds, whichever is earlier, to the date which precedes by
one month the due date of the first installment of principal and interest;
(e) To the knowledge of the Seller, with respect to each Mortgage
Loan, as of the date of origination, no material portion of the Mortgaged
Property was used for commercial purposes, and since the date of origination, no
material portion of the Mortgaged Property has been used for commercial
purposes; provided, that Mortgaged Properties which contain a home office shall
not be considered as being used for commercial purposes;
(f) Except as would not materially adversely affect the aggregate
value of the Mortgage Loans, with respect to each Mortgage Loan the documents,
instruments and agreements submitted for loan underwriting were not falsified
and contain no untrue statement of material fact or omit to state a material
fact required to be stated therein or necessary to make the information and
statements therein not misleading. Except as would not materially adversely
affect the aggregate value of the Mortgage Loans, no fraud, error, omission,
misrepresentation, negligence or similar occurrence with respect to a Mortgage
Loan has taken place on the part of any Person, including without limitation,
the Mortgagor, any appraiser, any builder or developer, or any other party
involved in the origination or servicing of the Mortgage Loan.
(g) With respect to each Mortgage Loan, all parties which have had
any interest in the Mortgage Loan, whether as mortgagee, assignee, pledgee or
otherwise, are (or, during the period in which they held and disposed of such
interest, were) (i) in compliance with any and all applicable licensing
requirements of the laws of the state wherein the Mortgaged Property is located,
and (2) either (i) organized under the laws of such state, or (ii) qualified to
do business in such state, or (iii) a Federal savings and loan association, a
savings bank or a national bank having a principal office in such state, or (3)
not doing business in such state.
(h) With respect to each Mortgage Loan, other than payments due but
not yet 30 days or more delinquent, there is no default, breach, violation or
even which would permit acceleration existing under the Mortgage or the Mortgage
Note and no event which, with the passage of time or with notice and the
expiration of any grace or cure period, would constitute a default, breach,
violation or event which would permit acceleration, and none of the Company, any
Subsidiaries thereof, nor any of their affiliates nor any of their respective
predecessors, have waived any default, breach, violation or event which would
permit acceleration.
(i) With respect to each Mortgage Loan, there are no material
mechanics' or similar liens or claims which have been filed for work, labor or
material (and no rights are outstanding that under law could give rise to such
liens) affecting the related Mortgaged Property which are or may be liens prior
to, or equal or coordinate with, the lien of the related Mortgage;
(j) With respect to each Mortgage Loan, the Mortgage contains
customary and enforceable provisions such as to render the rights and remedies
of the holder thereof, adequate for the realization against the Mortgaged
Property of the benefits of the security provided thereby, including, (i) in the
case of a Mortgage designated as a deed of trust, by trustee's sale, and (ii)
otherwise by judicial foreclosure. Upon default by a Mortgagor on a Mortgage
Loan and Foreclosure on, or trustee's sale of, the Mortgaged Property pursuant
to the proper procedures, the holder of the Mortgage Loan will be able to
deliver good and merchantable title to the Mortgaged Property. There is no
homestead or other exemption available to a Mortgagor which would interfere with
the right to sell the Mortgaged Property at a trustee's sale or the right to
foreclose the Mortgage, subject to applicable Federal and state laws and
judicial precedent with respect to bankruptcy and right of redemption or similar
law;
(k) With respect to each Mortgage Loan, the Mortgage Note is not and
has not been secured by any collateral except the lien of the corresponding
Mortgage and the security interest of any applicable security agreement or
chattel mortgage referred to in clause (j) above;
(l) With respect to each Mortgage Loan, any future advances made to
the Mortgagor prior to the Closing Date have been consolidated with the
outstanding principal amount secured by the Mortgage, and the secured principal
amount, as consolidated, bears a single interest rate and single repayment term.
The lien of the Mortgage securing the consolidated principal amount is expressly
insured as having first or second, as applicable, lien priority by a title
insurance policy, an endorsement to the policy insuring the mortgagee's
consolidated interest or by other title evidence acceptable to FNMA and FHLMC.
The consolidated principal amount does not exceed the original principal amount
of the Mortgage Loan.
SECTION 4.08. Pipeline Mortgage Loan. With respect to each Pipeline
Mortgage Loan, individually or in the aggregate, as applicable:
(a) as of Closing Date, the characteristics of all applications
received with respect to Mortgage Loans that are Pipeline Mortgage Loans are as
presented in all material respects in Section 4.08(a) of the Disclosure
Schedule;
(b) With respect to the portfolio of Pipeline Mortgage Loans in the
aggregate, any and all requirements of any Federal, state or local law with
respect to the origination of such Pipeline Mortgage Loans, including, without
limitation, truth in lending, real estate settlement procedures, consumer credit
protection, equal credit opportunity or disclosure laws applicable to such
Pipeline Mortgage Loans and, as applicable, the terms and conditions of the
related Investor Commitments and the applicable Investor Requirements have been
complied with in all material respects;
(c) as of Closing Date, there are commitments outstanding to fund
Pipeline Mortgage Loans on a product by product basis as set forth in Section
4.08(c) of the Disclosure Schedule;
(d) each Pipeline Mortgage Loan was and shall be underwritten to
guidelines no less stringent in any material respect than those applied to
Mortgage Loans other than Pipeline Mortgage Loans; and
(e) with respect to each Pipeline Mortgage Loan, such Pipeline
Mortgage Loan, if and when originated, will comply in all material respects with
all other representations and warranties set forth in this Section 4.08.
SECTION 4.09. Mortgage Banking Licenses and Qualification. (a) Each
of the Company and its Subsidiaries (i) to the extent required for the conduct
of its current business, is approved (A) by FHA as an approved mortgagee and
servicer for FHA Loans, (B) by VA as an approved lender and servicer for VA
Loans, (C) by FNMA and FHLMC as an approved seller/servicer of first lien
residential mortgages, and (D) by GNMA as an authorized issuer and approved
servicer of GNMA-guaranteed mortgage-backed securities and (ii) has all other
material certifications, authorizations, licenses, permits registrations, other
approvals and exemptions, including without limitation certifications,
authorizations, licenses, permits, registrations, other approvals and exemptions
issued or granted by State Agencies and Investors, and has filed all
notifications with State Agencies and Investors, necessary to conduct its
current business, except to the extent the absence of which would not constitute
a Material Adverse Effect (together with the approvals and qualifications set
forth in clause (i), the "Mortgage Licenses").
(b) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will affect the validity of
any Mortgage License currently possessed by the Company and its Subsidiaries,
and all such Mortgage Licenses will be in full force and effect immediately
after the Closing Date; provided, however, that no representation is made with
respect to the impact or effect of any business, conduct, activities or
regulatory status of the Purchaser or any affiliate thereof on any such Mortgage
License.
(c) Each of the Company and its Subsidiaries is in compliance with
all requirements relating to all of its Mortgage Licenses. The Company has not
received written notice from any Agency or Investor of pending actions or
actions threatened in writing or investigations which would question the status
of the Company as an approved lender, seller/servicer or issuer of securities.
To the knowledge of the Seller, no event has occurred which, with the passage of
time or the giving of notice, or both, would result in the loss by the Company
of its qualification as an approved lender, seller/servicer or issuer or by the
Company as a contractor or as a person otherwise permitted to transact business
with any Agency or Investor.
(d) The Company has notified each of the relevant Agencies of the
transactions contemplated hereunder; and each has confirmed that the
transactions hereunder will not result in termination of the relevant approval.
SECTION 4.10. Mortgage Banking Compliance. (a) Each of the Company
and its Subsidiaries is in compliance in all material respects with (i) all
applicable Regulations, (ii) all orders, writs, decrees, injunctions and other
requirements of any court or governmental authorities applicable to it, its
Assets and the conduct of its business and (iii) all Mortgage Loan Documents
relating to each Mortgage Loan. To the knowledge of the Seller, any and all
Investor Requirements with respect to the documentation, underwriting,
origination, modification and sale of each Mortgage Loan in the Servicing
Portfolio, including, without limitation, truth-in-lending, real estate
settlement procedures, consumer credit protection, equal credit opportunity or
disclosure laws applicable to such Mortgage Loan, have been complied with in all
material respects except where such non-compliance would not reasonably be
expected to have a Material Adverse Effect.
(b) The Company and its Subsidiaries have timely filed all reports
required by any Agency, Investor or Insurer or by any Federal, state or
municipal law, Regulation or ordinance to be filed by the Company or any of its
Subsidiaries except where the failure to file such reports would not reasonably
be expected to have a Material Adverse Effect. The Company and its Subsidiaries
have not done or failed to do, and have not caused to be done or omitted to be
done, any act required of the Company or its Subsidiary, the effect of which
would operate to invalidate or materially impair (i) any Mortgage License,
including without limitation any approval of any Agency or Investor, (ii) any
FHA insurance or commitment of the FHA to insure, (iii) any VA Guarantee or
commitment of the VA to guarantee, (iv) any private mortgage insurance or
commitment of any private mortgage insurer to insure, (v) any title insurance
policy, (vi) any hazard insurance policy, (vii) any flood insurance policy,
(viii) any fidelity bond, direct surety bond, or errors and omissions insurance
policy required by FHA, FHLMC, FNMA, GNMA, HUD, VA or a private mortgage insurer
or (ix) any surety or guaranty agreement.
(c) No Agency, Investor or Insurer has (i) claimed that the Company
or any Subsidiary has violated or not complied in any material respect with the
applicable underwriting standards with respect to Mortgage Loans sold by the
Company or any Subsidiary to an Investor or (ii) imposed any restrictions on the
activities (including commitment authority) of the Company or any Subsidiary. To
the knowledge of the Seller, there exist no facts or circumstances which would
entitle an Investor to demand repurchase of a Mortgage Loan or indemnification
from the Company or any Subsidiary or which would entitle an Insurer (A) to
demand indemnification from the Company or any Subsidiary, (B) to cancel in
connection with a Mortgage Loan (or deny with respect to any pending Mortgage
Loan) any mortgage insurance held for the Company's or any Subsidiary's benefit
or (C) to reduce any mortgage insurance benefits payable to the Company or any
Subsidiary.
SECTION 4.11. Custodial Accounts.
(a) The Company and its Subsidiaries have full power and authority
to establish and, to the extent applicable, maintain escrow accounts ("Custodial
Accounts") for the Mortgage Loans and are the lawful fiduciaries of all
Custodial Accounts related to the Mortgage Loans. Except as required by
applicable Regulations, neither the Company nor its Subsidiaries is required to
pay interest on the Custodial Accounts during any period during which the
Company or its Subsidiary is responsible for maintaining such Custodial
Accounts. To the extent that any applicable Regulation in any jurisdiction or
any Investor Requirement requires the payment of interest on funds in a
Custodial Account with respect to any particular Mortgage Loan, all such
interest has been properly paid or arrangements for such payment has been made.
(b) All Custodial Accounts required to be maintained by the Company
pursuant to the terms of the Mortgage Loans currently comply in all material
respects with, and have been maintained by the Company or any Subsidiary and,
all prior servicers, in all material respects in accordance with, all applicable
Regulations, the mortgage servicing agreements, the Mortgage Loan Documents
related thereto, and usual and customary industry practice. All payments
required to be made by Mortgagors for deposit into Custodial Accounts are in the
possession of, or under the control of, the Company or any Subsidiary or an
authorized subservicer, and there exist no material deficiencies in connection
therewith for which customary arrangements for repayment there of have not been
made. No such required payments or other charges or payments have been
capitalized under any Mortgage or the related Mortgage Note. Within the last
twelve months, the Custodial Accounts and payments required to be made by
Mortgagors for deposit into the Custodial Accounts have been analyzed, and
appropriate adjustments to the requirements payments have been made and, as
applicable, additional payments required so as to eliminate or avoid any
deficiency or shortage in the Custodial Accounts. All Taxes, insurance premiums,
charges and other items to be paid with funds in Custodial Accounts have been
paid on a timely basis and, when required by applicable Regulations, the Company
or any Subsidiary has advanced its own funds to pay the Taxes, insurance
premiums, charges and other items. The Company or any Subsidiary has delivered
to the related Mortgagors the statements and notices required by the applicable
Regulations in connection with the Custodial Accounts.
SECTION 4.12. Environmental Matters. Except as would not have a
Material Adverse Effect or as set forth in Section 4.12 of the Disclosure
Schedule:
(a) Each of the Company and its Subsidiaries is, and for the last
two years has been, in compliance with all applicable Environmental Laws,
including without limitation all applicable Environmental Permits;
(b) No Environmental Claim has been brought or, to the knowledge of
the Seller, threatened, concerning real property owned, operated or leased by
the Company or its Subsidiaries ("Company Property");
(c) To the knowledge of the Seller, and there are no circumstances
or conditions that could reasonably be expected to result in any Environmental
Claim;
(d) To the knowledge of the Seller, each Mortgaged Property is
operated and maintained in compliance with all Environmental Laws, and all
businesses and activities conducted at or on each Mortgaged Property have been
and are in compliance with all Environmental Permits necessary for such
businesses and activities;
(e) To the knowledge of the Seller, there have been no Releases of
Hazardous Materials at, on, through, or from Company Property during the period
of the Seller's ownership, use of occupation of the Company Property;
(f) There are no Encumbrances arising under or pursuant to any
Environmental Law on any Company Property or, to the knowledge of the Seller,
Mortgaged Property, and no action of any governmental authority has been taken
or, to the knowledge of the Seller, is in the process of being taken which could
subject any Company Property to such Encumbrances, and the Company and any other
person have not and are not reasonably expected to be required to place any
notice or restriction relating to the presence of Hazardous Material at any
Company Property in any deed to such Company Property;
(g) The Seller and the Company have provided to the Purchaser all
environmental investigations, studies, audits, tests, reviews or other analyses,
in draft or final form, which are, as of the date of this Agreement, in the
possession of the Company or its Subsidiary in relation to Company Property and
provided access to the Purchaser all environmental investigations, studies,
audits, tests, reviews or other analyses, in draft or final form, which are, as
of the date of this Agreement, in the possession of the Company or its
Subsidiary in relation to the Mortgaged Properties;
(h) The consummation of the transactions contemplated hereby will
not require any governmental approvals under Environmental Laws, including as
example and without limitation, the New Jersey Industrial Site Recovery Act,
N.J. Stat. 13:1K-7 et seq.
SECTION 4.13. Pool Certification. Each Mortgage Loan included in a
Mortgage Pool meets or will meet, in all material respects, all eligibility
requirements for inclusion in such Mortgage Pool, except where the Investor has
agreed otherwise, and such Mortgage Pools will be in compliance, in all material
respects, with all applicable Investor Requirements and guidelines, within the
period required by applicable Investor Requirements. To the knowledge of the
Seller, all Mortgage Pools relating to the Mortgage Loans have been or will be,
within the period required by applicable Investor Requirements, certified in
accordance with applicable Investor Requirements. All Mortgage Pools relating to
the Mortgage Loans are or will be, within the period required by applicable
Investor Requirements, eligible for recertification by the appropriate
custodian. No Mortgage Loan has been bought out of a Mortgage Pool without
approval of the appropriate Investor.
SECTION 4.14. Servicing. For the period of time that any individual
Mortgage Loan was serviced by the Company or any Subsidiary, the Servicing of
each Mortgage Loan now or previously serviced by the Company was serviced in
accordance with standard industry servicing practices or of prudent servicers
and complies or complied, as applicable in all material respects in accordance
with the terms of (i) any applicable Regulations including, without limitation,
the Fair Debt Collection Practices Act, and (ii) the terms of any applicable
Servicing Agreements and the applicable Mortgage Loan Documents. The Mortgage
Loan Documents contain all documents, instruments and information necessary to
enforce and service the Mortgage Loans in accordance with all applicable
Regulations and any applicable Servicing Agreement. To the knowledge of the
Seller, all information provided to the Purchaser by or on behalf of the
Company, including, without limitation, any data tapes or similar media, is true
and accurate in all material respects.
SECTION 4.15. Ongoing Servicing Operations. Since the date of the
Interim Financial Statements, the Company and its Subsidiaries have (i) used
commercially reasonable efforts to preserve intact the current servicing
business; (ii) not sold or encumbered any material assets primarily used in the
servicing business, amended any pooling agreement, Servicing Agreement or other
Material Contract in any material respect, entered into any new subservicer
agreements or amended any existing subservicer agreements in any material
respect without the Purchaser's prior consent; (iii) not changed collection or
REO procedures in any material respect, or changed or modified procedures with
respect to amending the terms of the Mortgage Loans in any material respect
without notice to the Purchaser; (iv) maintained and implemented the Company's
customary administrative and operating procedures, and kept and maintained or
obtained, as and when required, all documents, books, records and other
information reasonably necessary or advisable for the collection of all
Advances, in each case, in accordance with past practice; and (v) paid when due
any Taxes applicable to the Company and payable in connection with the
Receivables and their creation and satisfaction or properly contested the
payment of any such Taxes in good faith and before a court or administrative
body of appropriate jurisdiction.
SECTION 4.16. ARM Loans. With respect to each adjustable rate
Mortgage Loan, the Company or any Subsidiary has (a) properly and accurately
entered into its system all data required to service the Mortgage Loan in
accordance with all applicable Regulations and the related Mortgage Loan
Documents, (b) to the knowledge of the Seller, properly and accurately adjusted
the mortgage interest rate on each interest adjustment date, (c) to the
knowledge of the Seller, properly and accurately adjusted the monthly payment on
each payment adjustment date, (d) to the knowledge of the Seller, properly and
accurately calculated the amortization of principal and interest on each payment
adjustment date, in each case in compliance with all applicable Regulations and
the related Mortgage Loan Documents, and (e) executed and delivered any and all
necessary notices required under, and in a form that complies with, all
applicable Regulations regarding the interest rate and payment adjustments and
the related Mortgage Loan Documents.
SECTION 4.17. Tax Service Contracts; Flood Contracts and
Certifications. Except as would not result in a Material Adverse Effect, (i) all
of the Mortgage Loans have, and at all relevant times have had, a valid, fully
paid life of the loan tax service contract with Lereta Corp.; (ii) all of the
Mortgage Loans have, and at all relevant times have had, a valid, fully paid,
transferable, life of the loan flood certification contract with Lereta Corp.;
and (iii) each Mortgage Loan has had a flood zone determination conducted and
such determination is included with the appropriate Mortgage Loan Documents.
SECTION 4.18. Release/Reconveyance Processing. The Company or any
Subsidiary, and each prior servicer, has prepared, filed and otherwise processed
all release and reconveyance documents with respect to any and all Mortgage
Loans that are paid off in full on or before the Closing Date in a timely manner
in accordance with the applicable Regulation.
SECTION 4.19. Investor Remittances and Reporting. At all times prior
to the Closing Date, all principal and interest payments received to which the
Investor is entitled under the applicable Servicing Agreements (including,
without limitation any guaranty fees), and all advances of principal and
interest payments required by such Servicing Agreements, have been properly
remitted or otherwise made available to each Investor, except as would not
result in a Material Adverse Effect. In accordance with the applicable Investor
Requirements, the Company or any Subsidiary has accurately prepared and timely
submitted to each Investor all reports in connection with such payments required
by the applicable Investor Requirements, except as would not result in a
Material Adverse Effect.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Seller as follows:
SECTION 5.01. Incorporation and Authority. The Purchaser is a
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all necessary corporate
power and authority to enter into this Agreement, to carry out its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by the Purchaser and the consummation by the
Purchaser of the transactions contemplated hereby have been duly authorized by
all necessary corporate actions on the part of the Purchaser, and no other
corporate proceedings on the part of the Purchaser are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by the Purchaser and, assuming
due authorization, execution and delivery by the Seller, this Agreement
constitutes a legal, valid and binding obligation of the Purchaser enforceable
against the Purchaser in accordance with its terms.
SECTION 5.02. No Conflict. Except as may result from any facts or
circumstances relating solely to the Company or the Seller, the execution,
delivery and performance of this Agreement by the Purchaser do not and will not
(a) violate or conflict with the charter or by-laws or equivalent formation
documents of the Purchaser, (b) except as would not, individually or in the
aggregate, have a material adverse effect on the ability of the Purchaser to
consummate the transactions contemplated by this Agreement, conflict with or
violate any law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award applicable to the Purchaser or (c) except as would not,
individually or in the aggregate, have a material adverse effect on the ability
of the Purchaser to consummate the transactions contemplated by this Agreement,
result in any breach of, or constitute a default (or event which with the giving
of notice or lapse of time, or both, would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of, or
result in the creation of any Encumbrance on any of the Assets of the Purchaser
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument relating to such Assets to which
the Purchaser is a party or by which any of such Assets is bound or affected.
SECTION 5.03. Consents and Approvals. Except as set forth in Section
5.03 of the Disclosure Schedule, the execution and delivery of this Agreement by
the Purchaser do not, and the performance of this Agreement by the Purchaser
will not, require any consent, approval, authorization or other action by, or
filing with or notification to, any governmental or regulatory authority, except
where failure to obtain such consent, approval, authorization or action, or to
make such filing or notification, would not prevent the Purchaser from
performing any of its material obligations under this Agreement and as may be
necessary as a result of any facts or circumstances relating solely to the
Company or the Seller.
SECTION 5.04. Absence of Litigation. There are no Actions pending or
threatened which seek to delay or prevent the consummation of the transactions
contemplated hereby or which would be reasonably likely to adversely affect or
restrict the Purchaser's ability to consummate the transactions contemplated
hereby.
SECTION 5.05. Investment Purpose. The Purchaser is acquiring the
Shares solely for the purpose of investment and not with a view to, or for offer
or sale in connection with, any distribution thereof. The Purchaser acknowledges
that the Shares are not registered under the Securities Act of 1933, as amended,
and that the Shares may not be transferred or sold except pursuant to the
registration provisions of such Act or pursuant to an applicable exemption
therefrom and subject to state securities laws and regulations, as applicable.
SECTION 5.06. Financing. The Purchaser has filed an equity shelf
that has been declared effective by the Securities and Exchange Commission,
which the Purchaser can utilize to more expediently effect the Purchaser
Offering. Upon completion of the Purchaser Offering and at the Closing (assuming
completion of the Purchaser Offering) the Purchaser will have all funds
necessary to consummate the transactions contemplated hereby.
SECTION 5.07. Brokers. No broker, finder or investment banker other
than Xxxxxxxx Xxxxxxxx, Xxxxxx & Co., Inc. is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Purchaser. The fees and expenses of Xxxxxxxx Xxxxxxxx, Xxxxxx & Co., Inc.
shall be paid by the Purchaser.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Conduct of Business Prior to the Closing. Unless the
Purchaser otherwise agrees in writing and except as otherwise set forth herein
or in the Disclosure Schedule (including Section 6.01 thereof), between the date
of this Agreement and the Closing Date, (a) the Seller shall cause the Company
and its Subsidiaries to (i) conduct the Business only in the ordinary course;
(ii) use reasonable efforts to preserve substantially intact the business
organization of the Business; (iii) use reasonable efforts to keep available to
the Purchaser the services of the present officers and key employees of the
Company and its Subsidiaries; (iv) use reasonable efforts to preserve the
current relationships of the Company and its Subsidiaries with their customers,
suppliers, distributors and other Persons with which the Company and its
Subsidiaries have significant business relationships; and (v) continue all
current sales, marketing, and promotional activities relating to the business
and operations of the Company; and (b) the Seller shall not permit the Company
to (i) (A) declare, set aside, or pay any dividends on, or make any other
distributions (whether in cash, securities, or other property) in respect of,
any of its outstanding capital stock (other than any cash dividends that are
paid to the Seller prior to Closing), (B) split, combine, or reclassify any of
its outstanding capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
outstanding capital stock, or (C) purchase, redeem, or otherwise acquire any
shares of outstanding capital stock or any rights, warrants, or options to
acquire any such shares; (ii) issue, sell, grant or otherwise Encumber any
shares of its capital stock, any other voting securities or any securities
convertible into or exchangeable for, or any rights, warrants, or options to
acquire, any such shares, voting securities, or convertible or exchangeable
securities; (iii) amend its certificate of incorporation or bylaws; or (iv) make
any change in the salary, wage, bonus or other compensation of any executive
officer of the Company.
SECTION 6.02. Business Covenants.
(a) Subject to paragraph (c) of this Section 6.02, without limiting
the generality or effect of Section 6.01, from the date of this Agreement until
the Closing Date, except as expressly provided in this Agreement or as set forth
in Section 6.02 of the Disclosure Schedule, the Seller shall not permit the
Company to, without the prior written consent of the Purchaser:
(i) acquire, make any investment in, or make any capital
contributions to, any Person in an amount in excess of $200,000;
(ii) open or close any office of the Company;
(iii) other than in the ordinary course of business or as required
by a governmental or regulatory authority, (A) incur any indebtedness,
other than borrowings under existing credit facilities and existing
indebtedness owing to the Seller, (B) make any loans or advances to any
other person or entity, other than routine advances to employees
consistent with past practice or (C) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other Person;
(iv) enter into any compromise or settlement of, or take any
material action with respect to, any material litigation other than the
prosecution, defense, and settlement thereof in the ordinary course of
business;
(v) change the responsibilities and reporting obligations of any
executive officer of the Company, other than pursuant to a good faith
determination of the Company's Board of Directors, after consultation with
the Purchaser, to make such change;
(vi) enter into or amend any employment, consulting, severance or
similar agreement with any individual or entity otherwise than in the
ordinary course of business, except with respect to new hires in the
ordinary course of business;
(vii) make any material change (other than in the ordinary course of
business or as required by changes in GAAP or applicable law) in (A) any
pricing, investment, accounting, financial reporting, inventory, credit,
compensation, commission, expense, reimbursement or allowance practice or
policy, (B) any method of calculating any bad debt contingency or other
reserve for accounting, financial reporting or Tax purposes, or (C) the
fiscal year;
(viii) enter into any agreement that restrains, limits or impedes
the Company's ability to complete with or conduct any business or line of
business;
(ix) violate, breach, or default under, in any material respect, or
take or fail to take any action that (with or without notice or lapse of
time or both) would constitute a material violation or breach of, or
default under, any term or provision of any material License held or used
by the Company;
(x) engage with any Person in any Business Combination;
(xi) acquire or dispose of, or incur any Encumbrance on, any Assets
of the Company, other than in the ordinary course of business and
consistent with past practice;
(xii) except as otherwise disclosed in this Agreement, authorize or
commit to make capital expenditures in an amount in excess of $200,000
individually or $600,000 in the aggregate; or
(xiii) authorize any of, or commit or agree to take any of, the
foregoing actions in respect of which it is restricted by the provisions
of this Section 6.02(a).
(b) Subject to paragraph (c) of this Section 6.02, the Company and
its Subsidiaries shall use reasonable efforts to maximize the amount of first
mortgages held for sale as of the Closing Date; provided, however, that as of
the Closing Date, the aggregate amount of first mortgages held for sale shall
not be less than $175 million.
(c) Notwithstanding the provisions of Sections 6.02(a) and (b), on
the later of (i) July 25, 2002 (the "Financing Date"), or, if the Purchaser
elects to effect a Restructuring (as defined herein), (ii) 30 days from the date
of the signing of the Restructuring (the "Extended Financing Date" ), the
provisions of Sections 6.02(a) and (b) shall terminate and be of no force and
effect if the Purchaser, prior to or on the Financing Date, or the Extended
Financing Date, if applicable, shall not have provided to the Seller and the
Company written notice stating that the condition specified in Section 9.02(e)
has either been satisfied or waived by the Purchaser.
SECTION 6.03. Transition. Between the date of this Agreement and the
Closing Date, the Seller shall cause the Company and its Subsidiaries to permit
certain representatives to be designated by the Purchaser in writing (and who
shall be reasonably acceptable to the Company) reasonable access to the
Company's facilities, during normal working hours, and to be located at the
Company's principal place of business and the Seller shall periodically consult
with such individuals on the day to day operation of the Company in order to
facilitate the transactions contemplated hereby and an orderly transition;
provided that such access shall not unreasonably interfere with any of the
business or operations of the Company or the Seller.
SECTION 6.04. Investigation. In connection with the Purchaser's
investigation of the Company and the Business, the Purchaser has received from
the Seller, the Company or their respective representatives certain estimates,
projections and other forecasts for the Company and the Business. The Purchaser
acknowledges that there are uncertainties inherent in attempting to make such
estimates, projections, forecasts, plans and budgets, that the Purchaser is
familiar with such uncertainties, that the Purchaser is taking full
responsibility for making its own evaluation of the adequacy and accuracy of all
estimates, projections, forecasts, plans and budgets so furnished to it, and
that the Purchaser will not assert any claim against the Seller, the Company or
any of their respective directors, officers, employees, agents, stockholders,
Affiliates, consultants, investment bankers, legal counsel or representatives,
or hold the Seller, the Company or any such Persons liable with respect thereto.
Accordingly, the Seller makes no representation or warranty with respect to any
estimates, projections, forecasts, plans or budgets referred to in this Section
6.04.
SECTION 6.05. Access to Information. (a) From the date hereof until
the Closing, upon reasonable notice, the Seller shall, and shall cause the
Company and its officers, directors, employees, auditors and agents to, (i)
afford the officers, employees and authorized agents and representatives of the
Purchaser full and complete reasonable access, during normal working hours, to
the offices, properties, books and records of the Company and its Subsidiaries,
(ii) permit the Purchaser to make such inspections and make copies of such books
and records as it may reasonably request, (iii) furnish to the Purchaser on an
ongoing basis all new listing applications accepted, interest rate commitments
provided to loan applicants and loan closings and other similar data as
reasonably requested, (iv) furnish to the officers, employees and authorized
agents and representatives of the Purchaser such financial and operating data
and other information available to the Seller or the Company regarding the
Assets and goodwill of the Company and the Business as the Purchaser may from
time to time reasonably request, and (v) afford the officers, employees and
authorized agents and representatives of the Purchaser reasonable full and
complete access to any employee of the Company or its Subsidiaries, with or
without representatives of the Seller or the Company present, to discuss in good
faith the Company's and its Subsidiaries' Business, the transition and such
employee's future employment with the Purchaser; provided, however, that such
meetings shall not unreasonably disrupt such employees from the performance of
their work in the ordinary course of business; provided further that after the
occurrence of such meetings, the Purchaser shall, upon request by Xxxxxxx Xxxxx
& Co., Inc. from time to time, inform Xxxxxxx Xxxxx & Co., Inc., as specified in
section 11.03 hereof, of the results of such meetings; provided further that
such investigation shall not unreasonably interfere with any of the businesses
or operations of the Company or the Seller; provided further that all documents
and agreements (and any and all copies thereof) which contain (x)
confidentiality provisions and/or (y) personal information of any individual
loan officer, branch manager and/or regional manager of the Company or its
Subsidiaries shall not be removed from the Company's premises by the Purchaser
or its representatives or agents.
(b) After the Closing, upon written notice and request, the
Purchaser shall (i) afford the Seller, and authorized agents and representatives
of the Seller, access, for commercially reasonable reasons as stated by the
Seller in such written request, during normal working hours, to the offices,
properties, books and records of the Company and its Subsidiaries and the
Purchaser (but only with respect to the Business) and (ii) make available to the
Seller the employees of the Company or the Subsidiaries whose assistance,
testimony or presence is necessary to assist the Seller in evaluating any claims
and in defending any claims, including the presence of such Persons as witnesses
in hearings or trials for such purposes; provided, however, that such
investigation shall not unreasonably interfere with the business or operations
of the Purchaser, the Company or the Subsidiaries.
SECTION 6.06. Books and Records. (a) The Purchaser agrees that it
shall preserve and keep all books and records of the Company and its
Subsidiaries for a period of at least six years from the Closing Date. After
such six-year period, before the Purchaser shall dispose of any of such books
and records, at least 90 calendar days' prior written notice to such effect
shall be given by the Purchaser to the Seller, and the Seller shall be given an
opportunity, at the Seller's cost and expense, to remove and retain all or any
part of such books and records as the Seller may select. During such six-year
period, the Seller and its representatives shall, upon reasonable notice, have
access thereto during normal business hours to examine, inspect and copy such
books and records.
(b) If, in order properly to prepare documents required to be filed
with governmental authorities, including the tax returns of the Seller, or its
financial statements, it is necessary that any party hereto or any successors be
furnished with additional information relating to the Company, the Subsidiaries
or the Business, and such information is in the possession of another party
hereto, such party agrees to use its reasonable efforts to furnish such
information to such other party, at the cost and expense of the party being
furnished such information.
SECTION 6.07. Confidentiality Agreement. The terms of the
Confidentiality Agreement are hereby incorporated by reference and shall
continue in full force and effect until the Closing, at which time the
Confidentiality Agreement and the obligations of the Purchaser under this
Section 6.07 shall terminate; provided, however, that the Confidentiality
Agreement shall terminate only in respect of that portion of the Evaluation
Material (as defined in the Confidentiality Agreement) exclusively relating to
the transactions contemplated by this Agreement. If this Agreement is, for any
reason, terminated prior to the Closing, the Confidentiality Agreement shall
continue in full force and effect in respect of such Evaluation Material.
SECTION 6.08. Regulatory and Other Authorizations; Consents. Each
party hereto will use its best efforts to obtain all authorizations, consents,
orders and approvals of all Federal, state, local and foreign regulatory bodies
and officials that may be or become necessary for its execution and delivery of,
and the performance of its obligations pursuant to, this Agreement and will
cooperate fully with the other party in promptly seeking to obtain all such
authorizations, consents, orders and approvals. The parties hereto will not take
any action that will have the effect of delaying, impairing or impeding the
receipt of any required approvals, including, without limitation, any agency
consent or approvals required by the relevant agency or reasonably requested by
the Purchaser with respect to the transactions contemplated hereunder.
SECTION 6.09. Transfer Tax. The Purchaser and the Seller shall each
pay one half of any stock transfer, real property transfer, documentary, sales,
use, registration, value-added and other similar Taxes (including interest,
penalties and additions thereto) incurred in connection with the transactions
contemplated by the Agreement (any such Tax, a "Transfer Tax"). The Seller and
the Purchaser shall cooperate to timely prepare and file any Tax Returns or
other filings relating to such Transfer Taxes, including any claim for exemption
or exclusion from the application or imposition of any Transfer Taxes. The
Seller shall timely file all Tax Returns for Transfer Taxes, provided, however,
that the Purchaser shall file any Tax Returns for Transfer Taxes it is obligated
to file under applicable law. With respect to any such Tax Return filed by the
Seller, the Seller shall furnish a copy of such Tax Return to the Purchaser, not
later than ten Business Days before the due date for filing such Tax Return, and
the Purchaser shall pay to the Seller, not later than five Business Days after
receipt of such Tax Return, an amount equal to the Transfer Taxes shown on such
Tax Return for which the Purchaser is liable under this Section 6.09, and the
Seller shall, following the filing thereof, furnish to the Purchaser a copy of
such Tax Return together with a receipt showing payment of such Transfer Tax.
With respect to any such Tax Return required to be filed by the Purchaser, the
Purchaser shall furnish a copy of such Tax Return to the Seller, no later than
ten Business Days before the due date for filing such Tax Return, and the Seller
shall pay to the Purchaser, not later than five Business Days after receipt of
such Tax Return, an amount equal to the Transfer Taxes shown on such Tax Return
for which the Seller is liable under this Section 6.09, and the Purchaser shall,
following the filing thereof, furnish to the Seller a copy of such Tax Return
together with a copy of a receipt showing payment of such Transfer Tax. In the
case of any Transfer Taxes allocable to the Seller hereunder and payable after
the Closing Date, the shareholders of the Seller, severally and not jointly,
shall indemnify and hold harmless the Purchaser for their allocable share of
such Transfer Taxes. The Purchaser and the Seller shall use commercially
reasonable efforts to provide each other with draft copies of such Tax Returns
prior to the Closing Date.
SECTION 6.10. FIRPTA Certificates. The Seller shall deliver to the
Purchaser at or prior to the Closing a certificate, in form and substance
reasonably satisfactory to the Purchaser and consistent with Treasury Regulation
Section 1.897-2(h), certifying that the Acquisition is exempt from withholding
pursuant to the Foreign Investment in Real Property Tax Act.
SECTION 6.11. Certain Tax Matters. After the date this Agreement is
signed, the Seller shall not, nor shall they allow the Company, any of the
Subsidiaries or any other member of a Company Group to make or change any Tax
election, change any annual Tax accounting period, adopt or change any Tax
accounting method, file any amended Tax Return, enter into any closing
agreement, settle any Tax Claim or assessment, surrender any right to claim a
refund of Taxes, or consent to any extension or waiver of the statute of
limitations period applicable to any Tax Claim or assessment, or take any action
or omit to take any action, in each case, outside of the ordinary course of
business (other than the transactions contemplated by this Agreement), if such
action or omission would, to the knowledge of the Seller, have the effect of
materially increasing the Tax liability or reducing any deduction, loss, credit
or other tax attribute of the Company or any of the Subsidiaries (including,
without limitation, deductions and credits related to alternative minimum
Taxes).
SECTION 6.12. Use of Name. No interest in or right to use the name
"Xxxxxxx Xxxxx" or any derivation thereof (the "Retained Name") is being
transferred to the Purchaser pursuant to the transactions contemplated hereby.
The Purchaser shall cause the Company and its Subsidiaries to, promptly
following the Closing Date, remove or obliterate the Retained Name from their
corporate names (including, without limitation, appropriate amendments to their
corporate charters), signs, purchase orders, invoices, sales orders, labels,
letterheads, shipping documents and other items and materials, and the Purchaser
shall not, and shall cause the Company and its Subsidiaries not to, put into use
after the Closing Date any such items and materials that bear the Retained Name
or any name, xxxx or logo similar thereto.
SECTION 6.13. Notification of Material Change. The Seller shall
promptly notify the Purchaser if any of them receives any notices, or learns of
any facts, that would cause the representations and warranties of the Seller set
forth in Article III or Article IV to be false in any material respect or impair
the Seller's ability to perform their obligations under this Agreement.
SECTION 6.14. Further Action. Upon the terms and subject to the
conditions hereof, each of the parties hereto shall use its best efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
other things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement and in a
timely manner to obtain all waivers, consents and approvals, and to effect all
registrations and filings, necessary to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement.
SECTION 6.15. Directors' and Officers' Liability. (a) The Purchaser
agrees that, for a period of six years from the Closing Date, the charter of the
Company shall contain provisions no less favorable with respect to the
limitation of liability of directors than those set forth in the charter of the
Company on the date hereof, and such provisions shall not be amended, repealed
or otherwise modified in any manner that would affect adversely the rights
thereunder of individuals who, at the Closing Date, were directors, officers,
employees, fiduciaries or agents of the Company, unless such modification shall
be required by any applicable law, rule, regulation, order, writ, judgment,
injunction, decree or determination.
(b) Following the Closing, the Purchaser shall, and the Purchaser
shall cause the Company to, to the fullest extent permitted under any applicable
law, rule, regulation, order, writ, judgment, injunction, decree or
determination, indemnify and hold harmless each present and former director,
officer, employee, fiduciary and agent of the Company and each Subsidiary
presently entitled to such indemnification prior to the Closing Date
(collectively, the "Indemnified Parties") in respect of acts or omissions
occurring on or before the Closing Date, provided such indemnification shall be
subject to any limitation imposed from time to time under any applicable law,
rule, regulation, order, writ, judgment, injunction, decree or determination. In
the event of any Action for which indemnification is available pursuant to the
previous sentence, (i) the Purchaser shall, and the Purchaser shall cause the
Company to, pay the reasonable fees and expenses of counsel selected by the
Indemnified Parties, which counsel shall be reasonably satisfactory to the
Purchaser, promptly after statements therefor are received and (ii) the
Purchaser shall, and the Purchaser shall cause the Company to, cooperate in the
defense of any such matter; provided, however, that neither the Purchaser nor
the Company shall be liable for any settlement effected without the Purchaser's
written consent (which consent shall not be unreasonably withheld); and provided
further that, in the event that any claim for indemnification is asserted or
made within such six-year period, all rights to indemnification in respect of
such claim shall continue until the disposition of such claim.
(c) The Purchaser agrees to maintain in effect for six years from
the Closing Date, if available, the current directors' and officers' liability
insurance policies maintained by the Company (provided that the Company may
substitute therefor policies of at least the same coverage containing terms and
conditions which are not less favorable) with respect to matters occurring prior
to the Closing Date; provided, however, that in no event shall the Company be
required to expend pursuant to this Section 6.15(c) more than an amount per year
equal to 150% of current annual premiums paid by the Company for such insurance;
provided further that the Company shall be required to procure as much insurance
as possible for such premium.
(d) The Purchaser agrees that, in the event the Purchaser, the
Company or any of their respective successors or assigns (i) consolidates with
or merges into any other Person and shall not be the continuing or surviving
corporation or entity of such consolidation or merger, (ii) transfers all or
substantially all of its Assets to any Person or (iii) sells or transfers all or
substantially all of the capital stock of the Company to any Person, then, and
in each case, proper provision shall be made so that the successors and assigns
of the Purchaser or the Company, as the case may be, shall assume the
obligations set forth in this Section 6.15.
(e) This Section 6.15 shall survive the Closing, is intended for the
benefit of the Indemnified Parties and their respective heirs, executors and
personal representatives and shall be enforceable by them as third party
beneficiaries.
SECTION 6.16. Purchaser Offering. The Purchaser shall immediately
begin preparation for the Purchaser Offering and shall use its best efforts to
complete the Purchaser Offering within 30 days from the date of this Agreement,
or as soon as practicable thereafter, provided, however, if the Purchaser elects
to effect a Restructuring, the Purchaser will use its best efforts to complete
the Purchaser Offering within 30 days from the date of the signing of the
Restructuring or as soon as reasonably practicable, it being understood that the
Purchaser will not be obligated to proceed with the Purchaser Offering if
applicable market conditions, in the reasonable opinion of the lead underwriter
to the Purchaser Offering, will not allow for gross proceeds to the Purchaser of
at least $30 million and will not satisfy such other conditions of the Purchaser
Offering set forth in Section 1.01 of the Disclosure Schedule. The Purchaser
agrees that prior to the completion of the Purchaser Offering, the Purchaser
shall not (i) enter into any equity, debt or other financing arrangements or
(ii) enter into any other material transactions, or take any other actions, that
could reasonably be expected to delay the Purchaser Offering or otherwise
adversely effect the ability of the Purchaser to complete the Purchaser
Offering.
SECTION 6.17. Restructuring. In connection with Purchaser's
investigation and diligence or otherwise, if Purchaser, in good faith, based on
the advice of independent public accountants, determines that there exists any
risk that the Company or any of its Subsidiaries will bear any tax liability as
a result of the acquisition of the Shares of the Company (including joint and
several liability as a result of the Company or a Subsidiary being included in a
Company Group), the Purchaser shall have the right, upon two days notice to the
Seller and the Company, to restructure the transaction as to provide for the
Purchaser to purchase the shares of capital stock of the Seller (the
"Restructuring") substantially on the same terms and conditions and for the same
aggregate price as that of the Purchase Price.
ARTICLE VII
EMPLOYEE MATTERS
SECTION 7.01. Continuation of Benefits. The Purchaser agrees that,
for a period of one-year immediately following the Closing Date, it shall, or
shall cause the Company and its Subsidiaries, to maintain employee benefit
plans, programs, contracts and arrangements for the benefit of current and
former employees of the Company and its Subsidiaries that in the aggregate will
provide compensation and benefits that are substantially comparable to the
compensation and benefits provided to such current and former employees under
the employee benefit plans, programs, contracts and arrangements of the Company
and its Subsidiaries as in effect immediately prior to the Closing Date. From
and after the Closing Date, the Purchaser shall honor, and shall cause the
Company and its Subsidiaries to honor, in accordance with its terms, all accrued
incentive and bonus obligations as in effect immediately prior to the Closing
Date that are applicable to any current or former employees or directors of the
Company or any of its Subsidiaries; provided, however, that the Company shall,
and the Purchaser shall cause the Company and its Subsidiaries to, continue such
incentive and bonus plans from the Closing Date through December 31, 2002.
SECTION 7.02. Service Recognition. Any service accrued or deemed
accrued by an employee of the Company or its Subsidiaries on or prior to the
Closing Date with the Company or any of its Subsidiaries shall be taken into
account as if it were service with the Purchaser or its subsidiaries in
determining such employee's eligibility to participate, vesting, benefit accrual
(except for benefit accrual under a defined benefit pension plan) and
eligibility to receive benefits under any employee benefit plan, program or
arrangement established or maintained on or after the Closing Date by the
Purchaser or its subsidiaries; provided, however, that such crediting of service
shall not operate to duplicate any benefit or the funding of any such benefit.
SECTION 7.03. Succession. In the event, for a period of one year
immediately following the Closing Date, the Purchaser or the Company or any of
their respective successors or assigns (i) consolidates with or merges into any
other Person and shall not be the continuing or surviving corporation or entity
of such consolidation or merger, (ii) transfers all or substantially all of
Assets to any Person or (iii) sells or transfers all or substantially all of the
capital stock of the Company to any Person, then, and in each such case, proper
provision shall be made so that the successors and assigns of the Purchaser or
the Company, as the case may be, shall assume the obligations set forth in this
Article VII.
SECTION 7.04. Survival. This Article VII shall survive the Closing,
is intended for the benefit of employees covered hereby and shall be enforceable
by them as third party beneficiaries.
ARTICLE VIII
TAX
SECTION 8.01. Tax Return Filings. The Purchaser shall, or shall
cause the Company and the Subsidiaries to, timely prepare and file with the
relevant Taxing Authorities all Tax Returns of the Company, the Subsidiaries and
each Company Group (such Company Group determined as of the date of this
Agreement and including any combined or consolidated group of which the Company
or any Subsidiary is a member on such date and the Seller is the common parent)
the due date for filing of which, determined taking into account extensions, is
after the Closing Date and shall pay all Taxes with respect thereto. The Seller
shall, or shall cause the Company and the Subsidiaries to, timely prepare and
file with the relevant Taxing Authorities all Tax Returns for any taxable
periods of the Company or any of the Subsidiaries the due date for filing of
which, determined taking into account extensions, is on or before the Closing
Date. Any Tax Returns described in the preceding sentence shall be prepared on a
basis consistent with the past Tax practices of the Company and the Subsidiaries
and in a manner that does not distort taxable income (e.g., by deferring income
or accelerating deductions). All Tax Returns for a taxable period including the
Closing Date shall be filed on the basis that the relevant taxable period ended
as of the close of business on the Closing Date, unless the relevant Taxing
Authority will not accept such a Tax Return. The Purchaser shall allow the
Seller to review and comment upon all income Tax Returns (including any amended
returns) for any combined or consolidated group of which the Seller is a member
for any Pre-Closing Tax Period. The Purchaser shall provide the Seller with the
applicable Tax Returns at least 30 Business Days before the due date for filing
such Tax Return. The Purchaser shall consider in good faith any revisions to
such Tax Returns as the Seller may reasonably request. The Purchaser shall
indemnify and hold harmless the Seller and the shareholders of the Seller for
all Taxes of the Company, the Subsidiaries, the Seller and each Company Group
for all Pre-Closing Tax Periods. The Purchaser shall have the right to control
any contest of such Taxes. The Seller and the shareholders of the Seller,
severally and not jointly, shall indemnify and hold harmless the Purchaser, the
Company and the Subsidiaries for all Taxes of the Seller for all taxable periods
(or portions thereof) beginning after the close of business on the Closing Date
and shall pay such amount to the Seller, the Company or the Subsidiaries, as
applicable, within 3 Business Days of the required date of payment for such
Taxes.
SECTION 8.02. Cooperation. The Seller, the shareholders of the
Seller, the Company and the Purchaser shall reasonably cooperate, and shall
cause their respective Affiliates, officers, employees, agents, auditors and
representatives reasonably to cooperate, in preparing and filing all Tax
Returns, including maintaining and making available to each other all records
necessary in connection with Taxes, and in resolving all disputes and audits
with respect to all taxable periods relating to Taxes. Upon the written request
of the Purchaser, the Seller shall disclose to the Purchaser the necessary
records with respect to Taxes that the Seller or the Company have in their
possession including, without limitation, (i) complete and correct copies of all
material Tax Returns of the Company and each Subsidiary, (ii) complete and
correct copies of all material private letter rulings, revenue agent reports,
information document requests, notices of proposed deficiencies, deficiency
notices, protests, petitions, closing agreements, settlement agreements, pending
ruling requests, and any similar documents, submitted by, received by or agreed
to by or on behalf of the Company or any Subsidiary, (iii) documents setting
forth the dates of the most recent audits or examinations of the Company and
each Subsidiary by any Taxing Authority in respect of material Federal, foreign,
state and local Taxes for all taxable periods for which the statute of
limitations has not yet expired, and (iv) a copy of any power of attorney with
respect to any Taxes that has been executed or filing with any Taxing Authority
by or on behalf of the Company, or any Subsidiary.
SECTION 8.03. Tax Sharing Agreements. Upon the Purchaser's request,
the Seller shall cause some or all Tax sharing agreements between (i) the Seller
or any of their Affiliates (other than the Company and the Subsidiaries), and
(ii) the Company or any Subsidiary, to be terminated on or before the Closing
Date. After the Closing Date, no party shall have any rights or obligations
under any such Tax sharing agreements.
ARTICLE IX
CONDITIONS TO CLOSING
SECTION 9.01. Conditions to Obligations of the Seller. The
obligations of the Seller to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment, at or prior to the Closing, of
each of the following conditions:
(a) Representations and Warranties; Covenants. The representations
and warranties of the Purchaser contained in this Agreement shall be true
and correct as of the Closing (except where the failure of representations
and warranties to be so true and correct in the aggregate without
consideration of any knowledge qualifiers would not result in a material
adverse effect on the Purchaser's ability to consummate the transactions
contemplated hereby), with the same force and effect as if made as of the
Closing, other than such representations and warranties as are made as of
another date, which shall be true and correct as of such other date
(except where the failure of representations and warranties to be so true
and correct in the aggregate without consideration of any knowledge
qualifiers would not result in a material adverse effect on the
Purchaser's ability to consummate the transactions contemplated hereby),
and all the covenants contained in this Agreement to be complied with by
the Purchaser on or before the Closing shall have been complied with
(except where the failure to so comply would not have a material adverse
effect on the Purchaser's ability to consummate the transactions
contemplated hereby), and the Seller shall have received a certificate of
the Purchaser to such effect signed by a duly authorized officer thereof;
(b) No Order. No Federal, state, local or foreign governmental or
regulatory authority or other agency or commission or 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 restricting, preventing or prohibiting consummation of the
transactions contemplated by this Agreement (nor shall any proceeding for
any such statute, rule, regulation, order, decree or injunction be
pending), provided that the provisions of this Section 9.01(b) shall not
apply if the Seller has directly or indirectly solicited or encouraged any
such action, and provided further that the parties invoking this condition
shall use their best efforts to have any such order vacated; and
(c) Other Governmental and Regulatory Consents. All filings required
to be made prior to the Closing with, and all consents, approvals, permits
and authorizations required to be obtained prior to the Closing from,
governmental and regulatory authorities in connection with the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby by the Purchaser shall have been made or obtained, as
the case may be.
SECTION 9.02. Conditions to Obligations of the Purchaser. The
obligations of the Purchaser to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment, at or prior to the Closing, of
each of the following conditions:
(a) Representations and Warranties; Covenants. The representations
and warranties of the Seller contained in this Agreement shall be true and
correct as of the Closing (except where the failure of representations and
warranties to be so true and correct in the aggregate without
consideration of any knowledge qualifiers would not result in a Material
Adverse Effect), with the same force and effect as if made as of the
Closing, other than such representations and warranties as are made as of
another date, which shall be true and correct as of such other date
(except where the failure representations and warranties to be so true and
correct in the aggregate without consideration of any knowledge qualifiers
would not result in a Material Adverse Effect), and all the covenants
contained in this Agreement to be complied with by the Seller on or before
the Closing shall have been complied with (except where the failure to so
comply would not result in a Material Adverse Effect), and the Purchaser
shall have received a certificate of the Seller to such effect signed by a
duly authorized officer of the Seller;
(b) No Order. No Federal, state, local or foreign governmental or
regulatory authority or other agency or commission or 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 restricting, preventing or prohibiting consummation of the
transactions contemplated by this Agreement (nor shall any proceeding for
any such statute, rule, regulation, order, decree or injunction be
pending), provided that the provisions of this Section 9.02(b) shall not
apply if the Purchaser has directly or indirectly solicited or encouraged
any such action, and provided further that the parties invoking this
condition shall use their best efforts to have any such order vacated;
(c) Governmental, Regulatory and Other Consents. All filings,
consents, approvals, permits and authorizations set forth on Section
9.02(c) of the Disclosure Schedule shall have been made or obtained, as
the case may be;
(d) No Material Adverse Effect. Since the December Statements, there
shall not have occurred and be continuing any event or circumstance which
has, or is reasonably likely to have, a Material Adverse Effect; and
(e) Purchaser Offering. The Purchaser shall have completed the
Purchaser Offering.
(f) Resignations of Directors. Such members of the boards of
directors of the Company and the Subsidiaries as are designated in a
written notice delivered at least two Business Days prior to the Closing
Date by the Purchaser to the Seller shall have tendered, effective at the
Closing, their resignations as such directors.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
SECTION 10.01. Termination. This Agreement may be terminated at any
time prior to the Closing:
(a) by the mutual written consent of the Seller and the Purchaser;
(b) by either the Seller or the Purchaser if any Federal, state,
local or foreign court of competent jurisdiction or other governmental or
regulatory authority with jurisdiction over such matters shall have issued
an order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the sale of the Shares hereunder and
such order, decree, ruling or other action shall have become final and
unappealable;
(c) by either the Seller or the Purchaser, if the Closing shall not
have occurred by September 13, 2002; provided that the Seller shall, in
its sole discretion, be entitled to extend such date (by delivering notice
of such extension to the Purchaser not later than two Business days prior
to such date) to December 13, 2002 if all conditions specified in Section
9.02 other than the condition specified in Section 9.02(c) shall have been
satisfied and such condition specified in Section 9.02(c) shall not have
been otherwise waived; provided further that the right to terminate this
Agreement under this Section 10.01(c) shall not be available to any party
whose failure to fulfill any obligation under this Agreement shall have
been the cause of, or shall have resulted in, the failure of the Closing
to occur prior to such date;
(d) by the Purchaser if the Seller or the Company shall have
breached any representation, warranty, covenant or other agreement
contained in this Agreement which would give rise to the failure of the
condition set forth in Section 9.02(a) and the Seller or the Company, as
applicable, has not remedied such breach in all material respects prior to
the earlier of (i) the date that is 30 days from the receipt of written
notice from the Purchaser that the Purchaser intends to assert its rights
under this provision unless such breach is so remedied or (ii) the
applicable date set forth in Section 10.01(c) above; or
(e) by the Seller if the Purchaser shall have breached any
representation, warranty, covenant or other agreement contained in this
Agreement which would give rise to the failure of the condition set forth
in Section 9.01(a) and the Purchaser has not remedied such breach in all
material respects prior to the earlier of (i) the date that is 30 days
from the receipt of written notice from the Seller or the Company that the
Seller intend to assert their rights under this provision unless such
breach is so remedied, or (ii) the applicable date set forth in Section
10.01(c) above.
SECTION 10.02. Effect of Termination. In the event of termination of
this Agreement as provided in Section 10.01, this Agreement shall forthwith
become void and there shall be no liability on the part of any party hereto
except as set forth in Sections 6.07, 11.01 and 11.02, and nothing herein shall
relieve any party from liability for any willful breach of this Agreement.
SECTION 10.03. Waiver. At any time prior to the Closing, each of the
parties hereto 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 warranties contained herein or in any document
delivered pursuant hereto or (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid if set
forth in an instrument in writing signed by the party to be bound thereby.
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01. Non-Survival of Representations, Warranties,
Covenants and Agreements. The representations, warranties, covenants and
agreements of the parties hereto contained herein are made jointly and severally
by the Company and the Seller and shall terminate on the Closing Date or upon
the termination of this Agreement pursuant to Section 10.01, as the case may be;
provided, however, the covenants and agreements set forth in Section 6.07 shall
remain in full force and effect for the applicable period specified in the
Confidentiality Agreement and the covenants and agreements set forth in Sections
6.04, 6.05(b), 6.06, 6.09, 6.11, 6.12 and 6.15 and in Articles II, VII and XI,
shall remain in full force and effect for the applicable periods specified in
such Sections or Articles or, if in any such case no such period is specified,
until the applicable period under the statute of limitations therefor has
expired.
SECTION 11.02. Expenses. All costs and expenses, including, without
limitation, fees and disbursements of counsel, financial advisors and
accountants, incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses, whether
or not the Closing shall have occurred.
SECTION 11.03. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by delivery
in person, by courier service, by cable, by telecopy, by telegram, by telex or
by registered or certified mail (postage prepaid, return receipt requested) to
the respective parties at the following addresses (or at such other address for
a party as shall be specified in a notice given in accordance with this Section
11.03):
(a) if to the Seller or the Company:
Xxxxx X. Xxxxxxxxx
Columbia National, Inc.
0000 Xxxxxxxx Xxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxx 00000-0000
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
with a copy to:
Xxxxxx X. Xxxxxx
Columbia National, Inc.
0000 Xxxxxxxx Xxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxx 00000-0000
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
and
Xxxxxxx Xxxxx & Co., Inc.
0 Xxxxx Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxx
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
and
Xxxxx X. Xxxxxxxx
Xxxxxxx Xxxxx & Co., Inc.
0 Xxxxx Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
and
Shearman & Sterling
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxxx, Xx.
Xxxxxxx X. Xxxxxxxxxxxx
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
(b) if to the Purchaser:
American Home Mortgage Holdings, Inc.
000 Xxxxxxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxxx
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
with a copy to:
Cadwalader, Xxxxxxxxxx & Xxxx
000 Xxxxxx Xxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxxxxx
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
SECTION 11.04. Public Announcements. The Purchaser agrees to provide
copies of any public announcement or press release to the Seller and the Company
with respect to the transactions contemplated hereby, at least two days' prior
to such public announcement or press release, and shall consider any reasonable
proposal by the Seller or the Company with respect to such public announcement
or press release; provided, however, only one day's prior notice to such public
announcement or press release shall be required if the Purchaser, in good faith,
notifies the Seller that such shortened notice is necessary in order to comply
with applicable securities laws; provided further, that the Purchaser shall not
make, or cause to be made, any public announcement or press release that
contains (a) the name "Xxxxxxx Xxxxx & Co., Inc.", the name of any affiliate of
Xxxxxxx Xxxxx & Co., Inc. or any derivative or derivation thereof or (b) the
name of any of Xxxxxxx Xxxxx Capital Appreciation Partnership No. B-XXIII, L.P.,
ML Offshore LBO Partnership No. B-XXIII, ML IBK Positions, Inc., MLCP Associates
LP No. III, Xxxxxxx Xxxxx Kecalp L.P. 1991, Xxxxxxx Xxxxx LBO Partners No. B-V,
L.P., Xxxxxxx Xxxxx Capital Partners, Inc. or KECALP, Inc. or any derivative or
derivation thereof without the prior written consent of the entities set forth
in clause (b) of this Section 11.04, which consent shall not be unreasonably
withheld or unreasonably delayed.
SECTION 11.05. 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 11.06. 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 in a mutually acceptable
manner in order that the transactions contemplated hereby be consummated as
originally contemplated to the greatest extent possible.
SECTION 11.07. Entire Agreement; Consequential Damages. This
Agreement constitutes the entire agreement of the parties hereto with respect to
the subject matter hereof and supersedes all prior agreements and undertakings,
both written and oral, other than the Confidentiality Agreement, and except as
otherwise expressly provided herein. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED
HEREIN, ALL WARRANTIES (WHETHER WRITTEN OR ORAL, EXPRESS OR IMPLIED) IN REGARD
TO MERCHANTABILITY, FITNESS FOR A PARTICULAR USE, CONDITION, DESIGN, OPERATION,
MAINTENANCE, VALUE OR OTHERWISE WITH RESPECT TO THE ASSETS USED IN THE BUSINESS
ARE EXPRESSLY EXCLUDED. In no event shall the Seller be liable for any
incidental, special, indirect or consequential damages, loss of profits, or
other damages arising in any way from the transactions contemplated hereby.
SECTION 11.08. Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that the Purchaser may assign, in
its sole discretion, any or all of its rights and interests hereunder to any
direct or indirect wholly owned Subsidiary of the Purchaser; provided, however,
no such assignment by the Purchaser shall relieve the Purchaser of its
obligations under this Agreement. Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
SECTION 11.09. No Third-Party Beneficiaries. Except as provided in
Section 6.15 and Article VII, this Agreement is for the sole benefit of and
binding upon the parties hereto and their permitted successors and assigns and
nothing herein, express or implied, is intended to or shall confer upon any
other Person any legal or equitable right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
SECTION 11.10. Amendment; Waiver. This Agreement may not be amended
or modified except by an instrument in writing signed by the Seller and the
Purchaser. Waiver of any term or condition of this Agreement shall only be
effective if in writing and shall not be construed as a waiver of any subsequent
breach or waiver of the same term or condition, or a waiver of any other term or
condition of this Agreement.
SECTION 11.11. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York applicable
to contracts executed in and to be performed in that State and without regard to
conflicts of law doctrines except to the extent that certain matters are
preempted by Federal law or are governed by the law of the jurisdictions of
organization of the respective parties.
SECTION 11.12. Time of Essence. Each of the parties hereto hereby
agrees that, with regard to all dates and time periods set forth or referred to
in this Agreement, time is of the essence.
SECTION 11.13. 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. Copies
of executed counterparts transmitted by telecopy or other electronic
transmission service shall be considered original executed counterparts,
provided receipt of such counterparts is confirmed.
SECTION 11.14. Waiver of Jury Trial. EACH PARTY HERETO HEREBY WAIVES
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER
BASED IN CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AGREEMENT, THE OTHER AGREEMENTS CONTEMPLATED HEREBY OR THE ACTIONS OF ANY PARTY
IN NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Purchaser, the Company and the Seller has
executed, or have caused this Agreement to be executed by their respective
representatives thereunto duly authorized, as of the date first written above.
COLUMBIA NATIONAL HOLDINGS, INC.
By: /s/ Xxxxxxx Xxxxxxx
------------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Executive Vice President
COLUMBIA NATIONAL, INCORPORATED
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Executive Vice President
AMERICAN HOME MORTGAGE HOLDINGS, INC.
By: /s/ Xxxxxxx Xxxxxxx
------------------------------------
Name: Xxxxxxx Xxxxxxx
Title: President and Chief Executive
Officer
