EXHIBIT 2.1
BUSINESS COMBINATION AGREEMENT
THIS BUSINESS COMBINATION AGREEMENT (the "Agreement"), made and entered
into February 7, 2002 but effective on the 1st day of January, 2002 by and among
WHY USA Financial Group, Inc., a Nevada corporation ("WHY USA"), DISCOVER
MORTGAGE CORP., a Minnesota corporation ("Discover") and XXXXXXX XXXXXX and
XXXXX XXXXXXX, (each a "Shareholder" and collectively the "Principal
Shareholders").
WHEREAS, WHY USA and its subsidiaries are engaged in the business of
providing various financial services primarily directed toward residential real
estate transactions including mortgage brokerage and real estate franchising of
its proprietary franchise WHY USA system, and its common stock trades publicly
on the Electronic Bulletin Board of the NASD, and it also is a fully reporting
public company under the federal Securities Act of 1934, as amended; and
WHEREAS, Discover is a mortgage brokerage company providing mortgage
services primarily in the Minneapolis/St. Xxxx metropolitan area, and all of its
outstanding capital stock is owned by the Shareholders; and
WHEREAS, the respective Boards of Directors of the corporate parties
hereto as well as the Principal Shareholders have determined it is desirable and
advisable and in the best interests of all parties hereto as well as the
shareholders of WHY USA to effect a Merger between WHY USA and Discover through
a stock exchange whereby Discover shall become a wholly-owned subsidiary of WHY
USA (the "Merger"); and
WHEREAS, the parties hereto desire to effect such an acquisition of
100% of the capital stock of Discover by WHY USA pursuant to the terms and
conditions of this Agreement including the parties hereto making certain
representations, warranties, covenants and promises as set forth in this
Agreement.
NOW, THEREFORE, for valuable consideration and upon the mutual
representations, warranties, covenants, conditions and promises set forth in
writing herein, the parties hereto agree as follows:
1. Plan of Business Combination Exchange; Tax-Free
Reorganization. It is the agreement and express intention of
all parties hereto that, upon the effectiveness of the Merger,
all of the outstanding common stock of Discover, shall be
converted solely into shares of common stock of WHY USA
pursuant to the conversion basis set forth in Section 4 of
this Agreement, after which Discover shall constitute a
wholly-owned subsidiary of WHY USA. It also is the particular
intention of all parties hereto that the Merger shall qualify
as a tax-free reorganization under Section 368 of the Internal
Revenue Code of 1986, as amended, and all regulations
promulgated thereunder, as in effect from time to time.
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2. Restricted Securities. All shares of WHY USA common stock to
be issued incident to the Merger shall be issued as
"restricted securities" as that term is defined under the
Securities Act of 1933, as amended, meaning that they will not
be restricted under either federal or state securities laws
and will be taken by the Shareholders of Discover in the
Merger for investment and not with a current view toward
further resale, transfer or other disposition thereof; and
accordingly, any further transfer or other disposition thereof
must be either registered under relevant securities laws or
exempt from registration under an appropriate exemption such
as Rule 144 of the Securities Act of 1933, and further that
all Shareholders of Discover will execute a standard
investment intent letter incident to the Merger which
evidences such express investment intent on their part, which
letter shall be in form satisfactory to legal counsel of WHY
USA. Moreover, stock certificates issued incident to the
Merger by WHY USA also shall bear an appropriate restrictive
legend setting forth the nature of such restricted status of
shares issued in the Merger.
3. The Merger; Effectiveness. Upon the closing and effectiveness
of the Merger, Discover shall become a wholly-owned subsidiary
of WHY USA and the current shareholders of Discover shall no
longer own any capital stock of Discover but shall rather
become shareholders of WHY USA in exchange for their former
respective ownership of Discover. WHY USA shall issue no other
consideration for the Merger to the Shareholders of Discover
other than common shares of WHY USA, and WHY USA shall become
the sole shareholder of Discover.
4. Exchange of Stock. The manner and basis of exchanging the
common stock of WHY USA for that of Discover shall be as
follows:
Upon the effectiveness of the Merger and without any action on
the part of the Shareholders of Discover:
(a) Conversion of Discover Shares. The Shareholders of
Discover shall convert their respective common stock
of Discover into common shares of WHY USA based on
the book value of Discover as of December 31, 2001
determined in accordance with generally accepted
accounting principles (the "GAAP Book Value"). The
parties hereto shall endeavor to direct their best
efforts toward completing a certified audit of the
balance sheet of Discover by the firm of Bertram,
Vallez, Xxxxxx & Xxxxxx, Ltd. or such other firm as
may be mutually agreeable to WHY USA and Discover as
soon as reasonable in order to specify such GAAP Book
Value for the share conversion under the Merger.
The total shares of common stock of WHY USA to be
received by the Shareholders of Discover shall be two
(2) times such GAAP Book Value (accrual accounting
basis) based on a share price of $.50/share;
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and the respective Shareholders of Discover shall be
issued their proportionate part of such total shares
based on the percentage schedule attached hereto as
Schedule A. The shareholders shall also receive
rights to future issuance of WHY USA common stock as
provided in the following Section 4(b), and such
earnout shares shall also be issued to the
Shareholders of Discover proportionately as specified
in Schedule A hereto.
(b) Additional Earnout Shares. The Shareholders of
Discover shall receive additional shares of WHY USA
common stock (the "Earnout Shares") based on the
income of Discover during the year ended December 31,
2002. The income of Discover for purposes of this
Agreement shall mean audited pre-tax operating
earnings of Discover in accordance with generally
accepted accounting principles (GAAP). The audit
shall be conducted as soon as possible after the year
end, but in no event shall be commenced within than
forty-45 (45) days after year end. Upon determination
of such GAAP income after being audited, the total
Earnout Shares to be issued in connection with the
Merger shall be based upon 6.5 times such earnout
income figure based on the lesser of i) a share price
of $.75/share, or ii) the public "ask" price of WHY
USA common stock at the close of trading on December
31,2002. During the earnout period, WHY USA
represents that WHY USA will not materially alter the
ongoing operation or business practices of Discover,
and the Principal Shareholders shall have the right
to manage the business consistent with prior
practices of Discover.
(c) Selection of Auditor. The independent auditor making
the foregoing determinations of GAAP Book Value and
earnout income shall be the firm of Bertram, Vallez,
Xxxxxx & Talbot, Ltd. or such other firm as may be
mutually agreeable to WHY USA and the Principal
Shareholders of Discover.
(d) The Principal Shareholders shall be entitled to
500,000 options for common stock per share at $0.50
per share under WHY USA's existing stock option plan
for performance bonuses to employees of Discover to
be awarded in Discover's sole discretion.
(e) The two Principal Shareholders shall each be
additionally entitled to options for 150,000 shares
of common stock at a purchase price of $.50 per
share; which can be fully or partially exercised at
any time within five years after the Closing Date.
5. Delivery of Securities. Upon Closing of the Merger, the
shareholders of Discover shall deliver all of their Discover
common stock to WHY USA, duly endorsed for transfer and
exchange at Closing, and concurrent thereto WHY USA shall
cause its
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independent transfer agent to issue and deliver to such
shareholders the shares of WHY USA common stock required
pursuant to Section 4 (a) hereof. The shares of WHY USA common
stock pursuant to Section 4(b) shall be issued and delivered
within thirty (30) days of completion of the independent
audit. The shares of WHY USA common stock pursuant to Section
4(d) shall be issued and delivered within thirty (30) days of
receipt by WHY USA of the Principal Shareholder's written
request, and the shares of WHY USA common stock pursuant to
Section 4(e) shall be issued and delivered of WHY USA's
receipt of written notice of the Principal Shareholder's
written request to exercise an option and payment of the
option price.
6. Approval. Approval of this Agreement and the Merger hereto
must be obtained from the Board of Directors of both corporate
parties hereto Discover and the Principal Shareholder's
obligation to perform is contingent upon Discover obtaining a
unanimous resolution of all of the shareholders of Discover.
WHY USA hereby represents and warrants that no consent or
approval of the shareholders of WHY USA is necessary to enter
into and consummate this Agreement and the Merger hereto.
7. Closing Date. The Closing of the Merger shall be on or before
February 28, 2002 ("Closing Date"), and shall be effective
January 1, 2002 unless extended by mutual written consent of
all parties hereto. The Closing shall be held at the corporate
headquarters of WHY USA located in Bloomington, MN.
8. Officers and Directors. Upon the effectiveness of the Merger,
the officers and directors of Discover shall remain the same
as before the Merger, and they shall continue to serve as such
unless changed by WHY USA as the sole shareholder of Discover
after the Merger. Concurrent with Closing of the Merger, WHY
USA shall add one member to its Board of Directors selected by
the Principal Shareholders of Discover. WHY USA shall execute
such other documents as necessary to confirm that the
Principal Shareholders shall at all times have the right to
have one individual on the Board of Directors of WHY USA with
all of the rights and benefits appurtenant thereto.
9. Articles and Bylaws. Upon the Closing of the Merger, the
current Articles of Incorporation and Bylaws of Discover shall
continue to govern Discover, unless and until amended, in the
manner prescribed by the Minnesota Business Corporation Act.
10. Anti-Dilution. In the event WHY USA (i) changes the number of
shares of its outstanding common stock prior to the
effectiveness of the Merger as a result of a stock spit, stock
dividends, recapitalization, reclassification, reorganization,
business combination or similar transaction, or (ii) pays or
makes an extraordinary dividend or distribution in respect to
its common shares, the consideration to be paid in the Merger
shall be proportionately adjusted.
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11. Representations of WHY USA. WHY USA, for itself and its
subsidiaries, jointly and severally, hereby represent and
warrant that, effective as of the date hereof, and as of the
Closing Date, the following statements are true and correct in
all material respects:
(a) WHY USA is a corporation duly organized, validly
existing and in good standing with the State of
Nevada, its state of incorporation, and has all
requisite power and authority to own, operate and
lease its properties and assets and to conduct its
business as it is now being conducted. WHY USA is
duly qualified to transact business as a foreign
corporation and is in good standing under the laws of
every state or jurisdiction where such qualification
is necessary and in which the failure to be so
qualified could reasonably be expected to have a
material adverse effect on WHY USA.
(b) WHY USA and each of its subsidiaries has complied
with all state and federal laws and regulations
regarding their incorporation and organization, past
issuances and/or sales of securities, capitalization
and business operations. No contingent liabilities or
claims exist against WHY USA or any of its
subsidiaries with respect to such incorporation,
organization, capitalization, business operations or
sale or issuance of securities.
(c) All Shares of WHY USA Common Stock issued in the
Merger will have the same rights and be in all
respects equivalent to the WHY USA Common Stock
outstanding prior to the Merger and will be
restricted and the shareholders of Discover will have
the ability to publicly trade the shares one year
after their issuance.
(d) The execution, delivery and performance of this
Agreement, including the documents, instruments and
agreements to be executed and/or delivered by WHY USA
pursuant to this Agreement, and the consummation of
the Merger will be duly and validly authorized by all
necessary corporate action on the part of WHY USA.
The obligations of WHY USA hereunder and thereunder
are or will be legally binding and enforceable
against WHY USA in accordance with their respective
terms.
(e) The officers of WHY USA executing this Agreement are
duly authorized to execute and deliver it and any
further documents as necessary to effect the Merger,
and further to take any and all actions necessary or
appropriate to effect the Merger.
(f) As of the effectiveness of the Merger, all
outstanding shares of WHY USA Common Stock, including
all shares of WHY USA Common Stock to be issued in
connection with the Merger, are or shall be duly
authorized, validly issued, fully paid and
nonassessable and no not subject to any preemptive
rights, and have been or will be issued in compliance
with all applicable federal and state securities
laws.
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(g) There are no other shares of capital stock of WHY USA
authorized other than it's authorized 300,000,000
shares of Common Stock. As of December 31, 2001
35,352,915 shares of WHY USA Common Stock were issued
and outstanding.
(h) WHY USA has filed all forms, reports and documents
required to be filed by it with the SEC since
becoming a publicly reporting company with the SEC,
as had made available to Discover such current or
past reports and financial statements desired by
Discover incident to the Merger. WHY USA SEC Reports
and any other forms reports and other documents filed
by WHY USA with the SEC after the date of this
Agreement will be prepared in accordance with the
requirements of the SEC and its rules and
regulations. All financial statements submitted by
WHY USA to the other parties hereto, including all
financial information in the WHY USA SEC Reports, are
complete and accurate for the dates and periods
indicated thereon. Such financial statements have
been prepared in accordance with generally accepted
accounting principles, applied on a consistent basis,
and they fairly represent the financial condition of
WHY USA and its subsidiaries on a consolidated basis
for the periods covered. There are no material
liabilities, either fixed or contingent, known or
unknown which are not reflected in such financial
statements.
(i) WHY USA and each of its subsidiaries has complied
with all state and federal laws and regulations
regarding its respective business operations and
transactions, and possesses all licenses and
authority required to conduct all business operations
carried on by it.
(j) Neither WHY USA nor any of its subsidiaries is
involved in any current or pending litigation or
governmental proceedings incident to their business
operations or assets except disclosed as follows: i)
the lawsuit involving lease of former facilities in
Arizona, ii) lawsuits in Michigan court involving two
copiers formerly leased at Arizona offices, and iii)
lawsuit to rescind Cashline purchase made in Arizona
in early 2001.
(k) Neither WHY USA nor any of its subsidiaries has
materially breached any contract or agreement to
which it is a party or by which it is bound. The
execution and Closing of the Merger will not breach
or violate (i) any provision of the Articles of
Incorporation or Bylaws of WHY USA, (ii) any
applicable laws or injunctions applicable to WHY USA
or (iii) any agreement, contract or commitment to
which WHY USA or any of its subsidiaries is a party
or by which any of their respective assets or
properties may be bound.
(l) Neither WHY USA nor any of its subsidiaries has
mortgaged or pledged as collateral any of its
properties or assets unless disclosed in the
financial statements referred herein.
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(m) There are no outstanding contractual obligations of
WHY USA to repurchase, redeem or otherwise acquire
any shares of capital stock of WHY USA or any of its
subsidiaries.
(n) There have not been any material changes in the
financial position of WHY USA since December 31,
2001, other than changes in the ordinary course of
business or changes expressly disclosed to the other
parties hereto.
(o) All corporate financial and operational records of
WHY USA and its subsidiaries will be made available
to the parties hereto for proper due diligence prior
to the Closing of the Merger.
(p) As of the date hereof, WHY USA has, and at the
Closing Date of the Merger, WHY USA will have, to the
best of its knowledge and ability, disclosed all
events, conditions and facts materially affecting its
business and properties. WHY USA has not now, and
will not as of the Closing Date, have withheld
knowledge of any such event, condition or fact which
it knows, or has reasonable grounds to know, may
materially effect the business, properties or value
of WHY USA or any of its subsidiaries.
12. Representations of Discover. Discover hereby represents and
warrants to WHY USA that, effective as of the date hereof, and
as of the Closing Date, the following statements are true and
correct in all material respects:
(a) To the best of their knowledge, Discover is a
corporation duly organized, validly existing and in
good standing with the State of Minnesota, its state
of incorporation, and has all requisite power and
authority to own, operate and lease its properties
and assets and to conduct its business as it is now
being conducted; and to the best of their knowledge,
Discover is duly qualified to transact business as a
foreign corporation and is in good standing under the
laws of every state or jurisdiction where such
qualification is necessary and in which the failure
to be so qualified could reasonably be expected to
have a material adverse effect on Discover.
(b) To the best of its knowledge, Discover has complied
with all state and federal laws and regulations
regarding its incorporation and organization, past
issuance and/or sale of securities, capitalization
and business operations. No contingent liabilities or
claims exist against Discover with respect to such
incorporation, organization, capitalization, business
operations or issuance or sale of securities.
(c) There are no other shares of capital stock of
Discover other than its authorized Common Stock and
its only outstanding stock consists of 23,000 shares
of Common Stock held of record as shown on Schedule A
hereto.
(d) Discover possesses all licenses, charters or
authorities necessary to conduct all business
operations carried on by Discover.
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(e) There are no liens or encumbrances against any of the
outstanding shares of Discover Common Stock.
(f) The execution, delivery and performance of this
Agreement, including the documents, instruments and
agreements to be executed and/or delivered by
Discover pursuant to this Agreement, and the
consummation of the Merger will be duly and validly
authorized by all necessary corporate action on the
part of Discover. The obligations of Discover
hereunder and thereunder are or will be legally
binding and enforceable against Discover in
accordance with their respective terms.
(g) The officers of Discover executing this Agreement are
duly authorized to execute and deliver it and once
approved by all necessary corporate action, any
further documents necessary to effect the Merger and
further to take any and all actions necessary or
appropriate to effect the Merger.
(h) All outstanding Discover Common Stock is duly
authorized, validly issued, fully paid and
nonassessable,
(i) Discover is not involved in any pending or, to the
knowledge of Discover or the Shareholders, threatened
litigation or governmental proceedings of a material
nature, other than in the ordinary course of its
business.
(j) To the best of their knowledge, all financial
statements submitted to WHY USA by Discover are
complete and accurate for the dates and periods
indicated thereon, and such statements have been
prepared substantially in accordance with generally
accepted accounting principles, applied on a
consistent basis, and they fairly present the
financial condition of Discover for the periods
covered. There are no liabilities, either fixed or
contingent, known or unknown, of a material nature
which are not reflected in such financial statements
or otherwise expressly disclosed to WHY USA.
(k) To the best of its knowledge, Discover is not now
materially in breach of any contract or agreement to
which it is a party or by which it is bound. The
execution of this Agreement and Closing of the Merger
will not breach or violate (i) any provision of the
Articles of Incorporation or Bylaws of Discover, (ii)
any applicable laws or injunctions applicable to
Discover or (iii) any agreement, contract or
commitment to which Discover is a party or by which
any of its assets or properties may be bound.
(l) The records of all issuances and transfers, if any,
of capital stock of Discover have been maintained by
Discover as its own transfer agent and registrar, and
they are in good and current order and status and
accurately reflect the record ownership of all issued
and outstanding capital stock of Discover. Moreover,
any beneficial ownership of any capital stock of
Discover known to Discover or the Shareholders has
been fully disclosed to WHY USA.
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(m) Discover has no outstanding options, warrants, calls,
commitments, agreements or other rights or
undertakings to issue, deliver or sell any equity
interests in Discover unless set forth on Schedule A
hereto or included in the corporate documentation
disclosed by Discover. At closing, there will be no
outstanding contractual obligations of Discover to
repurchase, redeem or otherwise acquire any shares of
capital stock of Discover.
(n) Discover has not mortgaged or pledged as collateral
any of its properties or rights or assets, except as
disclosed in the financial statements referred to
herein.
(o) There have not been material changes in the financial
position of Discover since the time of the most
current financial statements submitted to WHY USA,
other than changes in the ordinary course of business
or changes expressly disclosed to WHY USA.
(p) All corporate financial and operational records and
transactions, and other material documents of
Discover will be made available to WHY USA for proper
due diligence prior to the Closing of the Merger.
(q) As of the date hereof, Discover and the Principal
Shareholders have, and at the Closing Date of the
Merger Discover and the Principal Shareholders will
have, to the best of their knowledge and ability,
disclosed all events, conditions and facts materially
affecting the business and properties of Discover.
Discover and the Principal Shareholders or any one of
them, have not now, and will not as of the Closing
Date, have withheld knowledge of any such events,
conditions and facts which any one of them knows, or
has reasonable grounds to know, may materially affect
the business, properties or value of Discover.
13. Audit of Discover. For SEC reporting purposes, an audit of
Discover operations and financial position may be required
incident to the Merger, which could be for the one-year period
ending and as of December 31, 2001. Such audit, if required,
will be at the expense of WHY USA.
14. Mutual Covenants. All parties hereto covenant and agree that
from the date hereof to the Closing Date of the Merger, unless
express written consent is obtained from the other parties
hereto, each corporate party hereto and any subsidiaries
shall:
(a) Conduct their respective businesses and operations in
the usual, normal and ordinary course of business,
use reasonable efforts to preserve the business
organization intact and to maintain employees and
relationships with customers, suppliers, vendors and
others having a business relationship with such
party;
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(b) Not make any material increase in the debt or
encumbrances against any assets or properties owned
by any corporate party or subsidiary, and not sell or
transfer any material assets or properties, except in
the ordinary course of business;
(c) Not make any material changes in accounting or
financial records or practices;
(d) Not terminate, change or violate any lease, contract,
license, charter, commitment or agreement having a
material adverse effect on the business or assets of
the corporate party or subsidiary;
(e) Not declare any cash or stock dividends;
(f) Not make any loan or enter into any other material
transaction with any officer or director, except in
the ordinary course of business;
(g) Not make any distribution to shareholders or any
other person of any asset or properties by way of
dividend, partial distribution, liquidation,
redemption or otherwise;
(h) Pay no salaries, bonuses or other compensation to
officers and directors, other than in the usual and
ordinary course of business and consistent with
employment practices currently in effect except that
the Principal Shareholders at their sole discretion
shall be entitled to, but are not obligated to take
deferred distributions after the effective date of
this Agreement and prior to the Closing Date in
amounts determined in their reasonable discretion as
long as the cash remaining in the accounts of
Discover is adequate to pay debts as they come due;
(i) Make no purchases or acquisitions of real property or
material amounts of personal property, except in the
ordinary course of business;
(j) Not amend any bylaws or articles of incorporation;
(k) Maintain accurate records of all issuances of common
stock and any rights or interests herein;
(l) Not borrow money, except as needed for current
operations or for acquisitions;
(m) Furnish to any other party herto reasonable access to
its properties, assets, premises, books and records,
and any financial and operation data and reports
regarding their respective business operations and
financial transactions, as each party may from time
to time reasonably request of a corporate party
hereto;
(n) Not enter into any material contract or make any
material capital expenditures, except in the ordinary
course of business or incident to acquisitions;
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(o) Use best, reasonable commercial efforts to obtain all
consents and approvals necessary to consummate the
Merger;
(p) Not split, combine or reclassify any of its capital
stock or redeem or repurchase any of its capital
stock;
(q) Unless this Agreement is terminated in accordance
with its terms, not enter into any other
reorganization, business combination or similar
arrangement or agreement with a third party;
(r) Not adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation or other
reorganization.
15. Confidentiality. Except as allowed pursuant to the terms of
this Agreement, to the extent required by law (or the rules of
any applicable stock exchange) or pursuant to an order of a
court of competent jurisdiction, no party hereto (the
"receiving party") shall disclose or use (and the receiving
party shall not permit its representatives to disclose or use)
any Confidential Information (as defined below) with respect
to any other party (the "disclosing party") furnished by the
disclosing other party or its shareholders, directors,
officers, agents or representatives to the receiving party or
its shareholders, directors, officers, agents or
representatives in connection herewith at any time or in any
manner other than in connection with the completion of the
Merger. For purposes of this paragraph, the term "Confidential
Information" means any information about Discover, the
Shareholders, WHY USA, or any of their respective affiliates
(including, without limitation, the terms or existence of this
Agreement), provided, however, that such term does not include
information which the receiving party can demonstrate (a) is
generally available to or known by, or becomes generally
available to or known by, the public other than as a result of
improper disclosure by the receiving party, or (b) is obtained
by the receiving party from a source other than the disclosing
party, provided that such source was not bound by a duty of
confidentiality to the disclosing party with respect to such
information.
16. Survival of Representations. All representations and
warranties contained in this Agreement by any party hereto
shall survive the Closing Date of the Merger for two years
from the effectiveness of the Merger (the "Survival Period"),
at which time, the representations and warranties of each
party set forth in this Agreement will terminate. The
affirmative covenants and agreements of the parties set forth
in this Agreement shall survive until fulfilled and the
negative covenants and agreements of the parties set forth in
this Agreement shall survive until the statute of limitations
with respect to the subject matter of such covenants or
agreements has run.
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Nothing herein shall limit any potential remedies or
liabilities of a party hereto with respect to any claim made
during the Survival Period; provided that (a) the liability of
each Shareholder hereunder shall be limited to the actual
consideration received by such Shareholder in the Merger (and
not the financial value thereof) and the liability of each
Shareholder shall be several (meaning pro rata in proportion
to the consideration received by such Shareholder) and not
joint and (b) the liability of WHY USA hereunder to the
Shareholders shall be limited to the consideration received by
such Shareholder in the Merger.
17. Termination of Agreement. This Agreement and the transaction
contemplated hereby may be terminated at any time prior to the
Closing Date:
(a) By written common consent of all parties hereto; or
(b) By WHY USA if there has been a material
misrepresentation or breach of the representations or
warranties of a material nature by Discover or the
Shareholders; or
(c) By Discover or the Principal Shareholders if there
has been a material misrepresentation or breach of
the representations or warranties of a material
nature by WHY USA; provided however, that with
respect to this subsection (c ) and subsection (b)
above, if any such material breach can and is cured
within 15 days of notification in writing thereof
from a non-breaching party, such breach shall not
constitute grounds for termination; or
(d) By any party hereto, if the material conditions for
the Closing of the Merger are not satisfied on or
before the Closing Date; or
(e) By either corporate party hereto if the Closing has
not taken place by February 28, 2002, unless extended
by the parties hereto.
18. Return of Documents and Nondisclosure. If this Agreement is
terminated for any reason pursuant to Section 17 hereto, each
party and its counsel shall return all documents and materials
which shall have been furnished by or on behalf of the other
party, and all copies thereof, and each party hereby covenants
that it will not use or disclose to any person any
Confidential Information about the other party or any
information about the Merger, except insofar as may be
necessary to comply with the requirements of any applicable
law, rule, regulation or to assert its rights hereunder.
19. Material Closing Conditions. Unless otherwise expressly waived
in writing, all obligations of the parties hereto under this
Agreement are subject to and conditioned upon the fulfillment
of the following material conditions prior to or as of the
Closing Date hereof:
(a) The Representations and warranties by or on behalf of
each party hereto contained in this Agreement or in
any document or certificate delivered to another
party incident hereto shall be true and correct in
all material respects at and as of the time of
Closing as though such representations and warranties
were made as of the Closing Date;
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(b) All parties hereto shall have complied with and
performed all covenants, conditions and terms of this
Agreement to be complied with by such party on or
prior to the Closing Date;
(c) All filing or notices to state or federal regulatory
authorities or agencies required to consummate the
Merger shall have been completed and resulted in no
objection to the Merger, and all necessary consents
and approvals shall have been obtained;
(d) The shares of WHY USA Common Stock being issued to
the Shareholders of Discover incident hereto shall be
issued pursuant to all necessary corporate action
having been legally taken by WHY USA for their
issuance, and they shall be fully paid and
non-assessable when issued, and certificates
therefore shall be in proper form and amount and bear
a standard restrictive legend preventing further
transfer or other disposition thereof unless
registered under relevant securities laws or exempt
from such registration;
(e) No material claim, suit, action or proceeding,
whether private or governmental, shall be pending
against any corporate party hereto or their
subsidiaries which, if adversely determined, would
prevent or hinder materially the consummation of the
Merger or the Closing of this Agreement, or result in
the payment of substantial damages as a result of
such claim, suit, action or proceeding;
(f) As of Closing Date, there shall be no outstanding
securities of Discover other than those existing as
of the date hereof;
(g) Each corporate party hereto shall have completed any
desired due diligence review of the respective
business and financial records of the other corporate
party hereto and any of their respective subsidiaries
and shall be reasonably satisfied with the results
thereof;
(h) There shall be no pending action, suit or proceeding
seeking to enjoin the consummation of the Merger;
(i) No governmental agency shall have issued any order
prohibiting or limiting the exchange of securities
contemplated by the Merger.
(j) The Principal Shareholders have received, reviewed,
and approved employment agreements for the Principal
Shareholders containing terms acceptable to the
Principal Shareholders in their sole discretion.
(k) All of the shareholders of Discover shall have
unanimously approved the Merger.
(l) Discover has received approval from governmental
authorities for the sale of the shares of common
stock for the Discover originator's license.
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In the event that the material conditions of closing are not satisfied,
this Agreement may be terminated by written notice by either party, and
neither party shall have any further obligation to the other party.
20. Closing. At the Closing Date of the Merger, the following
transactions shall occur, all of which shall be deemed to be
simultaneous;
(a) Discover and its Shareholders shall have delivered to
WHY USA all stock certificates of Discover Common
Stock to be exchanged incident hereto, duly endorsed
by the holders thereof for transfer to WHY USA;
(b) WHY USA shall have delivered to all Shareholders of
Discover stock certificates representing their
respective ownership interests of WHY USA Common
Stock as specified in Section 4 of this Agreement;
(c) Each of the Chief Executive Officers of WHY USA and
Discover shall execute and deliver a certificate on
behalf of their respective corporations which
certifies that all representations and warranties
made herein as to such party are true and correct as
of the Closing Date and all covenants, agreements and
obligations to be complied with by such party on or
prior to the Closing Date have been complied with;
(d) Each corporate party hereto shall deliver at Closing
certified copies of any required resolutions of the
respective Boards of Directors and shareholders of
each corporate party approving this Agreement and the
Merger;
(e) Each corporate party hereto shall furnish the other
corporate party with such other instruments and
documents as are required to be delivered pursuant to
the provisions and conditions of this Agreement, or
which may be reasonably requested in furtherance of
the intent and purposes hereof.
21. Indemnification. In the event this Agreement is terminated
without a material misrepresentation or material breach of
warranty by any party hereto, or due to the failure of a party
to satisfy any Closing conditions for reasons other than a
material breach of any party, then all further obligations of
all parties hereto shall terminate without further liability
of any party hereunder. Otherwise, indemnification shall be as
follows:
(a) Indemnification of Discover. In the event of
termination of this Agreement without Closing due to
a material misrepresentation or material breach of
warranty by WHY USA, WHY USA hereby agrees to defend,
indemnify and hold Discover harmless from, against
and in respect of:
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(i) Any and all losses, damages or deficiencies
arising out of actions, suits or proceedings
by a third party resulting in a judgment
against Discover based on any and all
misrepresentations or breaches of warranty
of this Agreement by WHY USA: and
(ii) All reasonable costs and expenses incident
to any and all claims, suits, proceedings or
judgments in respect to the foregoing
Subsection (a)(i), including reasonable
legal fees and expenses, but only to the
extent the indemnified party is the
prevailing party.
(b) Indemnification of WHY USA. In the event of
termination of this Agreement without Closing due to
a material misrepresentation or material breach of
warranty by Discover or the Principal Shareholders,
Discover hereby agrees to defend, indemnify and hold
WHY USA harmless from, against and in respect of:
(i) Any and all losses, damages or deficiencies
arising out of actions, suits or proceedings
by a third party resulting in a judgment
against WHY USA based on any and all
misrepresentations or breaches of warranty
of this Agreement by Discover or the
Principal Shareholders; and
(ii) All reasonable costs and expenses incident
to any and all claims, suits, proceedings or
judgments in respect to the foregoing
subsection (b)(i), including reasonable
legal fees and expenses, but only to the
extent the indemnified party is the
prevailing party.
22. General Matters.
(a) Notices. Any and all notices provided for in this
Agreement or related to this Agreement shall be in
writing and hand delivered or sent by certified mail,
or by facsimile directed as follows:
To WHY USA: With a copy to
Xxxxxx Xxxxxxxxx, Chairman
WHY USA Financial Group, Inc. Xxxxxx X. Xxxxxxx
0000 Xxxxxxxxx Xxxxxx #000 0000 Xxxxxxxxx Xxxxx
Xxxxxxxxxxx, XX 00000 Xxxx Xxxxxxx, XX 00000
Facsimile No. 000-000-0000 Facsimile No. 000-000-0000
To Discover Shareholders: With a copy to:
Xxxxxxx Xxxxxx and Xxxxx Xxxxxxx: Xxxxx Xxxxxxxxxxx
Discover Mortgage Corp. 0000 Xxxxxxxx Xxx. So.
0000 Xx. Xxxxxxx 000 # 000 Xxxxxxxxxxx, XX 00000
Mpls., MN 55416 Facsimile No. 612-827-3564
Facsimile No. 000-000-0000
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(b) Parties in Interest. This Agreement or any of its
rights or obligations shall not be assigned by any
party hereto without the express written consent of
all other parties hereto. Otherwise, this Agreement
shall inure to the benefit of and bind all parties
hereto, and their respective successors or
representatives, as the case may be, and any
permitted assigns.
(c) Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of
which shall be deemed an original but all of which
together shall constitute one and the same document.
(d) Waiver. Any failure on the part of any party hereto
to comply with any of the obligations,
representations, warranties or conditions hereto may
be waived in writing by the other parties hereto.
(e) Severability. If any part of this Agreement is deemed
to be unenforceable, the balance of the Agreement
shall remain in full force and effect.
(f) Governing Law. This Agreement shall be governed by
the laws of Minnesota.
(g) Entire Agreement. This Agreement constitutes the
entire agreement for the transactions contemplated
hereby, and supersedes and concels any prior
agreements or understanding of the parties hereto,
whether written or oral, with regard to the subject
matter hereof. This Agreement cannot be modified or
amended unless by written consent of all parties
hereto.
(h) Additional Action. At any time, and from time to
time, after the Closing hereto each party hereto will
execute and deliver to the other parties such
additional documents or instruments, and take such
additional action, as may be reasonably requested by
another party hereto, in order to conform or perfect
title to any assets or property transferred hereunder
or to otherwise consummate completely all terms and
conditions of this Agreement or carry out its intents
and purposes.
IN WITNESS WHEREOF, all parties hereto have executed this Agreement as of the
day and year first above written.
DISCOVER MORTGAGE CORP WHY USA FINANCIAL GROUP, INC
By /s/ Xxxxxxx Xxxxxx By /s/ Xxxxxx Xxxxxxxxx
------------------------------------- --------------------------------
Xxxxxxx Xxxxxx, President Xxxxxx Xxxxxxxxx, Chairman
And /s/ Xxxxx Xxxxxxx
-------------------------------------
Xxxxx Xxxxxxx, CEO
And /s/ Xxxxxxx Xxxxxx
-------------------------------------
Xxxxxxx Xxxxxx, as Principal Shareholder
And /s/ Xxxxx Xxxxxxx
-------------------------------------
Xxxxx Xxxxxxx, as Principal Shareholder
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